Private sector bullish on economy, asks Govt to let reforms settle
Despite the economy dragging its feet for the past few quarters, the private sector says it is bullish on India's prospects as long as government gives time for “reforms to settle”.
The general consensus about the economy’s outlook was positive at India Economic Summit, organised by World Economic Forum and Confederation of Indian Industry (CII), with industry players believing that demand would pick up in the next few quarters, beginning the festive season.
“In last six to eight months, consumer demand on the round has been muted but we are starting to improve now,” said Sanjeev Bajaj, managing director, Bajaj Finserv. “We have festival season coming up and we are geared up for volume sale”.
“We did have a slowdown after demonetisation but we can see a pick up,” said Adi Godrej, chairman, Godrej group.
India saw gross value added (GVA) of 5.7 percent in the April to June quarter, down from 6.1 percent for the quarter ending March 2017.
Shobana Kamineni, president, CII, feels that once the issues related to Goods and Services Tax are ironed out, the “GDP might pick up by two points”.
GST was rolled out on July one, replacing scores of indirect taxes like value added tax, octroi, sales tax, service tax, etc to have a single system of taxation.
Industry players also believe that even though reforms have been disruptive, they will be positive for the economy in the long run. They, however, asked the government to “let things settle” now.
“… Reforms will always have lag effect…,”said Bajaj.
“GST is the biggest economic reform since 1991. To my mind, it will be very good for the economy,” said Godrej, adding, “we should now ensure that we do not bring in more reforms frequently… let the previous reforms settle”.
He reasoned out that the dip in GDP was “temporary” due to destocking in the month of June ahead of the GST rollout.
“The question mark on GDP came because we showed a relatively slow growth rate in the June quarter… In my view, April and May GDP growth rate were reasonably good (considering monthly GDP numbers). June growth rate dragged alone,” Godrej said.
“In manufacturing sector, there were considerable number of items where the new GST rate was less than the previous combination of rates… So obviously there was destocking of the items and lower production and clearance of good which affected the GDP growth rate in that month”.
He said that the companies are now beginning to “re-stock” and the growth is expected to be picked up in next quarter.
“It will improve in the July to September quarter and I expect the second half to show good growth rate,” he added.
Keiko Honda, executive vice chairman-chief executive officer, Multilateral Investment Guarantee Agency (MIGA), World Bank group told Moneycontrol that India was far better than global averages and was faring well.
“India definitely has medium to long term growth prospects,” Honda said, adding “Of course, in the short term, there is a little bit of up and down but in the medium to long term, I foresee a very healthy economic growth in the country”.
She said that low growth of five percent in India was not as worrisome as people are perceiving it to be and that the country has huge potential.
“Low growth in the world is not five percent. Low growth in the world is less than a two or one percent… Everybody is forecasting that (in the long term), India will be growing a lot faster than the world”.“There has been a lot of efforts from the government’s side in the form of ease of doing business, especially for small and medium companies… in terms of goods and services tax, which will go a long way in increasing the tax base… So, we are very bullish. I think the government is taking a lot right steps,” said Sarvesh Suri, director, operations group, MIGA