On 8th September 2015, PM Modi and his team met with 27 of India’s top industrialists, bankers and economists (together known as India Inc.) at his 7 Race Course Road home in New Delhi, for a discussion titled ‘Recent Global Events – Opportunities for India’.
Although this was not the first time the Prime Minister has had a sit-down with India’s business leaders, it was the first time since his election in May 2014 that he has met with all of them together to take cognizance of India’s growth strategy.
We give you an overview of their quick but important conversation:
1. Economic Development
As with the economy of any developing nation, there is the need (and scope) to expand. Apart from a renewed focus on strengthening the agriculture sector and establishing a social security system, the Indian Government has thought of steps to make the financial sector more inclusive. Below are listed the new initiatives undertaken by PM Modi:
- MUDRA Bank: Funding small businesses
- Direct Benefit Transfers: Making it easier to transfer subsidies
- Start up India Stand up India: Encouraging start-up businesses
- Make in India: Encouraging Foreign Investment in the manufacturing sector
- Jan Dhan Yojana: Making financial services more affordable and accessible to the public
- Digital India: Introducing e-governance to reduce paperwork, and make administration faster and more transparent
Hopefully, these initiatives will introduce a new section of India’s society to the world of economics and business.
2. India’s opportunity to explore international market
For India’s economy, the recent stock-market crash in China, and the subsequent devaluation of the Yuan was a significant event.
Traditionally, the Indian economy has shown a preference for domestic markets and (internally) strong financial policies. China, on the other hand, has spent a large part of the last decade positioning itself for trade and manufacture in the international market. So when China’s stock market crashed, its ability to do business globally was affected, as were the nations it did business with. India, luckily, remained largely unaffected.
As China’s focus shifts to fixing its domestic issues, the Government and India Inc. agreed at the meet that this was a good opportunity for India to grab. They discussed how India must turn outward, expand its business globally, and strengthen sectors like agriculture, manufacturing, infrastructure, tax, exports and banking, that will prepare the economy for international trade.
3. Ease of doing business
To raise India’s profile, PM Modi asked India Inc. to take bigger risks and increase investments in domestic markets. However, when policies to conduct business aren’t conducive, markets can’t be efficient. And so, India Inc. lobbied for reforms in policies pertaining to the business sector.
The Government has thought of landmark legislations like the Land Acquisition Bill and Goods and Service Tax Bill, that could potentially change the country’s economic landscape.
- Land Acquisition Bill: By making it easier to acquire land for industrial purposes, the Land Acquisition Bill would make business development and expansion significantly easier for Indian and foreign companies. However, the Bill has a negative effect on India’s farming population who currently use the land in question. As this is a sensitive policy, it was hardly mentioned in the meeting.
- Goods & Services Tax Bill: The Goods and Services Tax Bill suggests a system of single taxation over the multiple systems that exist today. This could potentially improve India’s GDP by 0.9-1.5%.
- Easing custom duties and RBI interest rates:
Regulating custom and excise duties for exports could not only ease business in India but also increase national revenue.
Cutting RBI-imposed interest rates would be another step in a direction favourable for India Inc. However, with delays in the Parliament and a pending monetary policy review, reforms seem like they may not turn into realities in the immediate future.
So in a nutshell…
India Inc. invests in India
India makes business for India Inc. easier
India emerges as a powerful economy
…But, could it really be that easy?
Well, the answer is, no. While the PM is justified in asking India Inc. to invest in India, hurdles like Government clearances, permissions and administrative delays make it hard for domestic investments to be profitable (especially in the infrastructure sector to which PM Modi gave particular emphasis). Further, industrial sectors are under monetary stress because of a disorganised and financially-deprived banking system. Simply put, unless it is easier for businesses to make more money, they won’t have money to invest.
So, in order to create meaningful economic growth, the ball is in the Governments court.
Since the meeting…
It seems like India Inc. is confident of cooperation from the Narendra Modi government. This week’s rise in the SENSEX and NIFTY, as well as the strengthening value of the rupee, stands testimony to that. However, the success or failure of the #IndiaIncMeet can only truly be gauged when government policies and industrial agendas reflect the matters discussed.
With the Monetary Policy Review scheduled for early next week (29th September 2015), the economic dialogue of India will evolve once again. Hopefully, this will bring about more positive changes.
Also, read about Mr Modi’s other meetings globally.