In a bid to allay apprehensions of India Inc, Home Minister Amit Shah on Tuesday said the government was looking into the “difficulties” faced by industries, even as several experts suggested pumping in more money into the sagging economy. “I understand your difficulties, your apprehensions. There may be uncertainties. But it is a sensitive and non-corrupt government,” Shah said at an All India Management Association (AIMA) event here. He also attributed some of the challenges faced by businesses to the global economic slowdown.
Speaking on the reforms initiatives taken by the government, Shah said the initial difficulties faced in systems like the goods and services tax regime would smoothen out soon. “...at the end reforms bring the larger good,” the minister said, as he asked the AIMA and other industry bodies to come up with suggestions to give industries a boost. “India has to be a $5-trillion economy by 2024 and it is a certainty,” he said, urging business leaders to build national confidence.
‘Pump in more money’
Later, experts deliberated on the need for fiscal expansionary policy at a time when the GDP growth rate has hit a six-year low of 5.5 per cent. “Banks are not short of funds, but NBFCs (non-banking financial companies) are. Liquidity should be infused there to increase consumer lending, even if it means widening of fiscal deficit,” suggested Akhil Bansal, deputy CEO at KPMG in India, at the panel discussion.
Ajit Ranade, group executive president and chief economist at Aditya Birla Group, said he would support fiscal expansion as the economy has a problem of low aggregate demand. He quoted Hindustan Unilever chairman Sanjiv Mehta as saying that “you can’t say FMCG is recession-proof but it is recession-resistant” to support his argument. Whether fiscal deficit be widened to 3.5 per cent from the budgetary projection of 3.3 per cent for the current fiscal year is a matter of discussion, he said. The Centre will anyway get Rs 1.76 trillion from the Reserve Bank of India, Ranade said.
Vikram Singh Mehta, chairman of Brookings India & senior fellow at Brookings Institution, said the fiscal space should be expanded to perk up demand and drive investments. He said the government should disburse the entire amount (Rs 75,000 crore) earmarked for the PM-KISAN in this year’s Budget.
A panellist, however, cautioned that economic growth driven by expanding fiscal deficit would not be sustainable. He was of the view that fiscal deficit was much higher than shown by the government. He cited a report by the Comptroller and Auditor General, pointing out that the Centre's fiscal deficit actually worked out to be 5.85 per cent in 2017-18, as against 3.46 per cent shown by the government. If one adds states' fiscal deficit of 3.1 per cent, the country's fiscal deficit would come to close to 9 per cent.
Higher borrowings by the government to finance fiscal deficit would not let interest rates to go down, he said.
On whether policymakers settle for a high growth-high inflation scenario or a low growth-low inflation scenario, Ranade said he does not think there is a trade-off between the two.
Mehta, on the other hand, said growth is absolutely necessary and if in that process, inflation rises a bit, it should be allowed.
‘India as global hi-tech hub’
Meanwhile, Ravi Shankar Prasad, minister for electronics and IT, called for turning India into the global hub of high-tech manufacturing and innovation.
He said that the number of mobile phone and component factories in India has grown to 268 from two in 2014, with 93 such factories in Noida alone.
He added that Apple was going to come to India in a big way.
“My ambition is that India becomes the world’s data refinery,” Prasad said.
Talking about data laws in the country, Prasad, who is also law minister, said that the government wants to balance data availability, data utilisation, and data anonymity.