Infosys co-founder and Executive co-Chairman, S. Gopalakrishnan, recently took charge as the President of the Confederation of Indian Industry (CII).
In a recent conversation with The Hindu, he talks on the current business environment in the country, and the outlook for the $108-billionIT-BPM (business process management) industry.
What are the three biggest challenges facing the economy right now?
The three biggest challenges are the revival of growth, reduction in macro-economic imbalances as manifested in the twin deficits and easing of supply-side bottlenecks to contain inflation. A growth revival alone may worsen the imbalances or trigger inflation. We must, therefore, tackle all three challenges together.
The key measures required to achieve a positive outcome include a reduction in the fiscal deficit, a reduction in interest rates, an improvement in the investment climate and a faster approval process for projects.
Both investor and consumer sentiment are quite low. As the new chief of CII, what needs to be done to increase it?
First and foremost, a moderation in inflation and a commensurate reduction in interest rates would revive consumer sentiment.
The CII is asking for a 100-basis point reduction in the repo rate in the current fiscal. The Reserve Bank of India (RBI) needs to indicate its willingness to aggressively reduce interest rates at the beginning of the year, instead of adopting a wait-and-watch approach.
This will spur consumer demand, and, subsequently, as capacity utilisation increases, investments will take place.
Second, it would be a good idea to work on improving the business climate so that when investor sentiment does turn around, investments can take place quickly.
The usual supply-side bottlenecks (clearances, land and the like) should not hamper a turnaround.
Besides introduction of GST (Goods and Services Tax), what other reforms are on your agenda? What are the challenges you foresee in their implementation as elections are drawing close?
I believe that the critical reform agenda is now largely in the domain of State governments. Priority areas other than GST include distribution reforms in the power sector, modification of the APMC Act to de-notify perishables, land reforms to allow leasing of land and procedural reforms to improve ease of doing business.
The Central Government needs to ease the FDI limits in financial sectors such as insurance and pensions to make more resources available for growth. These require legislative changes, and, are currently on the government’s agenda.
Tax evasion by companies has become the topic of the day. What needs to be done to bring in more transparency and avoid this problem?
It is our belief that more complex and discretionary a system of taxation is, the more would be issues of malfeasance. We need to reduce human interfaces and discretionary powers in the hands of officials.
Technology is the way forward in governance, and, I believe, the industry can work very closely with the government to ensure that more transparent and simple administrative machineries are in place.
Which are the sectors you see contributing most to creating employment in the next few years?
It is apparent that while the share of agriculture in GDP has declined sharply, its share in employment remains at high levels. Therefore, new employment has to be created outside agriculture, whether it is in industry or services.
The data shows that between 2004-05 and 2009-10, the sector that created most jobs was construction. We will work towards spreading the job creation process across more sectors. Reforms in labour laws are urgently required to facilitate industrial restructuring to help create employment. Sectors such as textiles, capital goods and automobiles have great potential for generating more employment.
Going forward, what kind of growth do you see for the IT industry?
Over the medium to long-term, I am very optimistic about the industry’s growth because the use of IT is only going to increase. This means that there are significant opportunities for new business creation, new products to be introduced, new use of technology and new business models.
Today the way IT is consumed, you no longer have to own the data centre, you no longer have to own the assets. If you need something, you use cloud (computing). Most people when they think of IT, they actually think about mobile devices. The mobile revolution is just starting. Everybody is shifting to some form of tablet and mobile device. Going forward, there will be a new class of devices which have sensors and can be used for anything that you can imagine.
There will also be a significant shift in the way jobs are being created in the sector. New companies are emerging, such as e-commerce players, they are creating new types of jobs. So the industry will shift. Will there be enough jobs? Yes. Will it be the same? No.