Agricultural reforms, interest rate cut and credit availability to micro, small and medium enterprises will drive India’s economic growth to 7.5% in 2019-20, said newly elected president of Ficci Sandip Somany.
“I expect growth rate for 2019-20, barring any unforeseen circumstances, to be 7.5-7.6%,” Somany told ET in an interview, adding that uncertainty due to global factors may affect exports while domestically, except a few months of election, the economy is on a “good footing.” He said, “If interest rates are taken care of and there is availability of credit to MSMEs, then there is enough demand growth.”
Emphasising that India’s real interest rates are very high, Somany favoured at least a 100 basis points rate cut. One basis point is one hundredth of a percentage point.
The Reserve Bank of India had kept policy rates unchanged in the December review of the monetary policy but had changed stance to “calibrated tightening” in October. However, with inflation declining, there is expectation it may soften its stance going ahead.
REFORMS, FARM LOAN WAIVER
Somany appreciated the government’s reform agenda especially the Goods and Service Tax Council, which after taking inputs from industry and trade, changed laws in a relatively quick period of time to take away their pain. Somany also said the Insolvency and Bankruptcy Code is a landmark reform, which will change the credit culture and business practice of corporate India.
“We need to look at reforms in agriculture to improve our productivity and change the type of agricultural produce we make. We do very little value added products,” he said. He, however, highlighted that farm loan waivers are not a sustainable solution but only temporary patch work to ease farmers’ distress. “It only gives immediate relief… I am not against it, but it does not guarantee that the farmer will not get into that mess again.” Instead, developing supply
chains such as transport and refrigeration can help farmers be better off.
On the government’s recent tightening of inventory-based provision for ecommerce and barring entities related to ecommerce platforms from selling on that site, Somany said the move will not scare foreign investors away.
“India is too large a market to scare anyone away. By default, India is the largest market because China does not let them enter. They will be here,” he said. The government, he said, is trying to create a level playing field by giving some kind of protection to domestic small traders against very large deep-pocketed foreign companies.
Source: Economic Times
