Stable government can take growth to 6.5%: CII

Strong reform agenda could create 150 mn new jobs over 10 years, says the industry body

CII compliments  Bharatiya Janata Party [BJP]  on its strong performance in General Elections 2014. “The outcome of the General Elections reaffirms India’s vibrant and dynamic democracy and would greatly help to revive growth and investor sentiments,” stated  Ajay Shriram, President, CII.

CII welcomes the results announced today that clearly expressed the decision of India’s electorate. “CII has worked closely with NDA in its previous term in Government as well as at the state governments. We extend our full support to the new Government and greatly look forward to engaging with its leaders including Shri Narendra Modiji in the next five years,” said  Shriram. CII has partnered with the Gujarat state government in the Vibrant Gujarat series of investor summits for several years and has benefited from the guidance and leadership of  Modi.

“The economic reforms agenda can be taken forward with a stable political dispensation and a multidimensional tool-box of policy instruments is required to kick-start growth. With prudent macroeconomic management, CII expects that the economy could recover to 6.5 per cent  GDP growth rate in 2014-15 as against an estimated 4.9 per cent  in 2013-14. Continued reforms could take GDP growth rate to 8 per cent  level in three years.

Chandrajit Banerjee, Director General, said that  a decisive mandate, the new Government could take the tough decisions that are urgently needed to revive economic growth. The first priority is to get the cleared projects operational. This is the quickest way to revive investment demand. From the point of view of sending a very clear message to the investor community at large, we shall also expect the government to give urgent attention to issues arising out of the land acquisition act and the new companies act. A strong reform package is needed at this stage to generate the 150 million new jobs that India needs over the next ten years. Industry expects a fresh view and innovative new ideas to come up as the new government takes over.

According to CII, the top priorities ahead of the new Government would be to revive economic growth and create millions of new jobs. CII would engage with the new Government to offer constructive suggestions on major issues of inflation control, fiscal consolidation, revival of industrial growth, and introduction of Goods and Services Tax (GST), said the CII press release. Reforms would require addressing investment revival and improving conditions for doing business across all sectors of agriculture, manufacturing and mining, services and infrastructure. At the same time, it would require strengthening education, skill development, institutional capacity and governance. A key issue to be addressed for job creation with social security is labour law architecture.

CII would partner with policymakers for action on top issues:

* Introduction of GST – CII has suggested a comprehensive GST with a low rate and covering all goods and services that would boost industry.

* Fiscal consolidation and containment of subsidies – Industry would expect the Government to adhere to fiscal deficit targets and bring out a roadmap for achieving them.

* Containing inflation by addressing supply-side bottlenecks – CII has called for better laws governing marketing of perishables and other agricultural products and greater investment by the private sector in cold chain, storage and marketing infrastructure in PPP mode.

* Monetary easing – CII strongly calls for reduction in the repo rate by 100 bps during the current year.

* Stable and competitive exchange rate – India needs to guard against volatile short-term flows and protect its currency to promote exports.

* Mining – CII expects a strong intervention and co-ordination to resolve multiple issues in the mining sector relating to allocation of natural resources, involvement of private sector and availability of fuel for power sector.

* PPP - An institutional mechanism to renegotiate the terms of concession in Public Private Partnership contracts in infrastructure could help resolve stuck funds.

* Governance and administrative reforms – CII recommends expansion of e-governance to simplify administrative processes and clearances. These should help to improve and facilitate the environment for doing business, said CII.

* Promoting employment - Restructuring labour laws including introduction of Fixed Term Employment for industry to hire manpower on short term assignments would help to create new jobs on a large scale.

* Ease of Doing Business: CII is of the opinion that India needs to move up significantly on the ease of doing business index, on which India is ranked 134 out of 189 countries assessed by the World Bank. The time bound target should be to reach top 10.

* One of the biggest issues that industry has had to grapple with in the recent past has been retrospective taxation. CII would urge the new government to ensure that no retrospective changes are made to tax policies in the future.