All hail the new finance minister
In chaotic democracies such as India, the wait for change can be long and weary. Despite a year full of bad news, CEOs still hope Chidambaram can turn things around. Abhijit Patnaik and Zehra Kazmi report. Corporate honchos get real | Vox popbusiness Updated: Sep 23, 2012 09:17 IST
In chaotic democracies such as India, the wait for change can be long and weary. The fourth edition of the CEO Speak survey shows that industry leaders, disappointed as they were with the UPA government's policy inertia in the second term, are still filled with hope (and recommendations) for the go-to man, finance minister P Chidambaram.
Trying to bring a sea change in the way his ministry works, Chidambaram has - despite fierce and vocal opposition - unveiled the biggest reforms of the year: FDI in multi-brand retail and airlines, along with a cut in LPG subsidy and an increase in diesel prices.
The survey, conducted by Hindustan Times and research agency MaRS in August-September 2012, asked more than 50 CEOs, representing a random mix of small, medium and large-sized companies, how to improve the government's finances. Most are in agreement with the finance minister - subsidies need to go.
With the recent announcements, the government seems to be signaling that the time has come for some painful tightening of the belt by consumers. The Prime Minister in his address to the nation on Friday, underscored this very point when he said: "At times, we need to say 'no' to the easy option and say 'yes' to the more difficult one... The time has come for hard decisions."
The question is, these decisions may be pro-business, but are they pro-poor?
With more CEOs now reporting that they expect the economy to grow below 6% than they did in the October 2011 CEO Speak survey, it is not surprising that close to three-quarters feel that the economic downslide has dampened business confidence to a high level. Though they may be down, they are not out.
"Investors realise that in the long- term, India is a great opportunity. It does not take long for sentiment to change," said Hitesh Oberoi, founder and CEO, Naukri.com.
The biggest news post Pranab-da's last budget was the retrospective tax hullabaloo. According to India Inc, it needs to be resolved to boost foreign investor confidence. About 35% of CEOs think foreign investment will receive a shot in the arm only if the government retracts these laws, introduced in the wake of the Vodafone tax row, with 21% saying that clarity on the General Anti-Avoidance Rules (affecting companies operating out of tax havens such as Mauritius, Seychelles, Liechtenstein) will go a long way in ensuring a sunny investor climate.
"For the finance minister, I would suggest that positively considering recommendations of the Shome Committee on GAAR, re-instating incentives given to SEZs and minimising retrospective amendments in income tax laws would significantly improve the confidence level of corporate India," said Sidharth Birla, chairman, Xpro India Ltd and vice-president, FICCI.
CEOs also shared their opinions on the best way to cut the government's fiscal deficit. Thirty-five per cent said they would want fuel subsidies cut and almost 30% would want Chidambaram to push for disinvestment in PSUs. Unsurprisingly, only a small fraction of those surveyed want tax exemptions available to them, cut.
There were some small surprises as well. Twenty-eight per cent CEOs agreed with Union steel minister Beni Prasad Varma when he said that inflation had benefited farmers.
And what about a report card of the FM himself? Though an overwhelming 63% feel that Chidambaram will be better for the economy than Pranab Mukherjee, only 40% feel that he has the right team in place to weather the economic turbulence.
The recent slew of reformist announcements has come as a breath of relief for India Inc. But CEOs are hoping that politics doesn't play spoil- sport.
Harsh Goenka, chairman, RPG enterprises, said: "From a Kumbhakaran-like slumber there has been an awakening. I am hopeful that the new measures will usher in a spate of reforms."