The Union Budget 2021 has managed to smash all kinds of records in the stock markets. Do you think the finance minister has convinced the industry to start investing? Has the animal spirit been unleashed?
This is indeed a visionary, growth-oriented Budget with focus on the six very important pillars to lay the foundation of sustained growth of the economy in future. It is very welcome and there has been an expansion in the fiscal space with a very clear glide path and the quality of expenditure is also commendable.
The second factor is when the corporate earnings are better and that is already starting to happen. Sometime back, the honourable finance minister had reduced the corporate tax and that also enhanced the competitiveness of investment in India. All this certainly augurs well
In addition, the focus on inclusive growth, rural infrastructure, human capital deployment and quality of life would create social equity. So all in all, it is a terrific Budget which takes care of growth, sets the growth cycle in place and also has the right levers to make sure that the growth is inclusive and sustainable.
In the pandemic year we saw a lot of growth was coming from the smaller towns and from rural India. How is the lifetime high expenditure that is being planned by the government, likely to pan out in the post Corona world?
While the competitiveness of the economy could happen over a period of time as the projects get commissioned, the moment infrastructure development starts, it creates livelihoods and consumption in the economy. The rural economy has been more resilient than urban during the pandemic year. The agriculture sector has performed relatively better. The government has also extended timely support to this sector during the year. Investments have also been planned for rural infrastructure and better performance of the agriculture sector. Rural demand and consumption is going to continue to be resilient.
Will we see the private sector capex cycle being turned around post this Budget?
I think the private sector is keen to invest. It is always keen to invest when there is opportunity. Now investment depends on capacity utilisation and with the sustained growth of consumption, we will be soon coming to a point where investment cycles will come. It is a matter of time when investment cycles will come and also with the reduction in corporate tax, the investments are getting more attractive. So certainly investments will happen. I am quite optimistic about it. It is going to be a virtuous cycle as consumption picks up, investments happen and will create further livelihoods and further consumption. It is going to be a virtuous cycle of employment, investment, growth and it will be sustained.
While the stock markets, stakeholders are celebrating a stable tax regime and no Covid cess, nothing has been done to put more money in the hands of the common man. How will that impact consumerism?
Once livelihoods are created, automatically more people will be earning. It is a more sustained approach and we must recognise and credit the government for the timely action it has been taking during the pandemic period to provide health facilities to those who need it. Incentives have been announced to enhance employment. But in my view the most important pillar to creating inclusive growth is to create sustained livelihoods. I think infrastructure is going to kick start it.
Coming to the agriculture sector, last year, a number of policy interventions were made in agriculture and a lot of them were to do with the supply side which is the formation of FPOs, cluster-based business organisations and agri infrastructure funds that provide tools to make the backend more productive and enhance the quality of produce. The Budget accelerated this process by enhancing the funds allocated for such interventions. It is going to create a lot of productivity and help multiply farmer incomes.
Secondly, other policy interventions have also happened to enhance the market linkages which has also been a problem area in agriculture. The PLI scheme provides impetus for value addition in agriculture. So competitive agri value chains, better market linkages, incentives to kick start value addition in agriculture all augur well. Agriculture employs nearly half of India’s workforce and when the quality of incomes improve, it can materially impact consumption cycles in the economy and kick start a virtuous cycle.
Budget is also a political message and the finance minister has tackled it head on. She spent a lot of time on agriculture and MSP for example. All this will have a ruboff effect on ancillary industries. What about FMCG?
Well FMCG growth is dependent on consumption in the economy and anything that boosts consumption will lead to further growth in FMCG. All the right levers have been pressed to create livelihoods, to make agriculture more productive, to enhance farmer incomes and all this will certainly give a boost to consumption and therefore FMCG should also benefit over a period of time.
You are the chairman of the CII National Council on Agriculture. What do you make of the farm cess? How is it going to pan out and what can it result in?
One has to read the entire fine print but as I understand, it is more of an allocation between certain line items and that is why it is not going to really impact the consumer. That is my understanding of it. But one has to certainly read the fine print. And let me add another point on agriculture. We in CII have been extremely enthused by all the policy interventions that have been made in agriculture over the last year and CII is working to create 50 model FPOs that will demonstrate the power of this idea to aggregate farmers into a larger organisations so that they can gain by access to collective buying of the inputs and also get access to knowledge collectively.
