The series of announcements made by Finance Minister (FM) Nirmala Sitharaman on Friday will prompt consumers to loosen their purse strings in the festive season, resulting in higher demand for private vehicles and homes, said corporate leaders. They are also hopeful this will help India Inc recover from low sales because of sparse consumer spending since September last year.
“This will certainly help India Inc recover in the short term. Now, India needs more medium-term reforms for lasting improvement in structural growth,” said Sanjay Nayar, chief executive officer (CEO) of KKR India, an asset management company.
The first quarter results for the financial year 2019-20 (FY20), announced by consumer product companies, showed demand was subdued for the second consecutive quarter. The auto companies were the worst hit. Also, the super-rich tax announced in the Budget in July this year dampened the mood of the stock markets, with BSE Sensex and Nifty50 falling since the Budget was announced.
India Inc also expects other measures to make the recovery more permanent. CEOs of consumer companies said unless the goods and services tax (GST) rate was cut demand would continue to lag. They were, however, hopeful about the other announcements made by the FM, though she did not announce any GST cuts.
“The measures announced for the non-banking finance companies will help. The rollback of surcharge will also help FPIs, but it should have been done for the salaried class also,” said Rajeev Talwar, CEO of real estate major DLF.
The chairman of M&M, Anand Mahindra, said the methodical approach of “bucketing” key drivers of the economy and administering a healthy dose of first aid was a good idea. “I am naturally enthused that the auto industry was recognised as a major growth generator and given a bucket of its own,” he said. Mahindra added,
“The most important announcement was the removal of the surcharge on FPIs. This showed strong evidence of the government listening… More than anything else, this should regenerate spirits.”
Chandrajit Banerjee, director-general, CII, said, “Each of the silos taken up by her (Sitharaman) would have a huge impact on key sectors and a positive trickledown effect on the economy.”
CEOs also welcomed steps to reduce “tax terrorism”. Decriminalisation of the provisions for corporate social responsibility was also welcomed. “We hope that other economic offences will also be decriminalised,” said Sandip Somany, president, Ficci. “The announcement to disburse and clear all pending GST payments to MSMEs within the next 30 days and ensure that all future refunds will be cleared within 60 days augurs well for industry. Strict monitoring of the delayed payments would lessen the financial burden on the companies.”