From telecom to oil sector, economists flag 'business uncertainties'

Economists and financial sector experts expressed their concerns on uncertainty in the business environment and allegedly arbitrary decisions taken by tax, regulatory and other authorities that hamper businesses in India, in a meeting with NITI Aayog on Tuesday. 

The meeting was about how to address the slowing growth, ahead of the Prime Minister’s meeting with economists and sector experts on June 22. 

According to sources, the participants were of the view that particularly in case of telecom and oil, policy changes have not been synchronised well and often the projects are stuck because of issues raised by anybody in the chain of authority. 

For example, the economists pointed out in case of 5G spectrum, the government’s assumptions were wrong, leading to the Telecom Regulatory Authority of India (Trai) differing with the government on critical issues. There have been differences over the allocation of 4G airwaves to state-run telecom companies Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL). 

The economists also wanted the NITI Aayog to pay special attention to the oil sector.

“There is no certainty in India’s oil policy. The country’s industrial policy, oil exploration and telecom policy should be clear. The tax seems to be arbitrary and based on interpreted rules,” according to a person who took part in the meeting. 

There were also some suggestions to lower the corporate tax. 

Economists said private sector has to be enabled to drive long-term growth, the government and public sector cannot. New engines of growth are needed in the same way that information technology and telecom had helped in the past. 

The participants asked the government to give attention to the micro and small enterprises segment more closely, and advocated ironing out the creases in the goods and services tax (GST) as soon as possible. The GST regime needs to be simplified too, the participants apprised NITI Aayog. 

A good many economists were fine with government taking reserves from the Reserve Bank of India (RBI), but they cautioned that the money should be utilized judiciously, instead of putting back on public sector banks without applying much thought. That would be akin to throwing good money after bad, they said.

The participants felt that the liquidity crisis in the non-banking financial companies (NBFC) could hit the financial stability soon if the government doesn’t take immediate measures. 

Importantly, the participants in the meeting were not bothered much about the government breaching fiscal deficit target.

“There won’t be any harm if the fiscal deficit target is a moving on based on the revenue generation and expenditure need. To protect the number, the borrowings are going up and putting lots of pressure in the market,” said another person present at the meeting.

India’s trade and export policy also came in for some criticism. The trade pacts done by India has mostly benefited the partner country as with almost every country, India runs a deficit, the participants pointed out, according to the source. This required India to revamp its export policy, increase productivity, but that can only happen when goods and services tax (GST) is simplified, economists said.

The participants also apprised the NITI Aayog about creating special economic zones in coastal areas of the country to create more jobs.

“Employability of workforce was also discussed in the meeting,” said a source. 

The RBI also came in for some criticism as economists blamed RBI’s tight monetary policy to have contributed to the slowdown in growth. However, governor Shaktikanta Das has lowered policy rate three times by 25 basis points each since February, while also ensuring adequate liquidity.