The Confederation of Indian Industry (CII) has called for an interest rate cut of 100 basis points for boosting the economic growth rate. It has also suggested interventions for depreciation of the exchange rate that would increase export-related jobs.“CII is of the firm belief that the current blip in growth rates is temporary and we are confident of a strong recovery by fiscal year end as industry gets over the teething problems of GST and other positive measures take effect. New investments will also start early next year as capacities fill up.” said CII President Shobana Kamineni. A cut in interest rates would encourage domestic demand in sectors such as affordable housing, consumer durables and construction. Interest Rate Subvention in certain sectors such as exports, housing and MSME would also help raise growth, noted the CII statement.
According to CII, there may be need to relax the fiscal deficit targets to accommodate stimulus measures, particularly for job-creating sectors. The FRBM Act permits a deviation of 0.5% of GDP on account of exceptional circumstances. The introduction of the historical tax reform of GST calls for certain adjustment time, said the CII statement. “The efforts of the Government towards building a formal, organised economy are encouraging and this requires all players to go through a period of adjustment. Industry is keen to accelerate this process while also creating the necessary jobs and lead into a virtuous cycle of higher incomes and demand,” added Ms Kamineni.
On the GST front, CII recommends procedural changes to ease initial administrative processes. These include allowing C form set-off, addressing reverse charges, redressing mismatches of higher rates on inputs and lower rates on final goods, and grandfathering of existing regional incentives among others. Also, input tax credit refunds for exporters need to be passed on, said CII.
CII has also highlighted the need for bank recapitalisation for enabling credit growth to revive the economy. The Government may consider lowering its stakes in public sector banks for this purpose, suggested CII.
CII has developed policy recommendations for a number of sectors aimed at kickstarting investments and jobs. These include both urgent short-term policy initiatives and medium term enablers. Sectors such as infrastructure, construction, and power are particularly impacted by stressed assets. Government can also intervene to increase import duties on gold to discourage gold imports and boost shift to financial savings.
There is also urgency regarding reforms in the labour regulations, said CII. Fixed term employment and fiscal incentives for creation of incremental jobs would help new employment generation. In the longer term, it is important to simplify and address labour laws for creating better quality jobs.