Temporary drop in GST on consumer goods could help stimulate demand: TV Narendran
Business and government should jointly tackle post-pandemic challenges such as worsening income inequality, said TV Narendran, chairman and CEO of Confederation of Indian Industries (CII) and CEO of Tata Steel Ltd . In an interview, Narendran also explained how one of the stimulus measures, including a temporary reduction in the goods and services tax (GST) rate on white goods, could help jump-start economic growth. Edited excerpts:
More than a simple drop in consumption, the pandemic has raised fears of worsening poverty and worsening income inequalities. What can the industry do to tackle these issues and ensure inclusive growth, beyond traditional business and financial goals?
The industry must obviously be responsible and go above and beyond what it would do for its employees anyway. We have many members who operate in the poorest parts of the country. They are taking action in terms of building schools, hospitals, providing infrastructure, water and other facilities. Many initiatives are already underway. Many of our members are already spending more than the law requires on corporate social responsibility (CSR). But can industry alone solve these challenges? I’m afraid he can’t. The total CSR spending of all companies in the country is around ₹20,000 crore, which is a drop in the ocean if you want to solve these problems. There has to be a way that industry, government and the social sector come together not only to create jobs, but also to do a lot of work in creating micro-entrepreneurs. We need to develop skills so that employability improves. Many actions must be taken beyond job creation. I think the government’s focus on building infrastructure will provide a lot of job creation opportunities across the country. We need to have more equitable growth across regions and of course you will have more inclusive growth as the benefits spread to people in those regions.
Booking public sector jobs has been an affirmative action tool for governments. Some states are experimenting with the same thing in the private sector. Given the current emphasis on the privatization of state-owned enterprises, is the industry open to this idea?
CII does a lot of things about affirmative action. He doesn’t need to be mandated by law and I don’t think we encourage him to be mandated by law. I think we encourage our members to do it voluntarily and a lot of members are doing it. Affirmative action is a very important part of our initiatives. We have been doing this for quite some time. At least ten years or more. It’s not just about employment, many members are also engaged in supplier development.
Industrial automation adds to unemployment, especially among the low-skilled. Your thoughts?
Technology will always bring change. We need to requalify people. As some jobs disappear, new ones appear. Thirty years ago there were apprehensions about computerization, but now we have seen the computer industry grow and has probably been the biggest job creator for the past 15 to 20 years. years. Many jobs are being created in the tech space and we cannot have an industry today without IT investment. One of the major areas of job creation will be renewable energy and climate change investments.
Your suggestions for a ₹$ 3 trillion in stimulus packages are primarily focused on small businesses and vulnerable segments of society, not large industries. Your comments?
These (relief measures for small businesses and vulnerable sections) are important parts of a stimulus, but it (the stimulus) should not be limited to that. We also asked if we could reduce the GST on consumer goods by 2-3% for at least six months to trigger consumption. Small businesses have struggled more than large businesses over the past year. Therefore, the focus has been on the sectors that have been affected, such as MSMEs, hospitality, travel and tourism, to restore consumption. When it comes to large companies, reforms are always important because if you want to restore the private sector investment cycle, you must continue to improve the ease of doing business at central and state level. One area where government and industry need to work together is immunization. We are also discussing how to get our members to commit to having all their employees vaccinated and, maybe in a month or so, when vaccines become available, will insist that anyone who shows up in their offices or factories be vaccinated.
Your forecast of medium-term growth of 9% is tied to further reforms, but many reforms can be politically difficult. Comments ?
Reforms are never easy because you have to integrate multiple actors. I think if you look at the last 30 years, I think no one doubts the need for reforms. It is the pace or extent of reforms that are discussed, not the direction. Healthy competition between states is important to attract investment, which also happens. If you want to carry out more reforms, it could be on earth, work. In the work, some actions have been taken. We need to make sure it is deployed at the state level. When it comes to land, we need to make sure that the land is available to investors on a plug and play basis. These are the things we need other than tax simplification.
While there is a recovery in demand in the West, uncertainties remain about the recovery of domestic consumption. Should we bet on exports or the domestic market to boost growth?
You need both. I think export markets look strong because most economies are preparing to avoid the impact of the pandemic. At least the developed world is recovering faster than previously thought, especially the United States and China. We must not lose the opportunity to take advantage of the growth that is happening in the EU, the US and China. That said, for most of the industry, revenue comes from the domestic market. We must therefore ensure that domestic growth also returns. Our recommendations focus on how to regain the growth momentum we saw before the second wave of covid – how can we help boost consumption, sustain infrastructure investments, get immunizations, and jumpstart growth. This is the goal for this year.
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