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Finance minister Nirmala Sitharaman on Tuesday asked Indian businesses what is stopping them from investing in the economy at a time foreign direct investors, foreign portfolio investors and domestic retail investors are confident about India.

The finance minister also called out some large businesses which delayed making payments to micro, small and medium enterprises (MSMEs).

The direct question posed by the finance minister at the Mindmine Summit 2022 in the capital reveals a degree of frustration at the failure of domestic private investments taking off even after the central government took the lead in stepping up capital expenditure in the hope of crowding in private investments.

The minister reminded the industry about the government’s policy measures taken to encourage businesses to invest, including the reduction in corporate tax rates in 2019.

“If it is not sort of impertinent to say this now, I equally would want know from the Indian industry what is it that they are hesitant about…. Since 2019, when I have taken charge of the finance ministry, I have been hearing the industry doesn’t think it is conducive (for investments). (They said) ‘Alright, bring the rate down’; the tax rate was brought down. ‘Give production linked incentive’ (PLI)—we have given PLI. I want to hear from India Inc., what is stopping you?" Sitharaman asked business leaders at the event, which was webcast.

The minister asked if it was a case of the Indian industry being unaware of its own strengths and capacity. “When countries and industries abroad think this is the place to be in, at this time, FDI is coming, FPIs are coming, stock market is also so confident, Indian retail investor believes in them...Is it, like Hanuman, you do not believe in your capacity, in your own strength, and there has got to be somebody standing next and say, ‘Hey, you are Hanuman, do it’. And who is that person to tell Hanuman? That certainly can’t be the government."

The ministry has laid emphasis on stepping up capital expenditure and giving long-term loans to states so that they can boost spending in the hope of crowding in private investment, which in turn could help speed up the economic recovery.

She also flagged delays in payments by big businesses to MSMEs. “Support to MSMEs is not just what the government can give. It is largely dependent on that. I can take an example on which all of you can equally help."

Sitharaman said the government had examined the dues to MSMEs, which included dues from central and state governments, as well as public sector enterprises under the Centre and states. “But I was surprised to find considerable pending payments were from big industries."

Sitharaman said she cross-checked this with the data from the Registrar of Companies on declarations made by companies. There were declared dues by large companies.

“I can push public sector enterprises, I can request states, I can make sure departments pay up. (But) I can only appeal to the industry. For all the tears that we shed for the MSMEs—my tears, your tears—can we limit the time by which the MSMEs will get their dues?"

However, Sitharaman acknowledged that companies were disclosing their dues to small businesses in their statutory documents.

An RBI survey released in August showed capacity utilization in manufacturing crossed 75% in Q4FY22, up from 69% a year ago, but was yet to touch 80%, a threshold businesses expect to hit before making further investments.

 

ABOUT THE AUTHOR

Gireesh Chandra Prasad

Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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