From simplified taxes to daring reforms, India Inc’s wish list for new government is long

Is all the planning in ministerial meeting rooms in tune with industry expectations

52-Workers-at-a-factory-in-Noida,-Uttar-Pradesh Aiming high: Workers at a factory in Noida, Uttar Pradesh | Shutterstock

Most bureaucrats in the corridors of power in Delhi look forward to the summer. The pace of work gets a bit languorous and a good chunk, family in tow, go to their native places for that much-needed summer vacation. Many others take off to cooler climes―the lucky few to Europe and others to domestic hill stations and pilgrim centres.

The stark reality is that India’s labour force is unskilled or, at best, semi-skilled. This is when the country has grandiose visions of becoming a tech manufacturing hub.

A lazy summer becomes an even greater attraction in an election year. With the model code of conduct limiting the incumbent government from making any major decisions or policy changes and with ministers away campaigning, the pace of government work further slows down. It is usually a relaxed few weeks spent speculating on election results and extended tea breaks before the flurry of activity hits them in full blast with a new government.

This summer, though, things have been a bit different. The outgoing Narendra Modi government, in a show of super confidence in its fate at the hustings, has given them so much work that the bureaucracy’s hope for a ‘chill-out summer’ just melted away. It was set in motion way back in February. Modi initiated in a cabinet meeting the planning for a 100-day agenda that his government would take up after coming back to power. The plan was to be worked out by senior bureaucrats; a final list of 50 projects or policies to be taken up immediately after the new government’s formation, targeted at the grand vision of ‘Viksit Bharat’ by 2047.

The result? Senior bureaucrats have been scampering around attending many rounds of meetings and presentations. Officials from the ministries of finance, corporate affairs, and micro, medium and small enterprises have been particularly busy, with meetings and deliberations on topics ranging from rationalisation of tax rates to prioritising pending reforms. A vision document for transforming the country into Viksit Bharat and the launch of a ‘Made in India’ branding are under preparation.

But is all the planning in ministerial meeting rooms in tune with what the industry and markets want?

“I have a straightforward answer,” said former Reserve Bank governor D. Subbarao, when asked what the new government should focus on. “We must focus on creating jobs.”

For all the big numbers that are being touted around―a blazing pace of growth not less than 6.5 per cent; soon to be the world’s fourth largest economy―India exhibits a curious dichotomy on the ground. The ‘India Shining’ sentiment does not reflect ground reality―there aren’t enough jobs for the youth, and the rural India and the lower middle class are not yet out of the distress caused by the Covid pandemic.

It is not that the government has not tried. Through its Atmanirbhar Bharat packages and production-linked incentive (PLI) schemes, it had sought to exert emphasis on improving the state of manufacturing in the country. Indian economy had moved from an agrarian one to a services-focused one, largely skipping the manufacturing phase which many developed nations had gone through in their transition. The post-Covid world order demanded that the country focus on self-reliance and its own manufacturing capabilities, with the neat dividend of it being a job creator.

But there was a problem. Where do you get the qualified workers?

“Growing the way we are, we are not able to get skilled, disciplined and regular manpower,” said Ajinkya Firodia, managing director of automaker Kinetic Engineering.

Leading from the front: Prime Minister Narendra Modi with Finance Minister Nirmala Sitharaman | Getty Images Leading from the front: Prime Minister Narendra Modi with Finance Minister Nirmala Sitharaman | Getty Images

While labour laws are one part of it, the stark reality is that India’s labour force is unskilled or, at best, semi-skilled. This is when India has grandiose visions of becoming a tech manufacturing hub, making anything from Tesla’s electric cars (Elon Musk willing) to semiconductors. Those leaving their farming days behind and venturing into industrial hubs eager for labour jobs may not fit the bill any longer.

R. Dinesh, founder and executive chairman of TVS Supply Chain Solutions and the outgoing president of the Confederation of Indian Industry, realises this gap. “We have formally educated workers ready to work, but with new technologies and artificial intelligence coming in, the process of manufacturing itself has changed dramatically,” he said. “All of it requires upskilling.”

While some corporates and even industry bodies like the CII have set up centres for upskilling, it might not be enough. “One of our asks for the future is for an employment-linked incentive plan,” said Dinesh. “Especially in sectors like textiles, logistics, tourism, hospitality and health care. And as we keep investing in those sectors, you will see that a virtuous cycle will be set in motion, because people get prepared and they get an opportunity.”

But it would be foolhardy to expect this mega job creation to happen through just big multinationals or the big daddies of India Inc. Therein pops up the most talked about, but yet-to-be-weaponised four-letter acronym in the country―MSME, or micro, small and medium businesses. It is still looking for a saviour as it has not come out of the troubles that Covid caused. Yet, the category offers the best possible avenue for job creation in a nation that desperately needs its GDP growth benefits to trickle down.

“With a new government coming on board, it is an important point for us to figure out how to support MSMEs for their own growth,” said Dinesh. He suggests creating a fund which allows first ‘loss’ guarantee (the government will cover a certain percentage of losses if the borrower defaults on a loan), developing a rating system that understands sector requirements, and helping MSMEs in their digital and green transition.

While advocating green transition is fashionable, India Inc, deep inside, does palpitate at its implications. Especially with India in advanced stage of negotiations for free trade agreements with the likes of the UK, Oman and the EU. It would trigger a new approach to the environment, carbon emissions and renewable energy, which can be an opportunity or a challenge, depending on how you approach it.

“Once the FTAs come into existence, many Indian businesses will feel that they are put at a competitive disadvantage as cost of compliance goes up,” said Sunil Kumar Sinha, principal economist & director (public finance) at India Ratings & Research, pointing to the EU’s carbon adjustment mechanism that might make Indian exports to the continent more expensive. “India has committed to energy transition. So it is a very important focus, irrespective of whether you are a cement manufacturer, steel manufacturer or fertiliser manufacturer. Everyone would be closely looking forward to what policies are put in place by the government in terms of energy transition and increasing use of renewable energy as compared with fossil fuel energy. It will call to form the very best of the government’s balancing act.”

Another challenge is the upswing in real estate prices, which poses a question to the government’s efforts to develop affordable houses. “We need a scheme for really affordable houses,” said G. Hari Babu, president of the National Real Estate Development Council. “Around 10 per cent of our population controls 63 per cent of the total wealth in the country. So it is time we gave some subsidies to the other 90 per cent.”

His suggestion? Plan houses under Rs35 lakh, offered with home loans up to Rs25 lakh on a lowered interest rate of 5 per cent for the first five years. “The Central government should put in a word to state governments to lower stamp duty for their registration process,” he said.

In commercial realty, too, there are expectations of unlocking potential through relaxing stipulations. For instance, allowing special economic zones (SEZs) to use a portion of their land for development “made India the most preferred location for Global Capability Centres”, said Sanjay Chatrath, managing partner of Incuspaze, a co-working space provider. “We expect that the new government would focus on initiating progressive initiatives like the GIFT City in other cities, too,” he said.

The government’s economic direction so far has been in alignment with the interests of big businesses. The massive investment in infra, ranging from highways to ports and airports, the Gati Shakti programme and the digitisation of logistic networks have directly helped business growth. “There is a clear consensus among industry members that we are on the cusp of seizing an opportunity to use this cost competitiveness and digital differentiation to become more global,” said Dinesh. “Already, it is happening in certain sectors, but we see a lot more opportunities.”

The new government will also be expected to push for the three big-ticket reforms that have vexed the Modi regime throughout its tenure―land, labour and agriculture reforms. “The pending reforms in labour and land are very difficult,” said Sinha. “When it came back to power in 2014, the NDA government tried to touch them, and immediately gave up because of the resistance.”

It was worse when it came to agriculture reforms, and these ‘holy trinity’ prompts Sinha to believe that the incoming regime will stay clear of it. “On the contrary, they will look at infra development and improvement in ease of doing business,” he said.

But a businessman can dream, right? “Land, labour and agri reforms are possible, in our view,” said Dinesh. “Just like GST, when people sit down and discuss, we can build up consensus.”