Jaitly, CII concur on need for demand creation
06 Jan 2016
Finance minister Arun Jaitley said on Tuesday that the government would continue the thrust on public spending in the upcoming budget, which is in step with industry demand for the government to prop up demand to boost growth.
In fact, Jaitley said, the government would do this in spite of the additional burden of nearly Rs1,00,000 crore due to One Rank, One Pension (OROP) and the Seventh Pay Commission recommendations for the next financial year.
Ahead of the finance minister's pre-Budget consultations with industry representatives on Wednesday, Confederation of Indian Industry (CII) president Sumit Mazumder is also reported to have stated that the state of the economy demanded that the government must help boost consumption in order to prop up growth.
Public investment has been stepped up in the past year and it will continue to be stepped up. When you fight a global slowdown, public investment has to lead the way, he said.
Simultaneously, a report in The Hindu quoted CII president Sumit Mazumder as saying that the broad theme that industry wants addressed in the budget was creation of demand.
''Private sector is not investing because there is a lack of demand. They are sitting on excess capacities due to past investments and thirdly, the lack of positive sentiments due to the failure to get GST going. This is reflected in reports that manufacturing is at a two-year low now. If these are addressed, we will definitely see a big pick-up in the economy,'' The Hindu quoted him as saying.
Industry is worried over the delay in reform measures, which it fears could translate into delayed implementation and lag in economic growth.
Besides, business is extremely disappointed with the stalling of the goods and services tax (GST) regime, which has become the overarching reform for all. The government has got other reforms through in areas like foreign direct investment in the past 18 months.
Jaitley has said that private sector plays a role when times are good and public investments lead the way when the going is tough.
But, here too, things have not been very bright with infrastructure projects in the doldrums due to the nature of the previous contracts that were signed. People who build the infrastructure are in trouble as most projects are stuck on the land acquisition issue.
However, in the recent contracts that have been awarded for highways, 90 per cent of the land is acquired, which was a big deterrent earlier.
Yet, there is no incentive for private companies to invest. And it is not merely the high interest rate that is holding up investment, the Parliament too is not functioning. Investors are worried because there is no direction - political or economic - feels CII.
