This is a make-or-break budget for the government in many ways. What are the two or three main factors you think the finance minister must consider and push in this budget?

There must be a considerable fiscal stimulus in this budget, the economy is not faring well, and GDP growth is decelerating. It is extremely important that especially industries that are not doing well such as capital goods, power, property development need stimuli and the government must look at adjusting taxes in various areas whereby those adjustments can get them more revenue by decreasing tax rates.

Corporate India is suffering from a bout of depression - what does corporate India particularly want for the mood to change? There is talk of the service and excise duty being raised to pre-crisis levels. Will this come as a setback to growth?
Most definitely, any increase in tax rates will be negative for growth. I hope the finance minister doesn’t resort to that because the last time the economy was not doing well, he reduced the tax rates very successfully and that gave a stimulus to the economy and growth was restored. Now we are in a worse position than we were then.

At this stage, to increase tax rates would not be good for revenue collection because the growth rate would further come down and therefor, revenues would come down as well. This is the time to provide stimuli. What the finance minister also needs to do is to announce some major reforms; the biggest reform that would affect the Indian economy and solve our macro-economic issues is the goods and services tax. The finance minister needs to make some announcements to placate the states who are not cooperating in the introduction of GST, it needs to be done. I think this is something the states and the Centre must sit down and get done. It’s been delayed for three years. It’s an extremely important economic reform for our country. He should also announce FDI reforms, in aviation, telecom and insurance. Such announcements would add tremendous value to the sentiment which is improving.

But you think the government will have the support of states in implementing GST this year? The UPA is on a sticky wicket, more so post the state assembly election results. How much can the FM (finance minister) do? Do you think the resolve of the government to cut spending and subsidies will take a backseat and we will have a populist budget instead?

No. I think GST is very easy to implement. It’s very good for the Centre; it’s very good for the states. It will benefit the states and it will benefit the macroeconomic situation. This is not a right time to increase wasteful expenditure. I think expenditure must be controlled and when the economic growth is restored with a good budget, then perhaps in that year, the government could increase expenditures too.

It's going to be a tight rope walk between managing fiscal deficit and growth. What are the tools the FM can make use of at this point? Is there a need a for renewed divestment push?

Yes. Even the Rs 40,000 crore target is very low; there should be a divestment target of a Rs 100,000 crore and it is very easily doable, there are many ways they can do it. Unfortunately, the government wakes till the end of the financial year to get active on divestment. Divestment should start from April and if the markets are good in the early part of the financial year, then divestment should take place. Every year I have noticed that they wait till the end and then something or the other comes up and they miss the target. The divestment should be managed efficiently with good advice and not set very high target rates for divestment. Besides that, the government should seriously look at privatization.

Do you believe that the last year was one of missed opportunities? And looking at the timing of the budget, do you think the government should go all out on reforms? If the FM sets a fiscal deficit target of 5.5 per cent and growth rate of 7 per cent, will you be ok with that scenario? Is that a comfortable environment for India Inc?

No, 7 per cent is too low. We could easily have a growth target of between 8-9 per cent .Implementation of GST alone, other things being equal, would add 2.5 per cent to our growth rate. It would solve a lot of our macroeconomic issue. So we shouldn’t be satisfied with such low figures because India needs to grow at 8-9 per cent or more over the next 10 years. If GST is brought in, I wouldn’t be surprised if Indian growth rate would reach the 9-10 per cent level again for many years to come.

The infra, power and mining sectors have been languishing this year. Any expectations on that front?

I hope so. The coal issue is being addressed as it was a major issue for the power industry, which has suffered considerably. Infrastructure hasn’t done well, capital goods haven’t done well. As we use to do in previous budgets, individual areas which are facing issues and problems should be addressed , aviation is in bad shape, so all these areas need to be addressed and solutions should be found.

Investments have come to a standstill, what can the FM do to spur investments and growth, reintroduce investment allowance? The RBI is now waiting for a fiscal consolidation roadmap in the Budget before actually cutting rates, but could that be lacking?

One of the biggest disincentives for investment is the very high minimum alternate tax (MAT) rate introduced. The MAT was 7.5 per cent, which is a reasonable alternative tax, which today is 20 per cent and after surcharge it is 21.5 per cent. So, you give incentive by one hand then take it away by imposing a very high MAT so investment incentive that you provide are being negated, I think the MAT should be brought down to a max of 15 per cent.

On the part of Godrej group - both on the FMCG and realty business what are you hoping for?

In realty, incentives must be provided to people to buy houses, current deduction is Rs 1.5 lakh which should increase just as the reduction for investment in the mutual fund should also be increased, such an increase will help the real estate sector and I do hope RBI reduces rates as lower mortgage rate would be a stimulus for the real estate sector. In FMCG, things are going quite well, demand is strong so there is no particular need to tweak anything in the budget.

Realistically speaking, how much do you expect the Budget to deliver considering the sticky situation for the government politically as well at this point?

I don’t think the political situation comes in the way of a smart, intelligence government-oriented budget, that’s what we need and that kind of a budget helps the political party in every political situation. So, I’m hoping that the FM is a very capable person and is very cognizant of what is going on in the country so I am hoping we have a budget that is growth oriented.

Source: NDTV, India,  dated 13/03/2012