As the Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) turns hawkish, new Confederation of Indian Industry (CII) President Rakesh Bharti Mittal tells Indivjal Dhasmana India is among the countries that have the highest interest rates. He, however, says industry should look at new technologies to cut cost. Amid some banks facing frauds and corporate governance issues, he says the chamber will soon come up with a voluntary code of ethical and transparent ways of doing business. Edited excerpts:
You are taking charge as CII president when the Narendra Modi government is about to complete four years. How do you rate its performance?
The government has operationalised many of its ideas very well. Most of Prime Minister Modi’s ideas have been executed on mission mode. Take the Swachh Bharat Abhiyan, Digital India, Startup India, Make In India — all are new initiatives. I would say Modi and his government have taken some bold and good decisions.
Critics say not enough jobs are being created. Is that so?
I have a different view on this. We generally measure jobs created in the organised sector. In 2016-17, the organised sector generated about 5.7 million jobs. There was also a loss of about 1.5 million jobs in the organised sector in 2017-18. But we do not take into account jobs created in the unorganised sector. The ‘Mudra’ scheme was launched three years ago. As many as 120 million people have been given loans, which total Rs 3.5 trillion. I presume mainly unemployed people have got loans. If that be so, 120 million people have become self-employed. And if they employ one person each, another 120 million jobs would be added. Analysts have missed this data point.
It was mainly the unorganised sector that bore the brunt of demonetisation and the goods and services tax (GST).
The effects of demonetisation and the GST were felt in 2016-17 and 2017-18. There had been losses in the unorganised sector, and those have not been tracked. However, the global economy is looking up, and is projected to grow 3.9 per cent this year against 3.7 per cent in the previous year. For the first time, we are seeing the synchronised growth since the 2008 meltdown. In all this, India is a shining star. The CII’s view is that India will grow at 7.3-7.7 per cent in the current fiscal year, against 6.6 per cent in 2016-17. There are risks of protectionism in advanced economies, but those may be neutralised by the pick-up in the domestic economy. Industry will start investing very soon. For the last three-four years, there have been unutilised capacities of 20-25 per cent.
How do you see the Modi government taking feedback from the CII, given the fact that there were issues between the chamber and Modi when he was Gujarat chief minister?
I am not aware of this. The CII is a good partner of the government. The chamber acts as a bridge between the government and industry. It goes beyond policy advocacy. Take, for example, the GST. The government reached out to us. We created camps and conferences in the country. This was done particularly for small and medium enterprises. Most of the time, the CII is the partner in investor summits.
The GST has been in force for more than nine months now. How do you see the journey so far?
This needed to be done long ago. When it happened, the CII and industry welcomed it.
But there are challenges...
There are teething problems whenever you bring in a law. This is probably the first law of this magnitude in independent India. To my mind, most GST and demonetisation issues are behind us. Will India have a single GST rate? The answer is “no”. Our recommendation to the government is to rationalise the rates against five we have at present.
How many rates do you eventually visualise?
Maybe two or three.
Besides rates, what are the other GST issues that confront industry?
We need to bring all the four sectors — petroleum, alcohol, electricity, and real estate — under the GST. Only then will taxes be uniformly applicable, making industry competitive.
What about the e-way bill?
It has just started. The good thing is that trucks need not stop in long queues. However, states should not become proactive and start stopping them.
Banks face many issues. What would be the CII’s role in resolving them?
The government and the regulator need to differentiate between wilful default and default due to business cycles. For wilful default, strictest action must be taken. It is the duty of India Inc to do business in ethical and transparent ways. The CII will be coming up with a voluntary code of compliance for large businesses, small businesses, and the financial sector. We have a voluntary code of corporate governance.
This will be voluntary in nature. How will it prevent, say people such as Vijay Mallya and Nirav Modi from indulging in frauds which they are accused of?
I am not here to judge whether the default is wilful or not. That is for the investigative agencies to do that. I am saying that if there is wilful default, there should be strictest action against the perpetrators.
Despite your code for corporate governance, there are alleged issues in ICICI Bank on that front...
Investigation is still on. We need to see what the outcome is. No indictment has yet happened.
The CII has been pitching for a cut in policy rate. However, the MPC turned hawkish this time. How would you prevail on the RBI to cut rate?
The cost of doing business in India is among the highest in the world. One of the factors is very high interest rates. We have to see what the RBI does on this front. More importantly, the Indian industry needs to start looking at investing in technologies and enhancing productivity. I do not see any reason why we cannot become competitive on this front.