at the ET Awards for Corporate Excellence. Edited excerpts from an interaction with ET’s Bodhisatva Ganguli
You have just returned from the US. What is your sense of the financial sector there? Do you see a contagion risk?
Contagion risk, if you go by the rule book, if all central banks are responding to the Fed’s action almost sequentially, and as a result you find Europe being more exposed to the chance of coming under recession. I think, since the last one-one and a half year, gradually our central bank is decoupling itself—not that it was entirely linked with the US Fed even earlier. So, for India, I would think the contagion risk is not really a problem, but the risk is there in the sense when markets to which you export are coming under recession. Then the demand is going to fall, your exports are going to suffer. So that risk is definitely there. But the contagion risk usually linked to the conduct of the central banks, I would think is not there for us to face.
The RBI recently paused rate hikes. Do you think we have hit the peak in interest rates?
I think it is only fair to give RBI its terrain and it is for them to take a call and I think most of you all are very happy with RBI having paused. So, I really cannot speak differently, can I? So, no comments on that because RBI is getting the sense from the ground, getting the sense of the urge for us to move forward in terms of growth and also seeing how the implications of a recession elsewhere can hit us. So, I think we should be confident that RBI will take the right step, right decision for the next round as well.
Do you think the OPEC+ decision to cut output plus the possibility that the monsoon may be on the weaker side due to the El Nino effect will put pressure on inflation?
Well every year, every season this question comes before (us). Now we have seen such historic unpredictable events happening where we do not have a template to deal with it, but we have come across and walked along and gone past them as well, whether it is a pandemic, whether it is a war and so on. Now El Nino is also not something which is happening for the first time. To ready our economy for meeting that kind of an impact on the monsoon or not a happy monsoon also is part of our preparedness. So there is no new element to it, but yes, one has to be cautious.
We have a number of state elections and of course the general election in a year. Do you see the possibility of an upsurge in populist pressures—for example, state governments reviving the old pension scheme (OPS)?
Well, first of all, this upsurge of populist demand is not from the population. It is more from the political parties which I think have no other card to win the election. There are instances of states where even after splendid freebies, parties have not won. I think some states are very prone to it, some others not in a big way.
But if you are referring to the OPS and NPS (National Pension System) debate, I would like to believe that post the budget, the discussions on NPS and OPS are a bit subdued. The implication of moving, the complications involved in the moving, are all now apparent for everyone to see. So, in the current set of elections, I do not think that is coming in for the debate also because we have a committee headed by the finance secretary to look into it. But one thing which is somewhere at the back of my mind, returning to OPS is probably going to be extremely impossible. It is not for A state or B state, every state will be burdened much more than what they can take even within a matter of five to 10 years and after which it will balloon.
Private sector capex is not picking up to the desired extent. The private sector is richly represented here in this room. Is there something that you would like to tell them or make a pitch for?
Well, for once, I am going to talk in favour of the private sector. If after bringing down the corporate tax in 2019 and giving (industry) time until March 2023 to expand businesses or set up new manufacturing businesses (to be able to take advantage of the low 15% tax rate) and if everything else in the world had been normal, telling the private sector that it hasn’t really come out with flying colours would have been a reasonable argument.
But immediately after the tax cut, you had the pandemic and then the uncertainties of the (Ukraine) war. But despite all these, I can still see many expansions happening, new investments coming up. Otherwise, why will there be such an impactful impression about India and its attempts to bring in renewable energy? Look at the keenness with which people are coming to India (for investments in many sectors)—whether it is semiconductors or renewable energy or rare earths. The policy per se has now opened up even the space sector. So, it (private investment) is happening. But I do not know from where this trigger has come about, some data is also flowing in that says the Indian private sector is not yet ready. I am sure they are ready.
Anecdotally, there seems to be a sort of rise in number of income-tax notices, GST evasion…
I think the industry knows where the raids are going on. Let me be very clear. I am not justifying it. I remember in 2019, I was pilloried for what some said ‘tax terrorism.’ You questioned me several times on it. I am not suggesting that this word is not being used anymore. There can be some harassment here and there. But today, when you are looking at deep data and artificial intelligence-driven and faceless-driven systems, and the fact that trails of shell companies are there in your face, I cannot see how the CBDT (Central Board of Direct Taxes) or the CBIC (Central Board of Indirect Taxes and Customs) can remain a mute spectator. I am glad if they are going after them efficiently because otherwise, those who are genuinely paying taxes will lose faith in the system. So, I do not want this to be a conversation eternally about India’s tax authorities. In fact, the tax authorities are now ready to answer (taxpayers’ grievances). But if they are going to be quiet for fear that they will be accused of unleashing a certain kind of tax terrorism, the inefficiencies will only perpetuate. We do not want that. We need to appreciate people who are genuinely paying the tax and those who are misusing the system will have to be called out.
Let me come to two of the biggest reforms of the government—GST and IBC. GST is a success but, IBC seems to have encountered various problems…
IBC has its problems in terms of the benches in the NCLT and NCLAT not having adequate members, and timely filling up of vacancies is not happening. It is not because we do not want to. The layers of decision-making which is involved in it only to track the right people so that they are efficient, they are transparent in their operations or in their decision-making. In that a lot of time gets consumed because appointments are jointly made by the court and by the government. The act per se is robust. It has been updated with inputs from the industry. So, we are periodically having awareness built on it. The professionals are also being given good training so that they do not delay the process. In spite of all that, if there is a problem, I admit to it. We have not really been speedily filling up the vacancies in the benches.
There has been some debate about reforming India’s capital gains tax regime…
Well, at this stage, there is no proposal before me. The government will do it when it wants to do it, but at the moment there is nothing.
There was a reference to gender budgeting in earlier speeches. Is there a plan?
We have now grown beyond what gender budgeting of let us say 2000, 2001-02 had to say. We are now looking at women-led policies, meaning where you give prominence much ahead for women to take it forward and so on. So, there are so many ways in which you are reaching women to empower them. It is not just the money which is going to the women, but also those other paraphernalia which is so important for women. So, I am not sure in the very typical lexicon-related gender budgeting there is anything happening, but there are a whole lot of things happening for women, women-related policy making.