69% CEOs say govt should focus on tax simplification, energy reforms under Modi 3.0: MC Survey

The Modi 3.0 is likely to continue with the transformational reforms with increased focus on capex and tax simplifications.

The Modi 3.0 administration is likely to continue with transformational reforms, with an increased focus on capex, tax simplifications, revenue augmentation, governance and energy, 69 percent of CEOs said in the MC-Deloitte CEO Survey.

The survey asked 78 CEOs across industries for their assessment of the reform agenda of the newly elected government.

While a majority of the CEOs said that the government will continue its focus on capital expenditure and energy reforms, 14 percent said that the government may opt for more populist measures in terms of subsidies, cash transfers and welfare programmes, with reduced focus on capex and infrastructure spending.

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Another 13 percent said that the pace of overall economic reforms is likely to slow down.

In the Modi 3.0 administration, allies such as the Telugu Desam Party (TDP) and the Janata Dal-United (JD -U)) play significant roles.

On being asked which reforms should be the government’s top priority to boost growth, 37 percent of CEOs said investment and trade reforms, higher exports and foreign investments should be the main focus.

Another 24 percent of CEOs felt that simplification of the tax regime needs to be prioritised by the government while 15 percent said fiscal consolidation, with a focus on bringing down the fiscal deficit to 4.5 percent without compromising capex spending, is a top priority.

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Speculation is rife that the government is likely to provide income-tax (I-T) relief to the middle class in the upcoming budget to boost spending.

The Centre had set a fiscal deficit target of 5.1 percent of the GDP in the interim budget, and the government intends to bring the fiscal deficit down to 4.5 percent of the GDP by FY26.

As many as 14 percent of the CEOs said that the government is likely to focus on factor reforms, including land and labour to boost growth while only five percent said that privatisation of public sector enterprises and monetisation of public assets will be on priority.

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In 2020, India took a bold step in simplifying its complex labour laws by consolidating 44 statutes into four comprehensive labour codes.

However, the anticipated benefits are yet to materialise due to the delay in implementing the rules. This delay not only hampers formal job creation but also obstructs equitable improvement in per-capita income, economic growth and expansion, experts have said.

Only four percent of the CEOs said that the government may keep energy reforms with a focus on energy security as the top priority to boost growth.

However, if the new government pursues highly populist policies, the businesses are likely to be affected negatively as it may affect fiscal discipline, leading to higher debt and weaker investment confidence, 32 percent of the CEOs said.

On the other hand, 21 percent of the CEOs felt the populist policies may affect businesses positively, if these measures are directed towards health, education and skilling.

As many as 17 percent of the CEOs said that if there are populist measures in support of small and mid-sized enterprises (SMEs) through grants, low-interest loans and subsidies, these enterprises will generate more jobs, and that will favour businesses positively. Businesses will benefit as the populist measures will increase rural incomes and spending, 14 percent of the CEOs said.

Only 10 percent of the CEOs said that populist policies will impact businesses negatively as inflationary pressures could lead to the Reserve Bank of India (RBI) keeping its monetary policy stance tight.

Another six percent of CEOs felt that the allocation towards capex spending (on infrastructure) might fall with the announcement of populist policies.