For Zydus Cadila CMD Pankaj Patel, leading from the front is nothing new. Now, as the new President of industry chamber FICCI, he is ready to do just that. Patel shared his views on the topics of the day — demonetisation, political funding by corporates and new a taxation regime. Excerpts:

The demonetisation deadline has ended. How would you weigh its impact on the industry?

It’s a short-term pain, long-term gain. Because of this move so much cash has come into mainstream banks, as a result of which we have seen one of the highest reductions in interest rates, of 1 per cent. If the Indian industry has to become globally competitive, I think the interest rate has to come down to about 7 per cent, since there are other factors such as our currency depreciating.

Also, because of lower interest rates, growth and development can happen, as the cost of projects can come down. That is the real benefit of demonetisation. This is the first step to reduction of interest rates. And I do expect that RBI would also come up with a monetary policy in which further relaxation may happen. More tax reforms should take place and rates should come down so that people have more money to spend and demand increases.

This large amount of money that is available with banks has to be used for infrastructure projects in a big way, and it can help increase demand.

What about the impact on the informal sector?

The unorganised sector, which depended on cash transactions, is likely to come into the banking system. These people would become compliant for the first time. We need to see how we can absorb them into the formal sector. A larger formal sector means more revenue would become available with the government and in the process more money would be available for development.

The discussions on GST are under way. What would be its implications for the pharma sector if the expected tax rate of 12 per cent is implemented?

I think a 12 per cent tax rate (under GST) should be in line with what the industry pays now, because there is excise duty, sales tax ranging from 4 per cent to as much as 10 per cent, depending on some States. Further, there are local levies like entry tax. If you combine these, the tax rate would be close to that (12 per cent). With GST the same formal versus informal economy picture will come into play.

For the economy as a whole, I think the government is trying to create a level playing field. Those who are tax compliant would gain from this, those who are not would have to fall in line and there would be fair competition.

Political funding by corporates has come under the scanner. What can the industry do to increase transparency there?

I think political funding by corporates takes place everywhere in the world and our laws legally provide for such funding. Companies should be able to give political funding to parties but asking them to disclose which political party got what is not correct.

So you don’t think disclosure should be mandatory…

Currently, disclosure is mandatory, which is not correct.

What are your views on simultaneous elections in the Centre and States?

First, it will reduce the cost. Now, at least a couple of times a year there is an election and the government can’t take or implement decisions. Everything comes to a standstill once the model code of conduct comes into force. Even tenders can’t be finalised.

Indian pharma companies are increasingly falling foul of the US FDA. Is there a significant compliance issue?

There is a compliance issue for certain. I think it’s a new thing for the Indian industry. The FDA has certain requirements and the Indian industry has now understood it completely and has taken steps to become compliant. From that point of it, we are now moving in the right direction. I think it’s an opportunity for the Indian industry to rise to the next level.

One bone of contention between the pharma industry and the Centre has been price control…

What we need is a more stable and predictable regime, not ad hocism. Periodic review is welcome but not too frequently.

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