In a first, govt is moving away from past policies

RC Bhargava | Updated on February 01, 2021

RC BHARGAVA, Chairman, Maruti Suzuki India   -  Bloomberg

Fundamentally, what I believe is that for the first time, the government is prepared to go away from many of the past policies that were handicapping wealth creation, manufacturing competitiveness and, therefore, job creation.

And, they are now willing to implement changes in those policies. Now, why I am saying this. Firstly, the Finance Minister announced that the government wants manufacturing to grow in double digits. I don't think I have ever heard such a thing before and, certainly, we have never grown double digit in manufacturing. And, to do that, the government is changing some policies.

For example, the decision to divest two PSU banks and one general insurance company is very significant in the context of what till now has been considered almost a 'holy cow' — mainly nationalised banks. It's obvious that these have done nothing much. So the decision to divest them, I think, is very significant because it upgrades from a policy which lasted for around 50 years and we were always reluctant to talk of divesting PSU banks and insurance firms.

PSU disinvestment

Along with this change, the government appears to have accepted that PSU divestment could be strategic and used for raising resources for development. The target for 2021-22 is ₹175,000 crore. The monetisation of the operations of infrastructure projects is another valuable source of funds for development besides having the potential for improving efficiencies.

The provision of ₹20,000 crore for recapitalising PSU banks, and the decision to create an asset reconstruction and management company, are steps that had become unavoidable and are intended to improve the health of the banks.

In future, it will become much easier to go further down this road and that could be a great help both to manufacturing and the economy. Then the huge emphasis on infrastructure building. Infrastructure, I think is one serious impediment in manufacturing growth, competitiveness and foreign investment. Therefore, this kind of infrastructure building, along with the monetisation of assets for operations using the PPP model, are one of the major steps forward because creation of assets is one thing and their efficient management is another. A good PPP model will ensure that the assets are better managed because the private partner will have the incentive to that. It will also help in raising resources.

Along with this, the emphasis on the agriculture sector is not only important for more equitable growth but will also create the market for the growth of manufacturing. Whenever the rural area becomes more prosperous, after a good monsoon, we have seen more sales of cars and FMCG goods.

The auto sector will grow because if manufacturing has to grow double digit then the auto sector has to do so, too. How the government will do that is something we have to see.

Similarly, the health/education schemes are part of the equitable growth. The extension of the gas distribution infrastructure will help in the growth in sales of CNG cars.

Scrappage policy impact

The detailed policy on scrappage is yet to be announced and its impact will be known only after that. But, hopefully, that will also mean that they will do away with many taxes against automobiles and many manufactured goods which existed for more than 70 years.

Finally, the fiscal deficit of 6.8 per cent doesn't worry me, provided that some changes are made in the rules so that asset creation is more efficient. The monetisation programme will hopefully ensure that they are operated viably.

Overall, an excellent budget and I congratulate the FM.

Published on February 01, 2021

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