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CII president Vikram Kirloskar: Have suggested the new government to reduce corporate taxes, remove all exemptions

Updated : June 03, 2019 08:08 PM IST

The Bharatiya Janata Party-led National Democratic Alliance (NDA) has started its second term after a comprehensive win in the 2019 Lok Sabha elections. However, the new government faces challenges of a sharp slowdown in growth and high unemployment.

CNBC-TV18’s Shereen Bhan caught up with the top team at CII — Vikram Kirloskar, President, CII, Uday Kotak, President-Designate, CII (2018-20), TV Narendran, Chairman, CII National Committee on Leadership, and Chandrajit Banerjee, DG, CII — and discussed what they are expecting from Modi 2.O and what should be on the government's priority list.

“The first one would be domestic consumption. How do we increase domestic consumption? Exports are there but the world economy is also having some constraints. Some of the issues are liquidity due to the past non-banking financial companies (NBFCs) crisis, perhaps tax rates — how to have more money in the hands of consumers, how to increase their confidence level in the economy. We need to look across all tax rates — one of the ideas we have suggested is on reduction of corporate taxes and removing all the exemptions. This is a new government with lot of new ideas, they want to do something, we need to kick-start the economy, we need to get into a 10 percent growth rate if we have to satisfy the demands of our rural and our young people. I think something more aggressive has to be done,” said Kirloskar.

Kotak said: “The Indian economy is on two legs, consumption and investment. Consumption has slowed down recently but for the first few years of this previous government, it was in good shape. Investment is where the challenge is. The government has invested pretty actively over the last five years. It is private investment and in order to get private investment back, we need entrepreneurs who feel like putting money to work. If we want animal spirit back, people should be ready to invest equity into new projects. There is a challenge for equity savings in this country as the traditional promoter class has got into hibernation. We need to get equity and risk capital and risk appetite back and whatever we need to do, it must make equity more attractive compared to debt and entrepreneurs must feel like putting money to work.”

Speaking about his expectations of a rate cut from the Reserve Bank of India’s (RBI) upcoming policy meeting, Kotak added: “Twenty five basis points (bps) is reasonably baked in by markets but it has to be combined with transmission and for banks to transmit, they need their cost of deposits to come down. For the cost of deposits to come down, alternative instruments should be at reasonable parity and this is where the issue is – small savings even now pay over 8 percent and a 20 percent of delta. Mobilisation of fiscal deficit is coming from small savings at much higher rates than government securities rates. So bring parity back and make sure that transmission of rates happens to better liquidity and lowering of deposit rates.”

Narendran said: “I agree with Uday Kotak. Twenty five bps cut is factored in already and I think that is the least one should expect. Certainly, to me liquidity is a very big issue, money needs to flow into the system. Over the last few months while various action have been taken, it has not been effective enough and a lot of money stopped flowing just before the election,” Narendran said.

Banerjee added: "One of the things that they should do is to go out of the box to look at certain sectors. For example employment, look at the sectors which can increase employment, which can increase foreign exchange earnings, which can trigger economy, for example tourism — bring in a tourism czar who will be able to change the complete spectrum of tourism. Similarly in certain other sectors of the economy, with empowered intervention and with one czar who is allowed to set a target, get the outcomes done that would create a huge impact and that would have a huge trickle down effect in various other sectors of the economy."


Vikram Kirloskar says

- Global growth slowed down and the the trend is likely to continue

- Domestic consumption needs to be increased

- World economy is facing headwinds in terms of growth

- Liquidity needs to be eased into the system

- Need to lower tax rate to put money in the hands of people

- There needs to be reduction in corporate taxes

- Govt needs to do something aggressive to revive growth

Uday Kotak says

- Indian economy is on two legs of consumption and investment

- The government has invested actively in last 5 years

- Need to see private investment back in the system

- It is a good time to put up capacity with a five-year view

- Interest rates need to correct downwards with improvement in liquidity scenario

- There are four taxes on equity which need to be uniformed

- People should be ready to invest equity into new projects

- Traditional promoters have gone slow and in hibernation

- 25 bps rate cut is baked into the market
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