Dhiraj Nayyar, the chief economist at Vedanta, spoke to CNBC-TV18 about what he expects from the Union Budget.
“We are hoping that this new government will give a big boost to this sector. This sector hasn’t grown at the kind of pace that it should in the last three-four years, its contribution to the gross domestic product (GDP) is limited at least about 2 percent and we firmly believe that this should be at least 4 percent of GDP, double its contribution in the next four-five years, so for this to happen for the sector to grow for investment to come, we need a certain set of reforms,” Nayyar said on Friday.
“The sector is very important for the economy, it can contribute to the investment in a big way – private investment in the economy as a whole has been relatively stagnant. This sector can give it a boost, it can help cut the trade deficit. Around 90 percent of India’s trade deficit is on account of minerals, fuels and metals. So I think if this sector gets a boost, that part of the macro-economy will benefit. Jobs – apart from construction – this sector has the highest employment elasticity of any sector. We are hoping that this sector will get a huge boost in this budget,” he added.
“We are expecting a lot of structural reform which will come outside the budget in terms of amending the mineral laws and so on. However, within the budget as well, on the oil side, we need to ramp up domestic production, which has been falling over the last two-three years. On the mineral side, the royalties on this sector are amongst the highest in the world adding upto about 65 percent of sales, there could be a rationalisation of that, royalties and taxes. On the metal side, there is a lot of import competition especially in the context of the US-China trade war, I think there is an opportunity for the budget to relook very strategically at some of the import duties that are there,” said Nayyar.