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Only reforms can help India tide over crisis
Terming the economic situation as 'grave', industry body Ficci on Monday asked the government to go in for bold steps like allowing foreign direct investment in multi-brand retail, cut in interest rates and halt funding of welfare activities to revive growth.
"India is in the midst of a grave economic crisis.
"The combination of low growth, high inflation, high fiscal deficit and the highest ever trade account deficit has raised a lot of concern," Ficci president R V Kanoria told reporters in New Delhi.
Suggesting a 12-point agenda, Kanoria said during the time of low growth and global uncertainties, all the political parties should strengthen the hands of the policy makers.
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Only reforms can help India tide over crisis
"There has to be a clear recognition on the part of ruling and opposition parties that we are in crisis situation and all parties need to stand united and strengthen the hands of policy makers to take bold decisions and act pro-actively and decisively," he added.
He said that reasons like excessive monetary tightening, delays and uncertainty over key economic legislations, projects delays on account of factors including stalled environmental clearances have pulled down the country's economic growth.
India's gross domestic product growth has slumped to 6.5 per cent in 2011-12, the lowest in the last nine years.
The chamber has suggested that the timely implementation of goods and services tax would be a major landmark reform that could alter the dynamics of Indian industry and exports.
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Only reforms can help India tide over crisis
"It would add 2 per cent in our GDP. Tax administration and tax collection will also go up," he said.
Besides, he asked for immediate easing of monetary policy and bring down interest rates by 2 percentage points and CRR by 1 percentage point.
Cash reserve ratio is the portion of deposits which banks are required to keep with the Reserve Bank of India.
"It is acknowledged that inflation in India is largely a supply side problem. To deal with such a problem using monetary tools may not be the right approach," he said.
He also asked to revisit the Land Acquisition Bill, as the bill restricts the use of irrigated multi-cropped land for infrastructure development.
He recommended to provide fiscal stimulus for investments across sectors.
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Only reforms can help India tide over crisis
"The government must ensure that these proposals (allowing FDI in multi-brand retail and allowing foreign airlines to take stake in domestic carriers) reach their logical conclusion as both these measures would enhance overall growth in the economy," he added.
Kanoria also asked the government to decontrol the prices of diesel and other oil products and 'the government can also consider imposing a higher duty on imported diesel cars'.
Kanoria said that repatriation of black money immediately could help in mitigating the balance of payment situation.
"The White Paper brought out by the government on the issue alludes to a scheme whereby some governments between themselves have entered into special administrative agreements for revenue sharing," he said.
The government should urgently hold discussions on this subject and arrive at a methodology in a time bound manner to enter into similar agreements, he added.
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Only reforms can help India tide over crisis
Further, he said the government should 'eschew the temptations of a premature welfare state and announce an immediate moratorium on any additional expenses on doles'.
The sums already allocated for welfare schemes should be distributed in an efficient manner as envisaged under the 'direct transfer of subsidies' programme linked to the Aadhar platform, he said.
He urged the RBI to cut repo rate by 1 percentage point in the forthcoming monetary policy review.
On Land Acquisition Bill, he said if the conditions in the Bill come into force 'we will find it extremely difficult to achieve the targets that we have set for ourselves for investments in infrastructure and manufacturing.
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Only reforms can help India tide over crisis
'The consequent impact on job creation will be devastating'.
Besides, he said the slowdown in growth in investments is deeper in case of the private sector and this trend must be reversed.
"We urge the government to look at measures such as providing accelerated depreciation and scrapping MAT for infrastructure projects as all of these would give a fillip to investment activity," he added.
The Ficci president said that availability of coal has become a major concern, which is hurting industry and taking a direct toll on power generation and manufacturing.
"The government must consider introduction of commercial mining with participation of private coal production/coal mining companies," he said.
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Only reforms can help India tide over crisis
Further, he said reforms like setting up of a coal regulator and allowing coal swapping as a tool to optimise physical movement of coal in the country should be considered.
"Finally, a graduated and controlled break up of Coal India Limited will both create competition and ease the fiscal situation," he said.
He also called for strengthening the framework for raising funds for infrastructure financing in the economy and pursue the objective of food security through productivity increase and agriculture marketing reforms.
"There are several important policies that are awaiting implementation and which could (once implemented) give a boost to the manufacturing sector Some of these policies include the National Manufacturing Policy and the National Electronics Policy. These need to be expedited," he added.