We should have got a land acquisition Bill that enables the industry to continue to grow by doing its acquisitions in a transparent manner.- Naina Lal Kidwai, President, FICCI
“India has the good fortune that the solutions are staring us in the face…the sad part is that we are not able to get it,” according to Federation of Indian Chambers of Commerce and Industry (FICCI) President Naina Lal Kidwai.
In an interview with Business Line, she opened up about how growth can be gotten back on track, interest rates, land acquisition and foreign investment in retail. Edited excerpts.
Should India get used to a sub-6 per cent growth in the near term?
I am quite hopeful of a turnaround.
All estimates suggest that, just by bringing in the Goods and Services Tax, India will add two per cent to the gross domestic product. Also, according to FICCI’s own analysis, if the projects that are cleared by the Cabinet Committee on Investments are executed properly, then growth can increase by one more per cent. These two measures can take the growth to near eight per cent.
A five per cent will not be able to support the social security initiatives of the government or provide for people at the bottom of the pyramid. We have allowed the growth rate to fall.
What are the other things that can be done to revive growth?
We have enough gas under our earth. We need the right pricing policy to get it out.
If we can bring the domestic coal supply back, we could save another $20 billion. After all what is the point of being the third largest coal deposit holder in the world when we are importing coal at three to four times the price.
The iron-ore and steel production and exports, which was stopped overnight, took away another $15-20 billion. All of these solutions lie with us, but we are not seeing it.
We don’t have to grow from a situation where everything was possible to a situation where no amount of mining is allowed. The whole world mines within a certain template. So, it is about balance returning.
But the situation that industry finds itself in, with regards to mining, is because they worked outside the template…
I totally agree… but we are going through the go-go years that every country has had. If you look at how gold mining happened in South Africa, it is horrifying. In every country there was a free for all at one stage…to what is a more conformist policy. In our case, what is worse is that the policy existed, but it was not followed. I think that is the balance…where the industry needs to be responsible and the government should to see to it that the rules are being adhered to.
There has been a lot of unhappiness in the industry over the land acquisition Bill. Does the industry feel that the Bill has put them back a little more?
I think land acquisition has pretty much stopped. The land acquisition Bill is unfortunately not going to allow it to start.
We should have got a Bill that enables the industry to continue to grow by doing its acquisitions in a transparent manner.
The fact is that the rules, as they exist in the new Bill, are unrealistic. We had suggested a 60 per cent consent norm (from the total number of land owners) for the land acquisition to proceed, but now we have to get 80 per cent consent. It is less about the price and more about the modalities. The modality of how you engage with the person you have brought land from and how you continue to work with that person goes well beyond the industry charter.
Even earlier, the industry did not acquire the land directly. It got it through somebody. Now it is that somebody who needs to be looked at. Who is that in between who benefits from not paying a fair price from the farmer?
The net effect of this is clearly the slowing down of large projects that require land. Foreign investors find these rules very threatening.
It has been a year since FDI in multi-brand retail was announced but not a single dollar has trickled in. Where do you think, the policymakers got the script wrong?
The good news is that there is continued engagement. It is a very complex area. Some of the rules which were brought in because of the political debate around modern retail did raise issues around if the model, which the policy prescribed, worked.
The issue and challenges around sourcing from domestic retail market is quite real. We don’t have clarity around how that 30 per cent rule will apply. Some of those norms needed some good hard look in terms of practicality.
But some of those got watered down subsequently…
The policies that got sent out initially were not going to be easy for somebody to subscribe to. It (the new relaxations) now suggests that we are reaching a more workable model.
When do you think banks will cut interest rates?
Low interest rates are one of the important ingredients for the good health of the industry.
As and when more money comes to banks from cheaper non-resident Indian deposits and other means, it will lower the cost of money. That in turn should bring interest rates down.
Some of that has happened already with the RBI relaxing some of the rules around foreign currency deposits.
It will take at least six months for the projects cleared by the CCI to take the desired effect.
These should help bring down the bad quality loans in banks as more and more industry participants pay up.
This will help banks lower interest rates as they will have to provide less to cover bad loans.