Govt, RBI blaming each other on NPAs shows there is no Team India: Assocham president

Q&A with Sunil Kanoria, President, Assocham

Assocham President Sunil Kanoria tells Subhayan Chakraborty his views on the debacle of non-performing assets (NPAs) by public sector banks and why it will have far-reaching consequences.

You had earlier said that the government needs to engage with entrepreneurs in a better way. Has it started to do so?

Indian entrepreneurs feel that the government needs to understand the genuine problems of industry. It needs to make a distinction between genuine problems and people who make frauds. Everyone is not a fraud. We’re not here to protect fraudsters. Deal with them appropriately, but don’t make everyone a fraud.

The non-performing assets (NPAs) of public sector banks (PSBs) have ballooned in the December quarter. What is your take on the matter?

The entire issue of NPA and all related problems are not being handled well. I feel it will have a major negative impact on the entire system. The way NPAs are escalating along with the tendency to write off bad loans is dangerous. Even the judiciary is now getting into the matter. In India, it is easy to put a blame on a guy and throw him off without getting to the core of the problem.

What is holding back the government from acting on the issue?

The golden goose is being killed. The realisation is not there because every stakeholder in the system is working independently. The RBI and the government are working with their own thought processes independently and blaming each other. Industry is looking to fend for itself. I will be very blunt to say there is no Team India.

Finance Minister Arun Jaitley recently signalled significant reforms in the financial sector in the upcoming Budget. Any reforms you would like to see?

I must say that certain things are progressing very well. The Bankruptcy Code is a step in the right direction. Hope it gets passed. Like we've said time and again, the Goods and Service Tax (GST) bill being passed is of paramount importance. Bringing these things will reduce the impact of the hit which companies are facing.

Do you expect the GST Bill to be passed in the upcoming Budget Session of the Parliament?

Maybe the government will manage to have majority in the Upper House of the Parliament by April. The timing does not matter; it should pass as soon as possible. Even after it passes, the implementation will take 9-10 months at least.

On the exports front, what can India do to stop the slide?

Definitely the global scenario will prove to be a difficult challenge to exports for some time. Solutions have to be tailor-made for various sectors. Those which have been hard bit should continue to be supported by the government for sustaining enterprises.

What is the industry’s opinion on the current state of business in the country?

There are no perfect answers. While a lot of work has been done in the areas of ease of business and road transport, I believe what the PM is doing is very positive. He has been able to market India very well. 

However, his actions need to be supported by work done at the ground level. Also, there is a need to acknowledge existing problem. Can’t shrug it off saying it had occurred during the previous regime.

Credit ratings agency Ind-Ra has forecast bleak prospects for the infrastructure development sector in 2016-17. Do you agree?

No, I do not. While there are problems from the past, it’s true that a lot of the projects have started to gain speed with bottlenecks being removed in the last 6-7 months. 

There are still some projects left which are more complex. The road transport and highways ministry is the only one which has looked hard at finding genuine solutions. I feel the hybrid annuity model of delivering infrastructure projects will lead to more investments. The EPC (engineering, procurement and construction) mode is also promising. All in all, (I am) quite positive about road sector.

What is the future of the Build Operate Transfer (BOT) model in project deliverance?

It is difficult to say. There’s no capital in it. There should be a focus on hybrid model and EPCs. There’s also a need to create an arbitration fund, take out the operational delays, and address the issue of pending arbitration.

What are your top recommendations for the Budget?

Public spending must be increased substantially. We also have to work out a way to augment rural growth and agriculture.