Captains of industry are beginning to lament the absence of a conducive environment for fresh investment and growth. Even if in a rather muted voice, it is good to hear from those who experience first-hand what it takes to be an entrepreneur in this country.
The slew of obstructions, the ubiquitous red-tape, the greasing of numerous palms, etcetera, etcetera required to start a business are all well-known. On top of that, if there is a hostile tax regime it makes it tougher for businesses to grow and prosper in India.
Yet, if they still do, it is due to their sheer determination to succeed by sharing a small part of that success with those who are in a position to harm them.
Now, even though the Modi government rightfully takes pride in the country having risen appreciably in the global rankings for ease-of-doing-business, the current environment has certainly turned against fresh investment.
The budget was particularly disappointing for the corporate sector. Rahul Bajaj, one of the doyens of Indian industry who has never shied away from expressing himself openly regardless of the party in power in New Delhi, was the first to lash out at the adverse conditions for growth.
A few days later, in somewhat muted terms the long-serving Larsen and Toubro Chairman, A M Naik, talked of negative factors which could slow down growth to less than that projected in the budget. He said that it would be hard to attain 7.5 percent growth as projected in the budget.
‘We should be lucky if we get 6.5 percent in this challenging situation…’ A day later, the HDFC group chairman, Deepak Parekh, enumerated problems that might drag down growth. There was a liquidity crunch building up, with banks reluctant to lend.
The non-banking finance companies were in the grip of a crisis resulting in a crippling shortage of funds for various sectors, including real estate. Auto sales were down eleven percent since July last year.
Corporate profits were under pressure. Telecom sector was suffering huge losses due to wrong government policies. Share markets had shed twenty percent from their record highs in the recent weeks. Foreign investors had pulled out over Rs 12,000 crores in July itself from the share markets.
Growth in eight core industries was down to 0.2 percent in June as against 4.3 percent in May. Export growth was virtually non-existent as global conditions further become adverse due to the on-going US-China trade war.
Brexit woes have added their own pressures on exports. In short, the economic climate is far from ideal. On top of it, the additional five percent levy on the super rich in the budget has affected the sentiment.
Unfortunately, the Government so far seems to have shown no appreciation of the worsening economic situation for it to take remedial steps. While its bill for various entitlement schemes rises, it has done precious little in real terms to boost growth and generate additional revenue to pay for those freebies.
Government spending on infrastructure by itself cannot be enough to inject additional liquidity into the system and lift the corporate spirits.
It is wrong to treat corporates as adversaries, always eager to dip into the public purse for private gain. It is for the government to keep a hawk-eyed watch on the corporate sector while it does all it can to ensure its expansion and success.
No country has prospered by suppressing the private sector. Its entrepreneurial energies, its sheer motivation to succeed, to take risks, to try new ideas, to raise funds from the markets, etc., need to be harnessed in nation-building.
Yes, private enterprise very often steals taxes, short-changes the system, indulges in malpractices, but for that reason to accord it a step-motherly treatment will be like cutting one’s nose to spite one’s face. Private and public sectors ought to complement each other, and they are certainly not mutually exclusive.
Unfortunately, Modi is no-liberalizer. Instead of further easing the flow of foreign funds, the budget has acted as a huge dampener. If liquidity crunch was behind the move to tap foreign markets for funds, strangely conditions were turned adverse for those foreign funds by roping them into the tax net in the budget.
Revenue was the leitmotif of Nirmala Seetharaman’s maiden budget. And yet, she did a lot to ensure that the big yielders of revenue feel the pressure and are no longer enthusiastic for fresh investment and expansion due to the negative provisions in her budget.
Environment for growth can improve only if the corporate sector gets the fillip it requires in better liquidity, hassle-free land and a less troublesome labour.
On land, labour and capital, Modi 2.0 is yet to do anything substantial, anything purposeful. It is time it did. Otherwise, the slowdown will be irreversible.