GURGAON, India (Reuters) - India Inc. demanded simpler tax rules, faster project approvals and tougher rules on corruption at the World Economic Forum (WEF) on Thursday, as companies challenged the government to push for deeper economic fixes than a handful of recent reforms.
Tempers frayed between frustrated executives and defensive ministers, and social activists took officials to task on a lack of action from the government, despite a much-trumpeted set of initiatives in response to slowing economic growth.
“The mood is a bit sombre,” Siddhartha Lal, managing director of Eicher Motors (EICH.NS), told Reuters at WEF. “There is a pressure to force some change.”
“Suddenly because three laws have been passed everyone is extremely excited. This should be a daily routine affair of passing legislation and making reforms. We should be having hundreds of these a year.”
India in September allowed foreign investors into the supermarket sector, increased overseas investment limits in airlines and raised diesel prices in a “big bang” push designed to perk up subdued business sentiment.
But executives said a long-delayed national taxation regime, a government body to fast-track infrastructure developments and a credible initiative to tackle widespread corruption would provide a far greater boost to the sluggish economy.
India’s GDP growth in the current fiscal year that ends in March 2013 is expected to be the worst for a decade, with many corporates blaming a lack of action from a government hamstrung by graft allegations and a lack of political clout.
Hundreds of big ticket infrastructure projects have been hit by delays, hurting investor sentiment. The government has pledged to roll out a National Investment Board (NIB) to speed up implementation, but the initiative has hit opposition.
“The air in Delhi is thick with not just the smog but with the expectation that these things will be translated into action,” Rajiv Lall, managing director of IDFC Ltd (IDFC.NS), said at the event in Gurgaon, a business hub next to New Delhi that was shrouded in thick, polluted fog.
In the absence of the prime minister or finance minister, both of whom had attended the forum in previous years, and with many attendees remarking on a lack of big-name policymakers, the subdued event sprang into life with a spat between a government minister and one of India’s most outspoken corporate figures.
Rahul Bajaj, chairman of the Bajaj Group and a former lawmaker, told the law minister that his companies’ success had come “in spite of the government, not because of the government”.
“Yes, there are no perfect situations and no perfect solutions,” minister Ashwani Kumar retorted. “However, if everything we are doing is wrong in terms of policies, how is it that Bajaj Auto is one of the most successful organisations over the last few years?”
Bajaj Auto is India’s second-largest motorcycle manufacturer and world’s largest three-wheeled vehicle manufacturer.
“Generally the perception of India has improved, we need to further improve this perception. We need to further take the reform process forward,” Adi Godrej, chairman of Godrej Industries (GODI.NS), told Reuters.
Initiatives such as the Goods and Service Tax (GST) and a National Investment Board (NIB), seen as important steps to cut through bureaucratic red tape and boost business sentiment, appear to be stalled on desks and in committee rooms across the country’s noisy democracy.
GST, intended to replace a myriad of state and central taxes, is seen reducing business costs and increasing government receipts. But some states are uneasy about a possible loss of fiscal autonomy.
“The most important reform for India, whether it is for our group or for India generally or for most businesses, would be the Goods and Services Tax. Because that would add about two percentage points ... to India’s GDP growth,” Godrej said. (Editing by Ron Popeski)