If implemented, GST can contribute 2% to GDP growth
September, 03rd 2014
The new government had started off very well and made major announcements in many different spheres, which are now having a positive effect, in the sense that the stock market has reacted extremely well. They have taken several steps on FDI, on containing inflation in vegetables as well as in petroleum products, in which they are helped by the fact that the international commodity prices have cooled down. Their maiden budget was good, wherein some steps were taken to revive certain sectors, certain excise and customs duties were reduced. Therefore, overall, they have done an excellent job. They have improved the sentiment in the country and are taking steps to improve the ease of doing business in India.
The prime minister, in his speech to the Japanese businessmen, said that he will ensure the ease of doing business in India will improve and I suppose, he would not do anything that is solely for the Japanese. I am confident about India's GDP growth accelerating going forward, and this year itself the GDP growth should be much better than in the previous years. To my mind, the next financial year should be even better.
ET Now: But, has the administrative efficiency, which was lacking in the previous government, improved on the ground?
Adi Godrej: Certainly! The new government has taken many steps to improve the ease of doing business. Now, it's but obvious that everything cannot change within 100 days. However, suffice to say that the trend has been good. Looking forward to, say, 6 months to 12 months from now, the ease of doing business in India would have improved considerably.
The sentiment has improved tremendously, since people believe this government will be able to deliver. Most Indian corporates have taken decision for further investment for growth to be able to meet the demand for their products. So overall, things are on a good wicket.
Moreover, the biggest reform that can help India's growth accelerate is GST - the goods and services tax legislation - which the finance minister Arun Jaitley is working on, to bring in force by April 1, 2015.
ET Now: Since certain states are still ruled by the Congress, don't you think it will be next to impossible to roll out GST on a national level by April 2015?
Adi Godrej: No, I do not think so. Most of the Congress states are very much in support for the GST. Moreover, in some of these Congress states, elections are due in October and November. Therefore, well before April, there will be a new government in office in most of these states. Maybe the Congress continues to maintain its stronghold, but most likely it will not be so. Therefore, I do not think it will be politically difficult, since also, this government has been tackling political issues reasonably well. I am sure they will try and take everybody on board, since everybody realises that GST is good both for the states and for the national economy.
ET Now: Any other reforms that the government should put on priority, over the next three to six months?
Adi Godrej: All reforms should be put on priority, since all reforms will help. Now, there might be political difficulties in certain reforms, but the biggest reform, that is the GST, should be stressed on.
The next big event would be the budget presented in February next year. It is about time to reduce tax rates and if GDP growth goes up, tax collection can go up with lower rates of taxes, which can help economic growth tremendously. I am sure this government realised this and the budget presented recently by Mr Jaitley entailed some steps in this direction. I am sure much more will come in the February budget.
ET Now: What about the land & labour reforms, since they are important if PM wants to fulfil his 'Make in India' dream?
Adi Godrej: The government has already expressed its desire to make changes in the Company's Act and in the Land Acquisition Bill. Even the labour reforms are on its radar. Rajasthan is one of the BJP states, which has already introduced labour reforms and we shall see some labour reforms coming from this government soon.
ET Now: Apart from labour reforms, what else needs to be done to kick-start the Indian manufacturing sector?
Adi Godrej: Mr Modi's statement of 'Make in India' was a significant one, since it indicates that he has fully realised the importance of increasing the salience of manufacturing in India's GDP. He has already taken some steps and some more will be taken soon, I expect.