Will take advantage of weak rupee to drive exports: Biocon

The Prime Minister’s Economic Advisory Council (PMEAC) on Friday lowered India’s growth target to 5.3 percent from 6.4 percent. He also expects the current account deficit (CAD) to be contained under USD 70 bn on the back of strong exports and weak gold imports.

Reacting to this, Kiran Mazumdar Shaw, CMD of Biocon says that the government needs to send the right signals to people looking at India as an investment destination. The government needs to address many other issues to solve the problems of high deficits, which it is currently not doing enough, Shaw told CNBC-TV18. She feels exports will drive growth going forward. However, the government must extend tax benefits in domestic tariff area (DTA) to SEZs too, she says. Shaw is positive on bettering their exports going forward. "Exports is something that we are going to really focus on and drive and take advantage of the weaker rupee ", she adds. Also read: PMEAC lowers growth projection for 2013-14 to 5.3% Below is the edited transcript of his interview to CNBC-TV18. Q: Dr Rangarajan has assumed that investment rate will be 34.7 percent compared to the actual 35 percent forecast for last year. We have been falling in terms of investment. We were at 36 percent up until 2010, we fell to 35 percent in FY12, this year his forecast it to come at 34.7 percent. Do you think investment would be as good as last year or would it be much lower? A: It is very difficult to really comment on these small differences, but we have to look at the broader picture. What are the signals we are really sending in terms of improving the investment climate in India? That is where we need to focus on. Right now the government is in a mode of assuaging the concerns and the panic that investors have been investing in India. Yes, at least to some extent Raghuram Rajan has bought in some kind of confidence in terms of supporting the rupee at a stable rate, but for how long? We need to do many other things to address both the fiscal and the current account deficit (CAD). I am not so sure that the government is doing enough. That is my concern. What are the various measures that we are actually evoking to kick start the economy and boost investment. Unless we do that, we are not going to see more investment coming into this country. We are still falling way short of really going the whole way attracting investments. Q: I just wanted to focus on the export. That has been spoken about as one of the key growth drivers for rest of the fiscal. Do you see formidable increase in exports simply because of the rupee depreciation? What would your estimates possibly be with your interactions with the industry? A: Certainly, I think a weak rupee does auger well for exports and we are all seeing our exports becoming more and more competitive. From that point of view, it is good for the export component of the corporate. We must remember that being in the manufacturing sector there is an import impact in this as well in terms of a weak rupee. But the net-net impact is positive, at least for Biocon certainly it is very positive. Exports is something that we are going to really focus on and drive and take advantage of the weaker rupee going at least for the foreseeable future. The industry across the board is also taking advantage of this and the services sector is certainly going to benefit a lot from a weak rupee. But, the commerce ministry has called for tax benefits on incremental exports in the domestic tariff area (DTA) region. I really believe they should extend this to SEZ as well to boost exports and investment. Q: I doubt that this on the government’s radar now because reaching the 4.8 percent fiscal deficit Dr Rangarajan himself said it is going to be extremely difficult? Look at their tax revenues; they base their budget on 6.1-6.7 percent real GDP growth- an average of 6.4 percent real GDP growth. The economist advising the prime minister is saying that it is 5.3 percent. So, tax revenues are going to take a huge break therefore at this point tax sops perhaps will be a little tough, but it is important and encouraging that to say service exports also will do well A: The kind of tax sops are not going to be making such a huge impact on these kind of targets. I just think it sends the right signals because we are talking about incremental exports. We are talking about the delta between last year’s exports and this year’s exports.