December 17, 2019
PHD Chamber suggests to create complementarities in the economic reforms to the Finance Minister in the Pre-Budget Meeting
Dr D K Aggarwal, President, PHD Chamber of Commerce and Industry in the Pre-Budget Meeting with the Hon’ble Finance Minister, Mrs Nirmala Sitharaman has suggested to create complementarities in the reforms such as readily availability of land for the industry, time bound single window clearances, full transmission of the policy repo rate, a dedicated fund for the MSMEs, tax reliefs for incremental exports, need for the review/ upgradation of India’s FTAs.
Dr D K Aggarwal suggested that in order to stimulate domestic as well as foreign investments in the economy, it is essential to enhance the ease of doing business with an effective single window system. The most important reform needed in this regard is to ensure single window clearances of all the government departments / all clearances at one stop in a time bound manner.
At this juncture, readily available land in the form of land banks by the states should be encouraged. States may provide availability of land in their respective territories on their respective websites to attract domestic and foreign investments.
He suggested that NITI Aayog may undertake benchmarking of ease of doing business index at the district level. This would help in identifying the problems at the grass root level and result in fruitful outcomes for the businesses.
Synchronisation of the economic reforms is a must as we are at a very delicate juncture at this point of time. The ease of doing business at 63 must be complemented by the full transmission of cut in policy rate by RBI to reduce the cost of capital to enhance the competitiveness of the businesses not only in the domestic market but to make them competitive in the international business arena, said Dr D K Aggarwal.
Access to finance is a major roadblock being faced by the industries particularly the MSMEs impacting their competitiveness and growth. The current banking norms result in high primary security and collateral security demanded by banks for the MSMEs which hampers their growth prospects. Focus of the government should therefore be on easy availability of finance at affordable rate of interest for the businesses, said Dr D K Aggarwal.
Further, to address the liquidity crunch in MSMEs, there is a need to set up a dedicated fund of Rs 25,000 crore or more with no collateral being asked for the MSMEs on the lines of fund for stalled housing projects.
MSMEs have been facing the problem of delayed realization of their bills and receivables particularly from their large corporate buyers and government organizations for a long time. It is therefore recommended that punitive measures should be introduced against the habitual defaulters who do not meet their payment obligations as per agreed terms maximum in 45 days, said Dr D K Aggarwal.
In the corporate bond market, Dr Aggarwal suggested that investment in corporate bond/ securities which have a rating of BBB should be allowed to raise more money from pension funds, insurance companies, among others in the coming times.
The PFRDA has recently allowed NPS schemes to invest in corporate bonds/securities which have a minimum of ‘A’ rating or equivalent. Going ahead, we suggest that these NPS schemes should be allowed to invest in corporate bond/ securities which have a rating of BBB, he added.
To kick-start the exports growth trajectory, Dr Aggarwal suggested increase in export earnings by the exporters on the base of the previous year (year-on-year earnings) should be tax free, said Dr Aggarwal.
To harness the export potential of the country, it is suggested that sectors such as agro and food processing along with dairy products and sea food, automobiles and automotive components, defence including arms and ammunition, parts and accessories, electrical machinery and equipment, gems and jewellery, oil and gas, pharmaceuticals, sports goods, textile garments, handlooms and handicrafts and IT & ITeS must be facilitated in terms of procuring raw materials with concessions in duties, facilitation in production processes etc., said Dr D K Aggarwal.
Dr D K Aggarwal said that in order to derive greater benefits from the already signed FTAs, they should be re-examined in consultations and necessary amendments to be made as and when their review/ up gradation comes.
We believe FTAs have to be signed keeping two things in mind, mutually reciprocal terms and focusing on products and services with maximum export potential, said Dr Aggarwal.
To incentivise Rental Housing, 10 year tax holiday be given to real estate developers on profits earned from rental housing as it will revive investment and boost a slowing economy, said Dr Aggarwal.
Entities engaged in real estate business should be exempted from the burden of tax on notional rental income because they are in any case subjected to levies at the time of Sale or the period of 1 year should be extended to 5 years before such a provision begins to operate, said Dr Aggarwal.
We appreciate the government for yet another bold move to provide a 2-year moratorium on spectrum-related dues. Going ahead, we suggest that focus should be on importing technology and not the products. FAB manufacturing should be encouraged domestically with support from the government, said Dr D K Aggarwal.
On the logistics front, Dr D K Aggarwal recommended that logistics costs at 14% are high and need to be reduced to promote ease of doing business in the country. The stalled infrastructure projects must be completed at the earliest to enhance movement of goods in the country. There is a need to enhance the state to state movement of goods.
There should be online tracking of goods reaching the ports for seamless and faster transportation of goods, said Dr Aggarwal.
Cold chain infrastructure should be enhanced to reduce the logistics costs and to reduce the wastages of agriculture produce which are estimated at around Rs. 30,000 crores. Reduction in the wastages will enhance farmers’ incomes and contain retail inflation in the economy, added Dr Aggarwal.
An environment of trust between government and industry needs to be created. The Companies Act must be made simpler to be complied with and all penalties must be reverted to Civil Laws; if the businesses are indulged in any kind of fraud that should be considered in the criminal proceedings against them, said Dr D K Aggarwal.
As MSMEs are not able to adhere the companies act because of lesser availability and affordability of manpower, these should be exempted from the prosecution provisions for minor infractions in Companies Act, added Dr Aggarwal.
We strongly believe that string of economic reforms undertaken by the government needs to create synchronisation and complementarities in the businesses and manufacturing processes, said Dr D K Aggarwal.
Dr Aggarwal suggested that entrepreneurs must be encouraged to meet their financial needs such as easier and low cost access to credit to encourage them for capital investments. So, full transmission of policy repo rates along with easy and collateral free finance to businesses particularly for small businesses becomes crucial for the effectiveness and fruitfulness of the reform efforts undertaken by the government, he said.
PHD Chamber of Commerce and Industry