Focus on spending & investment rather than meeting fiscal deficit target: industry body to govt
Updated: Jan 12, 2015 01:27:33pm
New Delhi, Jan 12 (KNN) Concerned over reports that planned expenditure may be cut to somehow meet the fiscal deficit target of 4.1 per cent of the GDP, industry representatives have appealed to the Finance Minister, Arun Jaitley to focus on spending and investment rather than meeting fiscal deficit target.
It should be the government and the government-owned companies which have to lead the investment revival cycle, ASSOCHAM said in a press release yesterday.
“Heavens would not fall if the fiscal target of 4.11 per cent in the current fiscal year is not met and the deficit moves up somewhat. But it will be quite detrimental to the efforts for economic revival if different ministries are asked to squeeze their planned budget and such saving saves the day for the fiscal consolidation,” ASSOCHAM said after deliberating the issue among its top brass.
It said even if revival were to happen, it would be a time lag of at least 18 months before it reflects on the manufacturing sector which is in the dumps. “In any case, where is the question of investment revival in the private sector when the existing capacity remains unutilised to the extent of 30-40 per cent in several industries,” the chamber said.
Besides, the private sector is under a heavy leverage and finding it difficult to service the debt under an interest rate regime which remains hostile to consumer demand and investors’ risk appetite.
“Under these circumstances, the only way left for investment to return is through state funding of the infrastructure- both economic and social as also asking the cash rich public sector companies to create additional capacity and expansion either through new projects or through asset acquisitions. The public spending on infrastructure has to increase rather than decrease, as there are apprehensions about the same,” ASSOCHAM Secretary General D S Rawat said.
According to the ASSOCHAM leadership, the states were right when they recently asked the Centre not to remain rigid on the fiscal deficit number and be liberal with spending. “That is only way we can revive growth in the economy which is faced with a number risk factors despite some turnaround because of reforms being taken up by the government.”
The risks to the Indian economy are mainly from the overseas situation which has so far helped in terms of low crude oil prices. But the negative impact would be seen on merchandise exports, IT exports and the money moving out from the emerging markets and the attendant impact on the rupee, the chamber said.
A faster movement to the Goods and Service Tax would make it incumbent on the Centre to be generous with the states in the initial years of the implementation, which would translate into still higher resource requirement. Despite being in positive business sentiment, the situation on the ground has to change in generating the real number for higher growth in industrial demand and production, it said.
Besides, the government and the RBI must move in tandem to ensure that the interest rates are brought down with the inflation coming down in order to revive the job-creating real estate sector. “Big time developers remain stuck for lack of liquidity and are under heavy debt. The asset sale is being difficult. Still there are cases where lakhs of built up flats are not being allowed to be handed over just because someone went to the court citing presence of bird sanctuary in the vicinities,” the Chamber added.
The environment and other regulators both at the Centre and the states move fast and clearances of these projects.
“It is only then that the mood generated at the investment summits can be turned positive and realistic. Implementation and delivery would remain the key,” ASSOCHAM said. (KNN Bureau)
It should be the government and the government-owned companies which have to lead the investment revival cycle, ASSOCHAM said in a press release yesterday.
“Heavens would not fall if the fiscal target of 4.11 per cent in the current fiscal year is not met and the deficit moves up somewhat. But it will be quite detrimental to the efforts for economic revival if different ministries are asked to squeeze their planned budget and such saving saves the day for the fiscal consolidation,” ASSOCHAM said after deliberating the issue among its top brass.
It said even if revival were to happen, it would be a time lag of at least 18 months before it reflects on the manufacturing sector which is in the dumps. “In any case, where is the question of investment revival in the private sector when the existing capacity remains unutilised to the extent of 30-40 per cent in several industries,” the chamber said.
Besides, the private sector is under a heavy leverage and finding it difficult to service the debt under an interest rate regime which remains hostile to consumer demand and investors’ risk appetite.
“Under these circumstances, the only way left for investment to return is through state funding of the infrastructure- both economic and social as also asking the cash rich public sector companies to create additional capacity and expansion either through new projects or through asset acquisitions. The public spending on infrastructure has to increase rather than decrease, as there are apprehensions about the same,” ASSOCHAM Secretary General D S Rawat said.
According to the ASSOCHAM leadership, the states were right when they recently asked the Centre not to remain rigid on the fiscal deficit number and be liberal with spending. “That is only way we can revive growth in the economy which is faced with a number risk factors despite some turnaround because of reforms being taken up by the government.”
The risks to the Indian economy are mainly from the overseas situation which has so far helped in terms of low crude oil prices. But the negative impact would be seen on merchandise exports, IT exports and the money moving out from the emerging markets and the attendant impact on the rupee, the chamber said.
A faster movement to the Goods and Service Tax would make it incumbent on the Centre to be generous with the states in the initial years of the implementation, which would translate into still higher resource requirement. Despite being in positive business sentiment, the situation on the ground has to change in generating the real number for higher growth in industrial demand and production, it said.
Besides, the government and the RBI must move in tandem to ensure that the interest rates are brought down with the inflation coming down in order to revive the job-creating real estate sector. “Big time developers remain stuck for lack of liquidity and are under heavy debt. The asset sale is being difficult. Still there are cases where lakhs of built up flats are not being allowed to be handed over just because someone went to the court citing presence of bird sanctuary in the vicinities,” the Chamber added.
The environment and other regulators both at the Centre and the states move fast and clearances of these projects.
“It is only then that the mood generated at the investment summits can be turned positive and realistic. Implementation and delivery would remain the key,” ASSOCHAM said. (KNN Bureau)
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