Budget 2017: Investments in R&D is necessary, says Tata Steel's Chatterjee

A: It is reasonable o expect that the exemptions should come down and should be eliminated if we have to move towards a lower rate of taxation in India which is expected to enhance both compliance and widen the tax base. I would only request the finance minister if there were some exemptions which should have longer transition life, for example, investments into the research and development (R&D) and innovations because as a country we need a more competitive positioning as far as R&D is concerned.

We are a country which is going to grow. We have a huge population and therefore, the consumptions will increase and therefore, Indian companies must take on the R&D path as a critical business objective and incentives, which are already in place, should be extended for a longer period of time.

The second is incentives like on climate change. There were exemptions which were given for missionary equipments which were targeted towards reducing pollution and if India is to achieve its climate targets as a signatory to the COP21 last year, then it is important for companies to aggressively invest in climate related equipments. Therefore, they should be incentivised to make those investments. These are the two that comes to my mind as needs a timeline rather than be abrupt in stuffing those incentives in the future. Other than that, a gradual or even a systematic elimination is fine.

Q: The other question is whether the economy desperately needs stimulus and has the government been very successful in stimulating so far?

A: Absolutely. If you really look at the Indian economy relative to the rest of the world, we would certainly say that we are doing extremely well. But that we can say, we have been doing well in the last few years and in fact, post the global financial crisis; India has weathered it better than most other developing economies and indeed the developed economies. So, that is not the question. It is whether India is performing to its potential and if you need to grow at a much higher rate; if the aspiration is to grow at about 8-9 percent then we need momentum of investments which will generate a significant amount of economic value for the country. And it has to be investment led, it has to be employment led and then consumption led. So, people are all searching for that big breakaway phase of investments where both private capital and public capital or government spending will go hand-in-hand and create that economic phase where the country will employ more people, will throw up more consumption surplus, people will spend more and that is the kick-start people are looking for and that has been the expectation for the last couple of years. So, we have been seeing a fair amount of public spending, but we have not seen private capital being put onto the ground.

The other aspect is there are some sectors of the economy where there is significant amount of capacity which is impacted by financial constraints or oversupply and things like that or even regulatory issues which is latent and people are waiting for policy changes and demand kickers coming in so that that capacity can be put to productive use. So, it is a combination or a balance. It is not so much a stimulus as such but it is A] the objective of performing to our potential and often Budget announcements take one-one-and-a-half year to actually fructify.

As you rightly said that there are issues on the ground which needs to be overcome, but if the policy direction is on that on an investment focused growth rather than consumption focused growth, then we will be on a much more solid pedestal than the rest of the world. And that is what we need to do because we have manufacturing competitiveness across many sectors. We just need to ensure that those investments flow in and make India a more competitive nation.