High fiscal deficit, rising prices and deceleration in investment activity are the three prime reasons for the slowdown of the Indian economy. I would say global factors have had a telling effect on the Indian economy as well. Though we remained more or less unaffected in the first wave of the global slowdown in 2008, this time around the effects have percolated into the Indian economy despite it being well insulated to sustain global imbalances.
Persistent high inflation and a fiscal deficit of 5.3 per cent (up from the earlier estimate of 5.1 per cent) are also key reasons for the economic slowdown. As a priority, the government should tackle the high fiscal deficit as this will ease pressure on the economy and help it get back on the growth trajectory.
I do not think policy paralysis is an overriding factor for new investments and expansion any more but the government will have to hurry and make the investment climate conducive to attract new investments. It will also have to take very proactive steps to boost investor sentiment which, like in all other countries, has dampened because of uncertainty in the overall economic scenario.
To boost growth, I believe the government should consider a fast rollout of a uniform tax code and take rapid steps in implementing the Goods and Service Tax (GST) and the Direct Tax Code.
As the investment sentiment is not very conducive at the moment, the government should avoid imposing any further taxes in general. Taxing the rich any further is also avoidable. A tax for the super-rich is a very debatable question as it is still not clear who comes under the category of the ‘super-rich class’ and above what income level it applies. Last, the number of subsidised gas cylinders that have now been fixed at nine per household per annum should continue to remain the same.
The Budget should look at making the investment climate more attractive. The reforms that were unleashed in September by Finance Minister P Chidambaram will encourage investment and lift the gloom that engulfs not only the Indian but the global economy as well. But in my opinion, a review of credit and exemption is needed.
I am sure with the passage of time, the investment climate in the country will improve and we would like to invest, expand and also employ more people.
Chairman & Managing Director, Videocon
The Sunday Standard