The corporate tax rate cuts announced by the government have created a feel-good factor and made Indian businesses more competitive, but much more needs to be done to revive consumption, says Harsh Mariwala, chairman, Marico.
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Mr. Mariwala, who is now involved in guiding and mentoring entrepreneurs through his Ascent Foundation, said the country needed more structural reforms in areas such as land, labour and judiciary, so that it can compete in the international arena.
“Some of the steps that the government has taken like the latest round of tax deductions will have some effect... but much more needs to be done,” he said .
“We need more structural reforms to make Indian businessmen and Indian businesses far more competitive. Interest rates are still high. You need land reforms, labour reforms, judicial reforms if you want to compete in the international market (or) if you want to take advantage of the U.S.-China trade war,” added Mr. Mariwala.
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The benefit of the ongoing trade war had not come to India but had gone to countries such as Vietnam, Bangladesh and Korea, and hence the government needs to do more than just reducing the taxes.
Incidentally, the FMCG sector, of which Marico is a part, is witnessing one of its worst slowdown in many years.
In a recent report, global financial major Credit Suisse said that for the FMCG sector, which has been facing extreme headwinds in the last few quarters, the current fiscal could be the worst in 15 years in terms of revenue growth, on account of agricultural slowdown, liquidity concerns, employment issues and slower-than-expected impact of government initiatives.
He said the immediate revival of the FMCG sector looks difficult as the money would not be directly flowing into the hands of the consumers post the tax cuts. “Money does not go into the hands of the consumers. The extra money flows into companies and they in turn invest again. But impact on consumption takes long,”Mr. Mariwala said.