Policy paralysis was the catchphrase India Inc. used to describe the state of functioning of the country's government over the last couple of years. Amid allegations of corruption and, in former Prime Minister Manmohan Singh’s own words, the pressure of coalition politics, growth slumped to new lows. The global macroeconomic condition didn't help either.
With the BJP-led National Democratic Alliance (NDA) poised to take charge at the Centre, Indian firms and business leaders are enthused at the prospect of having a stable government. They expect the Modi-led government to jumpstart a slew of reform measures and revive the economy to the levels of the 8-8.5% growth that they once saw.
Harsh Goenka, chairman of the Mumbai-based RPG Enterprises, said corruption within the country had, in the last few years, reached the “heights never seen before.” One of the ways to overcome this problem was to maintain consistency in policy making and move away from an ad-hoc approach to decision making, Goenka said.
According to Adi Godrej, chairman of the Godrej Group, the key priorities of the new government should be to improve the ease of doing business in India, “which was never very good but further deteriorated during the last three years.”
One of the biggest bones of contention between the UPA-led government and several multinational companies such as Vodafone, Nokia and Royal Dutch Shell has been the issue of taxation, often retrospective in nature, leading to long-drawn litigation.
Solving the tax disputes with foreign and Indian investors as a result of retrospective amendments and transfer pricing interpretations should also be one the immediate key agendas of the new government, Godrej said.
At least a dozen industry leaders that FE spoke with agreed that key tax reforms that have been on the anvil for years now such as implementation of the Direct Taxes Code (DTC) and the Goods and Services Tax (GST) needed to be expedited at the earliest. Godrej said that the implementation of these tax reforms could add as much as two percentage points to India's Gross Domestic Product (GDP) growth.
Relook at policies
One of the rare points on which Modi's predisposition may have disappointed some businesses has been reservation against allowing FDI in retail. "The entire retail policy needs to relooked,” says Kishore Biyani, founder and group chief executive of Future Group.
“Everywhere else it segmented into supermarket, hypermarket, and so on. We need to look at retail the way the rest of the world sees it."
Focus on infra & health
In India, the healthcare sector, despite improvements in recent past, suffers from underfunding and bad governance, says Glenn Saldanha, chairman and managing director of Glenmark Pharmaceuticals. “The new government should look at substantially increasing its spend on healthcare.”
Satish Reddy, chairman of Dr Reddy's Laboratories, said the new government needs to address the concerns surrounding clinical trials in India. “There is a lot of angst in the industry with respect to that and you have already seen the clinical trials being moved out of India,” Reddy said. “We are also seeing a slowdown in the process of approval...We hope that this delay is plugged.”
Not only housing, sectors like automobiles have also witnessed a slump in demand. “Customer sentiment is expected to improve in the medium to long term with a new government at the Centre,” P Balendran, vice president of General Motors India said.
Managing Centre-state relations
The success of many of the policy initiatives that the NDA government may want to push forth will depend on the kind of support it receives from the various state governments in power across India.
S Unnikrishnan, MD and chief executive of Thermax, says that with Modi being a long-serving CM of a state himself, he will play a vital role in ensuring cordial relations between the Centre and states.
“The government should embrace digital technologies to connect with citizens in a holistic manner,” N Chandrasekaran, chief executive and MD of Tata Consultancy Services said. “For India, digital governance is the only way to fundamentally simplify its interactions with citizens at key service touch points.”