India Inc has commended the Modi government's overall stewardship of the economy but criticised slow progress in reducing stress in key sectors such as exports and agriculture in a nationwide poll on New Year's eve. A majority of the poll's participants continue to have modest expectations about economic growth next year and believe that the crippling bad loan problem will not be resolved any time quickly. 

The Economic Times CEO poll was conducted over the past 10 days with ET reporters talking to 51 top CEOs in sectors ranging from information technology to metals and heavy engineering. 

About 55% of poll participants believe that growth will hover at 6.5-7% in 2018-19, a clear sign that the headwinds which battered the economy in 2015-17 will take a much longer time to abate. Less than half the participants (49%) said they have recovered fully from the effects of demonetisation and issues related to GST but a high 43% said they are still in the recovery phase. 

And in another troubling sign for the government, a strong 67% said it could adopt populist measures in the wake of the Gujarat election, where it lost seats but managed to hold onto its majority position. 

Most of the participants awarded a rating of 7 out of 10 to the government's performance so far, a sign that its economic leadership enjoys broad support despite problems and some level of dissatisfaction. 

About 33% of participants said they are planning significant capital expenditure in the new year while a whopping 92% said they are optimistic about growth and profitability in 2018. A similarly high 73% said they are planning to recruit more people in the new year, a sign that the slowdown of last year has not affected the organised sector's hiring plans. 

The years 2015-17 have been tough on the Indian economy and the corporate sector, with plunging commodity prices aggravating the bad loan crisis and forcing banks to divert much-needed capital for provisioning rather than growth. Demonetisation in the winter of 2016 and GST in 2017 complicated what already was a tough situation. 

Big and mediumsized companies in the organised sector recovered quickly but the informal sector and the farm economy suffered. A majority of 57% said the government has not done enough to tackle the problem of export growth with key sectors lagging behind the recovery. 

The government's efforts to stimulate demand in rural areas was also criticised with a narrow 51% saying that not enough is being done in this respect. The distress caused to farmers due to poor rainfall and low prices is also not being tackled effectively, with 78% saying the government's efforts are a work in progress and 14% saying the problem has been badly handled. 

About 70% said the biggest challenges facing the economy are unemployment and lack of private investment. About 63% of participants said the government's efforts to create work for private sector defence companies is a still work in progress. 

LIST OF DEMANDS India Inc wants the government to cut corporate tax rates, allow foreign direct investment in multi-brand retail, announce measures to boost the farm sector and put more money in the hands of the working class in the coming Budget. It wants petroleum and aviation turbine fuel to be brought under GST, further rationalisation of the levy, labour reforms and measures to ease land acquisition norms. 

"Reduction in corporate income tax — the effective rate has gone up in the last couple of years because of removal of deductions but keeping the headline rate the same," said Pawan Goenka, managing director, Mahindra & Mahindra. 

"Boosting of exports — Indian exports are non-competitive because of various bilateral treaties that countries have. We need to offset lack of bilateral with export-promotion subsidies." 

Some industrialists want tax rationalisation without negatively impacting long-term capital gains. "Significant, direct benefit for further implementation through subsidy and not just tax linking," said Mahendra Singhi, group CEO, Dalmia Cement. 

"After the twin impacts of demonetisation and GST introduction, the economy seems to be settling down and therefore one would expect 2018 to show an upward growth trend," said Harsh Pati Singhania, director, JK Organisation. "This should be aided by revival in global trade and improved growth in some of the developed economies. However, challenges of imports into India from global surplus capacities and that of job creation will need to be addressed."

Source : Live Mint

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