The Hindu Business Line : Make India Inc the main instrument of growth

The Government should create a stable plan which enables India Inc to prepare a strategy to get better, improve trade, and secure a higher share in the global economy.

The one sector that must get the impartial horizontal and vertical attention of the government is industry. Pre-Independence, the British rulers did not look at industry as an agency to be promoted at state expense. When the socialistic model was adopted in 1952, the need was felt to promote public sector establishments across all segments to provide the wherewithal to the millions of Indians aspiring for a better life. This signalled an era of state support to industry.

Today, India has nearly 5,000 companies listed on the stock exchanges — many from the public sector from which the government has partially disengaged. There are a large number of closely-held companies that are not listed. So, the market capitalisation of listed companies, amounting to Rs 32,16,600 crore , is not a true reflection of the size of the corporate sector. For this also does not take into account the extensive investments that Corporate India has made across the globe.

Traditionally, industry is the main source of revenue for Central and State governments. But equity in terms of securing revenues from Indian industry is at a slight disadvantage to the other sectors. India is essentially a rural economy and its strength and potential are seen in agriculture. But the 60 years since Independence has shown that agriculture can grow only in a limited way.

Radical shift needed

But now there is definite stagnation with no new plans or investments. The Green Revolution has faltered. Farm production is not uniform. nor are the yields. The monsoon continues to be a major influence on farm operations. Land reforms are slow and `controlled' inputs do not fully meet the needs of the farmers. A radical shift is needed for the rural economy to prosper and for income levels to match those in urban India.

Joint corporate operations with farmers and panchayats could be one way to once again accelerate farm output.

India's large land area, with its huge bio-diversity, offers unique opportunity for agricultural development. The climatic conditions range from the dry cold of Ladakh to heavy rainfall areas, to the semi-arid tropics, and it is for the planners to understand all this and then develop a farm sector that can also produce for the global market.

Corporates can help

To expect the simple farmer to rise to the occasion is unfair to him. Farming can be one of the most mechanised methods of production. But occupational farming holds the key to satisfying the growing demand of the market.

Corporates have indicated their readiness to help agriculture that benefits not only the current practitioners but also to gain a certain global dominance.

Thailand, with limited surface area, is one of the world's largest exporters of rice while India with the largest area under cultivation is a net importer of foodgrains.

It is time India reflected and planned the best way forward to fortify agriculture and make it robust and resilient. Not just to feed the country but to display an ability to command deserved heights in terms of output, cost and quality.

The manufacturing sector, with the capability to match world standards, needs focussed attention. For instance, engineering goods, transport equipment, textiles, leather, chemicals, and gems and jewellery, where the country has won global reputation and trust.

Showcase potential, proficiency

The Budget has an impact on almost all industries. The Government should create a long-term stable plan which enables India Inc to prepare a strategy to get better, improve trade, and secure a higher share of, and a prominent voice, in the global economy.

The country still remains a marginal player and that must be corrected. The time has come when India must showcase its full potential and proficiency.

Manufacturing is essentially value adding and in the dynamic flux of today staying ahead is a tough game.

Value-addition varies and execution and location remain fluid and unpredictable. There is little room and time to manoeuvre among these elements.

The primary requirement which the Budget should assess is how India can improve operational effectiveness in production for higher throughput to benefit (local and foreign) customers, lead to higher employment, raise GDP growth, and result in increased government revenues.

The advantages of controlling markets and product segments are obvious. The country prospers, incomes grow at the individual level, living conditions improve and with it the nation gets stability and strength. The poverty so rampant today can disappear tomorrow.

Global horizon

Most corporations now have a global horizon. The concept of a market related economy will force India to become efficient and productive. It can no longer be one among many or even the second best. It has to be at the top and demonstrate what it can do. Services which till recently were in the government domain have emerged as successful private sector endeavour.

No outlays needed

India Inc has shown interest in various fields. Now, it must be the Government's endeavour to help corporates achieve their aspirations.

The Government, despite its imperatives, must accept that liberalising trade and industry does not imply any outlays. In fact, it brings in the much-needed funds to spend on important projects, especially infrastructure.

What is involved is the exit of the Government from certain spheres to concentrate on efforts that would ensure a good life to the citizens.

Ensure fair competition

One aspect that the Government should ensure is fair competition. Currently, some regions receive preferential tax treatment on the plea that they are `backward'. These are necessary up to a point. But they can have a distorting impact too.

Most important is for the country to become one single market, unencumbered by the tariffs and barriers. It should not be easier to ship goods from Chennai to Singapore than to Mumbai.

There are too many restrictions and the cost of compliance for movement between and through States is needlessly high. It is essential that the Union Government removes as many hurdles as possible, with the States following up with simpler procedures. One pronouncement can be the rapid withdrawal of Central Sales Tax rather than reduce it in fractions every year.

The Value-Added Tax is to be followed by a General Service Tax that is the more modern and preferred method of generating revenues. The commodity tax levied by each State may continue but the Central Sales Tax is an anachronism with VAT in place.

Every year, the Budget provides the Centre (and to some extent the States) a chance to impact a billion lives. What will it do this time around?

(The author is Vice-President, Madras Chamber of Commerce and Industry.)

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