We've to reduce interest rates to boost demand: Shobana Kamineni

Interview with Shobana Kamineni, president of the Confederation of Indian Industry

Shobana Kamineni, executive vice-chairman of health major Apollo, recently took over as president of the Confederation of Indian Industry (CII). In an interaction with Subhayan Chakraborty, she says agricultural income should be taxed above an exemption limit. Edited excerpts:

What is CII's position on the issue of agricultural income being taxed?

CII believes in tax parity. Ninety per cent of the people earn so little that they are not within the purview of any tax. In fact, they ought to be helped. They are not even within the taxable income bracket.

What about those who are?

They are just like us. If I earn Rs 5 lakh and am taxed only because I live in a city, why shouldn't I be taxed if I live on a farm? These things are now whispers that'll become a shout. I'm looking at it from the angle of tax parity and not a political one. People are also misusing it (tax exemption) by rerouting benefits. That should not happen. We believe in transparency, governance and in parity.

Will the other business chambers share your views on this?

We are not advocating more taxation for agriculture. We are saying let there be parity. We are not advocating taxation because that's not our constituency. Also, 90 per cent of people are in the non-tax bracket. I want more. I really believe in 'sadak, paani, bijli' for all farmers. The CII works on such developmental issues which are much more important than taxing those few people.

The CII has vehemently opposed changing the financial year cycle. Why?

We did not vehemently oppose it. We gave our opinion to the government's Shankar Acharya committee on the issue. We are trying to understand the potential benefits of such a move.

You have said Make in India is not only for foreign investors; it is for domestic players as well. On that note, when do you think the investment cycle will pick up?

When banks are ready to give credit and do not shy away. Right now, they are struggling with this balance sheet issue. The situation would become better now, as the non-performing assets (NPAs) ordinance has been signed. Let the banks be in a better frame of mind so that they want to advance credit. Next, for business to take the credit, demand also has to pick up.

How do you see that happening?

Demand will pick up in two cases. One is if there's clear consumption of capacity, so that companies will need to add capacity. The other is when we finally have parity on taxes. You are disincentivised to grow after Rs 50 crore (turnover). You have to pay 30 per cent tax. If I'm currently at a 25 per cent level, why would I want to do that? Both these cases are dependent on a favourable interest rate. That's what we are struggling with. We need to bring our interest rates down.

On the goods and services tax (GST), how prepared is industry, especially smaller firms? Experiences in nations such as Malaysia have shown widespread disruption after its implementation.

This government has never shied away from doing the right thing and it is important that they have the will. At this point, while there will be confusion in the system, yes, it'll take a little time to settle. But I think industry's preparedness is good. We have been asking for GST for a long time and the CII members have been behind it for even longer. So, we might not have the same problems as in Malaysia.

How hopeful are you of meaningfully engaging the government on reducing the corporate tax?

Very hopeful. They have brought the rate down to 25 per cent; let us see. The next Budget might see movement on the issue. What's important is that the tax base starts to increase.

You had said the dividing line between manufacturing and services is getting blurred.

Both Microsoft and IBM charge you for service. Everyone is trying to see how they can engage the customer for a longer period. Similarly, Amazon's biggest share of income comes from their server firm. That's why Industry 4.0 is required. We are fundamentally advocating the idea because maybe our industrial policies need to be relooked at. They don't take into account today's sectors, like e-commerce.

What might be some of your suggestions to the government on this matter?

It is very important to understand the character of services in all pertinent policies. As things merge, we should have a uniform industrial policy.