India Inc mood was negative under UPA: Biocon founder Kiran Shaw

Congress Spokesperson Anand Sharma  on Saturday refuted the claims made by Prime Minister Narendra Modi in an exclusive interview with Network18. Terming Modi's gross domestic product (GDP) figures as factually incorrect,  Sharma challenged the Prime Minister to come out with a White Paper on the economy in the Parliament.

In the interview Narendra Modi had said that he did not reveal the full economic rot before his first Budget as he thought that it would depress business and investor sentiment further.

In a panel discussion on CNBC-TV18, top executives of Corporate India list their views on the how much of the present economic woes are a result of the 10 year-UPA regime and analyse the Prime Minister's prescription for reviving the economy.Below is the transcript of Naushad Forbes, Kiran Mazumdar Shaw, Rajiv Kumar, V Vaidyanathan, MS Unnikrishnan and Rashesh Shah’s interview to Ronojoy Bannerjee on CNBC-TV18. Q: Before we go into the political fallout on that statement that the Prime Minister made in that interview, tell us in retrospect, do you think it was a wise decision on part of the government not to go ahead with a White Paper? As the Prime Minister said, it could have led to a feeling of hopelessness and may have also scared off many of the foreign investors. In retrospect, was it a good decision to make? Forbes: Yes, very much so. It was a wise call and I think it was a wise call for a different reason. The different reason being that one should one’s energies into moving ahead. Whatever the situation was in 2014 was the situation and instead of spending a lot of time on how things were and how dire they were and so on and so forth, one could simply focus more energy and effort on moving ahead and trying to improve things. That was the call that was taken and it was the right call. Q: The crux of the Prime Minister’s interview over there as far as when he was talking about the economy was the fact that he inherited a fledgling economy. Many of today’s problems, whether it is the non-performing asset (NPA) crisis or the low rate of private investment actually goes back, it has its roots in the United Progressive Alliance (UPA) regime. Do you agree with that? Shaw: It was very clear that when the elections were held, there was a sense of very deep despondency within India Inc that things were not going well. There was a slackening of investments, there was a clear feeling that no projects were moving ahead, we were also listening to a lot of scams. There was certainly a very negative sentiment in India Inc and I know it because a large part of that was expressed by all of us in India Inc saying that things are not auguring well for the UPA government at that time. It is very clear that there were a large number of project related issues pertaining to land acquisition, pertaining to timely approvals, there were environmental delays and so on and so forth and mega-projects were stuck. There was also a feeling that the infrastructure projects were just not moving at the pace that they should have happened at. In fact, I am pleased to see that at least the road building has got back on to track because I heard the other day from Nitin Gadkari that the rate of road construction has gone up to 22 kilometres a day. And I can tell you that during the UPA times, it was nowhere near this number and there was a general feeling that the required investments were just not happening in the way they should. So, there was certainly a feeling of despondency and there was a feeling within India Inc that things had to move into a different direction and a large part of the sentiment that saw the National Democratic Alliance (NDA) government under Modi come into being voted in was because of this. I know a large part of India Inc also voted for Modi. Q: Let us go into some of the reactions that have come in especially from Anand Sharma. He made two specific points. He said that capital formation is actually in the negative and he also talks about how overall industrial capacity is at 70 percent whereas ideally it should have been 100 percent. But how much of that blame rests with the UPA for that? Kumar: As Ms Shaw has pointed out, the downturn had become very well in the last two years of the UPA government and we are seeing in some sense the continuation of that downward cycle. There is a clear weakness in overall demand, both rural and investment demand and the investor’s confidence has not yet been restored because of the change in regime and because of the way of doing things. By the way, Mr Anand Sharma is right because those are facts. The fixed investment has declined, 3.9 percent this quarter and 1.8 percent previous quarter. And it was clear that the private investor was still waiting for the right signals on the upturn in demand in both domestic and external before they make their decisions. But the emergence of the excess capacity in the manufacturing sector had started very clearly during the UPA’s regime, so that is where the demand had turned turtle and that is what has continued. I think the expectation that the investment cycle will turn right away with the installation of the new government is misplaced and it will take its time and there is a lot of work in progress, and this is where I become optimistic, which will begin to bear fruit and you will see the upturn in investment as we go forward. Q: Mr Unnikrishnan, come in on that because you are in the infrastructure space and clearly, the Prime Minister did talk about policy paralysis. That was really the overarching concern of India Inc at least in the last 3-4 years of the UPA government. Give us an honest assessment. How was it operationally on the ground then and have things really changed on the ground now for a company like yours? Unnikrishnan: In fact, during the last two years of UPA government, there were hardly any decisions that got tabled at the upper echelons of the government or at the bureaucracy and that is where in fact, all of us learned this word as policy paralysis. So in that context, if I were to talk about, Prime Minister Modi and his team has done a wonderful job in terms of ensuring that it is contained at Delhi. And a lot of changes were also brought in by them. They have tried to give a lift for these stalled projects, but fundamentally the capacity utilisation in the country for the infrastructure areas, the steel plants, cement plants, power plants, they are all tottering at something like 50-60 percent. So, even if there is a capital formation which Anand Sharma spoke about, even if he had money available in the system, would anybody be setting up a new capacity in any of the infrastructure areas barring what Kiran mentioned about the roads, railways and defence. Apart from that the industrial capacity building has stalled in infrastructure area on account of the fact that the capacity utilisation is, even today, remaining at maybe 50-60 percent. Unless otherwise the consumption picks up, you will not see major investment happening in the country and I would certainly not blame the government for it. It has nothing to do with India, it has a lot more to do with international surplus capacity, especially in China and some of the other countries. So, that is my take on that. But on the ground level, I would say a major positive impact was brought in by the current government at the central level and further for it to happen in the state level, I do not think the Prime Minister will be able to. We need to have the state governments now taking on and start engaging with industry and starting projects in this space. Q: The sense clearly from the panel is that it is indisputable. The fact that at least in the last three years of UPA government, things did come to a situation where there was a feeling of despondency as Kiran puts it. But clearly, the UPA government did a lot of things right. Why do you not focus on a little bit about what they got right and perhaps something that maybe the NDA government can learn from? Vaidyanathan: First of all, the opening question, I must point definitely point out that during the last 3-4 years of the previous government, the press was very negative and almost every single magazine were representing problems on the cover. Outlook magazine carried Blackout Nation, the Business Today put out a programme which showed India flying off a banana peel and we were trying to raise equity for our company to buy out certain promoters and it was very difficult to get foreign direct investment (FDI) even though we were in a sunrise sector of financial services. So, there is no doubt that there was a certain amount of problems and paralysis in the previous regime. It must also be pointed out that during the last year and a half or two, they tried to fix some of those things, they started to fix the oil subsidy by maybe Rs 0.50 a month for maybe 13-14 months. They were doing course correction no doubt, but the larger picture was definitely difficult. The other good thing they did was they did the Aadhar programme which was a good thing which is being used by the current government. Q: Tell us a little bit about how the investors that you speak with have reacted to the black money law and also a word, a question that I also posed to Mr Forbes. Looking at the steps the government has taken, do you think the steps are have been taken in earnestness and they will perhaps go a long way in actually dealing with the menace of black money?Shah: Absolutely. If you have seen the last couple of years, this government has gone about on all the agenda items in a very structured way and this entire black money issue which has been festering for some time, the government has taken a very balanced approach. There is a carrot and there is a stick. So even the income declaration scheme (IDS) that has opened right now is a way for those people who want to come clean and draw a line in the sand and go forward. It is an opportunity on that. And as you said, there is always a fear about tax terrorism, but almost everything we have seen of this government in the last couple of years, it shows that increasingly, they want to remove the arbitrariness in decision making whether it was the auction schemes, whether it is how they approving projects, there is a lot more structure and a framework around decision making that has come about and I would assume that the same will apply to tax laws also. And we have seen that in the last at least a year, a lot of the interaction with the tax department has become easier, refunds have started coming in without follow up. So, there is a lot of improvement that is there. And I do think that amongst the 3-4 agenda items that this government had, black money obviously has been an important one and they have taken all the steps that is required. Now it will be about implementation and enforcement which I am fairly sure they will follow through on that. And India Inc and a lot of the business people in India will also take this opportunity to see the new India because as the tax rates become more rational as there is more transparency, a lot of this will have to go away and this is the beginning of maybe another phase in India.