Government shouldn’t worry about some degree of slippage on the fiscal deficit target as the economy desperately needs public expenditure, FICCI president Sangita Reddy told FE’s Prasanta Sahu and Sumit Jha on the industry body’s suggestion to the government for the Budget. Reddy, who is also the joint managing director of Apollo Hospitals, has batted for a higher Budget allocation, at least 2.5% of GDP, to the healthcare sector. Excerpts:
Q: What are FICCI’s suggestions to the government for reviving the economy?
A: One of the recommendations is to infuse capital into the economy. In analysis with multiple economists, we have concluded that we shouldn’t worry about a certain degree of expansion of the fiscal deficit, and the government should infuse Rs 1.5-2 lakh crore into the economy. However, in the same breath, we should also create a time-bound plan for disinvestment worth least `3 lakh crore so that this money can be paid back to the RBI which raised it for the government in lieu of bonds. This will ensure that there is no downgrading of the country in terms of rating.
The exports have also been dragging the economy down. What are your suggestion on this front?
We need to completely reorient our export outlook. Currently, we are doing only 1.7% of the global supply chain, we need to expand our exports to nearly $545 billion. We are only at the halfway mark for the target of $1 trillion of exports. While our service sector needs to continue to grow, it also needs to enhance value realisation further because we are doing a lot of service but its backend and actual value capture is happening in the global market. We need to creep up the value chain.
While services are vital, the economy needs large-scale manufacturing to create enough jobs. How do you propose to solve the problem?
On the manufacturing side, we need to look at growth in existing capacity, and import substitution in a big way. Further, our focus should also be on cluster manufacturing so that we can enhance competitiveness, globally. We need to focus on sector-based issues such as defence, downstream automobiles and everything related to new-age economy. The benefits from developing artificial intelligence, robotics, 3-D printing and genomic, among others, would yield hefty dividends.
The agriculture sector is suffering from its own challenges as its contribution in the GDP continues to slide. We can’t ignore agriculture and say that we should substitute it with more manufacturing. We have a significant emphasis on agriculture because we believe agro should contribute upward of 25-30% of GDP so that India can become the food bowl of the world. We should focus on improving farmers’ income by involving them in the value chain. Currently, India is sitting on twice the requirement of foodgrain (rice and wheat). But the production is less than 11% of the value chain. We need to capture the rest, which is important for livelihood of 50% of our population.
Have you suggested any tax relief to the government, given this is another measure to put money in the hands of the consumers?
Given that the corporate rates have been reduced, we are not making any suggestion on tax front. Trust and sentiments would improve from consumption, and money in the hands of consumers would signal industry what to do.
Given your background in healthcare, what do you expect the government to do for the sector?
The GST for healthcare was put at zero but all the input costs from vendors are taxed higher and in some cases as much as 18% for housekeeping. It’s very important that this is changed. The government must also increase the budgetary allocation towards healthcare. With under 2% of GDP as budgetary allocation currently, its very important that it goes up to 2.5% of GDP.
Source: Financial Express