Experts discuss: Impact of big-bang reforms

A host of pending bills got Cabinet approval late on Thursday. To become law, these bills need to be ratified in Parliament. In a discussion on CNBC-TV18, Adi Godrej, president, CII hoped for a smooth passage of insurance, pension and company (amendment) bills, and Sandeep Parekh, Founder, Finsec Law Advisors spoke about the impact of Company Bill going through.

Below is the edited transcript of the interview on CNBC-TV18.  Q: How would you look at the slew of announcements – yesterday’s announcements are not yet law but would you go with the feeling that much of it will become law? What is the gut feeling you are getting?
Godrej: First of all it is very good that the government has taken various decisions yesterday. I was very impressed with the fact that the cabinet passed a lot of issues yesterday. Some of them of course only need governmental approval, some will need parliamentary approval. I do hope they go through because they are relatively non controversial issues. They would be very good for the economy, for example- FDI limit increase in insurance and in pension funds will be very good for the economy so, I do hope parliament passes them. Q: When do you think investments will chug on? We have seen a lot of announcements but is it enough for industry to start putting in money especially in the key sectors?
Godrej: I think the perception has certainly improved tremendously, partly because of the reforms announced in the middle of September and yesterday. But a major reason for the perception having improved is also the fact that GAAR implementation is likely to be postponed, the GAAR rules are likely to be amended very considerably and even retrospective amendments passed in the budget are likely to be reviewed. I think all of that will help improve the perception both outside the country and within the country and investments will certainly start flowing in. Q: What will be the impact of Company’s Bill going through? Parekh: The previous Act is of 1956 or so, 56 years onwards We got a fairly dated law in place. This is probably the fifth attempt at passing the bill. I hope this time it is more successful. There is tremendous way forward. Couple of headlines about the bill are over rated clearly – things like class action and lawsuit etc because you already have class of action lawsuits. Second thing is director liability because the Companies Act protects independent directors only from acts under the Companies Act rather than from labour law Inspector sending a notice or a 138 bounce cheque notice. Directors are not going to feel any safer after the act. There are lots of positive things which will have a deep positive effect. Just to name one thing for instance, e- voting by shareholders can truly democratize the corporate world. Q: In your mind how much time do you think will pass before these bills become a reality? Do you think Opposition from either the allies or from the BJP will hinder the process or is the government in too strong a momentum for any of these to, to be an obstruction?
Godrej: This is very difficult to predict. The political process is always difficult to be sure about but I do hope there is no resistance from the Opposition to some of these bills. I think they are very mistaken in their view about opposing such bills including FDI in retail which of course does not need parliamentary approval. It reminds me of the old days when the Luddites opposed the industrial revolution. Even in India if you go back a few years there were many who oppose computerization in banks in India – productivity is the reason why an economy grows and any move to improve productivity whether through investments or improved techniques or improved management should be welcome. I am very surprised that some of these Oppositions parties are opposing some of these moves. I do hope better sense will prevail