Ahead of Budget, an industry confidence survey shows that a sustainable turnaround remains elusive on investments, profits and exports, while another study urges the government to ‘walk the talk’ and take steps to improve ease of doing business.
The results of the Business Confidence Survey, conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI), show a marginal dip in the proportion of respondents anticipating ‘moderately to substantially better’ performance over the near-term at economy, industry and company level.
While the situation is certainly better when compared to last year, the change in quarter-on-quarter numbers is yet to indicate a firm turnaround, the FICCI survey says.
According to FICCI's poll, measures announced by the government over the course of last 7-8 months did have a positive impact on the sentiment of the business community. However, to sustain this buoyancy, it will be important that the process of implementation of these reforms continues with momentum.
The survey results come within days of eminent banker Deepak Parekh stating that industry remained optimistic but impatience had begun creeping in among the industrialists as to why not much had changed on the ground on the ease of doing business front in the last nine months that the new government had been in power.
The FICCI survey also finds that industry is confident about the government pursuing its broad economic agenda to push reforms.
In another survey, consultancy major Grant Thornton says that more than half of the Indian businesses expect radical tax reforms as well as more clarity on certain taxation measures in the Budget.
“There is political stability, markets are at a high, everyone is talking about ‘acche din’, the Prime Minister has spoken about ‘Make in India’, he has stressed on our desire to attract FDI, and has reassured global investors a non-adversarial tax environment but India still ranks 142 out of 189 countries in the ease of doing business,” Grant Thornton Advisory Director Pallavi Bakhru said.
“Now is the opportunity for the government to walk their talk. India Inc is waiting with bated breath!,” Ms. Pallavi added.
Another survey, conducted by the Confederation of Indian Industry (CII), also finds that industry is pinning high hopes on the Narendra Modi-led government’s first full Budget, to be unveiled on Saturday.
Both FICCI and CII surveys show that majority of the CEOs believe that a framework for Goods and Services Tax (GST) will be announced in the Budget, which will tilt the balance in the interest of revenue neutrality.
Besides, India Inc wants Finance Minister Arun Jaitley to simplify taxes and step up action on ease of doing business.
Most CEOs, polled by the CII, expect the revenue deficit target for the coming year to be between 2.6 and 2.8 per cent, while they believe the fiscal deficit will be set between 3.7 and 4 per cent of GDP.
The participants say that they are also looking forward to labour reforms and incentives for sectors, including manufacturing, infrastructure and real estate.
CEOs, participating in the CII survey, point out that sustained GDP growth was essential for tax revenue buoyancy, and growth recovery needed a capex stimulus.
Capital expenditure was budgeted at Rs.2.30 lakh crore in 2014-15, and is still falling short. According to CEOs polled, a majority believe that an increase in capital expenditure outlay in 2015-16 will be budgeted at Rs.70,000 crore.
To fund this capex, they suggest that apart from subsidy rationalisation, revenues can be augmented through aggressive disinvestment of government holdings in public sector enterprises. While the disinvestment target in 2014-15 was Rs.63,000 crore, CEOs expect this to be Rs.75,000 crore and above in 2015-16.
On GAAR, the CEOs are unanimous in their expectation of a two-year deferral.
The FICCI survey polled responses from about 150 companies with a turnover ranging from Rs.3 crore to Rs.10,000 crore and belonging to a wide array of sectors — chemicals, steel, paper products, textiles, automotive, electric machinery, pharmaceutical, food processing and hospitality.
The ‘Pre-Budget Corporate Expectations’ survey of Grant Thornton found that 66 per cent of the firms was optimistic about reduction in personal income tax rates.
At the same time, most of the companies (79 per cent) feel that corporate tax rates will largely remain unchanged, while another 57 per cent feels that the rate of Minimum Alternate Tax (MAT) will remain constant.
About 56 per cent corporates say that the upcoming budget will usher in radical tax reforms.
On corporate tax amendments, 60 per cent of the firms anticipate clarity from the Finance Minister on 'indirect transfers' and deferment of General Anti Avoidance Rule (GAAR) in the upcoming budget.
The pre-budget survey also finds that corporate India expects maximum thrust on the infrastructure and defence sectors, followed by manufacturing and agriculture sectors. About 41 per cent of the companies also expect that the budget would provide indirect tax incentives to make ‘Make in India’ campaign a success.
“Given our demography, we need to generate employment in the country not just to become an economic giant but also to make sure that we do justice to our youth,” Ms. Bakhru said.
