India needs to bring down the level of government influence in business, says Sumant Sinha
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The Indian industry requires a stable taxation regime and policy framework as the country’s economy recovers from the pandemic’s lows, said Sumant Sinha, who took over as the president of Associated Chambers of Commerce and Industry of India (Assocham) on Monday and chairman and managing director of ReNew Power. A stable policy environment will help the industry plan for long-term investments, Sinha said.
“An important thing is that we need to create a stable, predictable tax regime and a stable and predictable policy environment. More than anything else, we need that," Sinha said.
The goods and services tax (GST) Council keeps changing rates and recently increased the tax rates on solar and wind power from 5% to 12%, Sinha noted. Taxpayers would get the benefit of input tax credit, but the refund process is cumbersome, he said.
“We should just have one single rate for everything," the Assocham president said about GST rates.
“On the policy front, we need to get the government out of business as the prime minister himself has said many times and the government is trying. However, I think if we look at the overall influence of the government on the Indian economy compared with other economies, it’s still fairly high," he said.
There is a lot of effort that needs to be put by companies into compliance and tax management, and meeting all regulatory requirements. Some more simplification is required that will help the government achieve its ease of doing business targets, though India has made significant progress in global rankings, he said. The Doing Business Report 2020 released by the World Bank had ranked India in the 63rd position, up from 142 in 2015.
Sinha observed that Assocham focuses more on the micro, small, and medium enterprises (MSME) sector and said that the growth of the sector would be in line with that of the overall economy. The government would have to ensure robust economic growth to boost these small businesses, he emphasized.
Liquidity measures for the sector will have to continue to help MSMEs recover from the pandemic woes and pursue growth. “Given that MSMEs are smaller in size, they are relatively less penetrative from a financial standpoint. I think the government will have to continue with its schemes on giving preferential access to credit to MSMEs. That is something that certainly should continue," contended the Assocham president.
Sinha also suggested the creation of area-specific MSME clusters focused on different sectors and linking them with the academia in to improve their efficiency.
Sinha said the immediate impact of the Russia-Ukraine crisis on the global economy, which the world is already witnessing, is the energy shock and rise in crude prices leading to inflationary pressures and growth concerns.
“It will also lead to supply chain issues in other sectors as well, because this is going to cause an even greater problem for the pandemic-hit global economy. Also, the increase in interest rates is going to start and it will lead to liquidity issues and risk aversion globally," he said.
However, India is rather well-placed at this time. Its financial sector is strong and the corporate sector is set to witness a rise in demand as covid wanes, he said.
Sinha also exuded confidence in India’s green energy efforts. “Clearly, the future demand growth (for energy) in India will be met from renewables, not from fossil fuel-based capacities," he said about India’s target for net zero carbon emission in 2070.
The Assocham president also said that there is enough investor interest on the green energy segment in India and a huge opportunity lies ahead for the country in all aspects of green energy, ranging from solar and wind to green hydrogen.
However, the government would have to focus on transmission and grid infrastructure, and the financial health of distribution companies, Sinha pointed out.
“The issue of distribution utilities needs to be addressed. The central government is trying but unfortunately a lot of reforms have to be undertaken at the state level and the states are dragging their feet on it," he said.