Focus on investment and exports to revive investment, economic cycles: Kiran Mazumdar Shaw

Kiran Mahumdar Shaw-1200

Government infrastructure spending is extremely important in terms of creating credible and trust filled PPP models, says Kiran Mazumdar Shaw, Chairperson & CMD, Biocon. Excerpts from an interview with Ruchi Bhatia of ETNOW.

Everybody has been talking about how there is a need to spend, spend and spend. The growth projections at most global rating agencies including the IMF even for next year is still at about 6%. How big a fiscal gap can the government afford? At the end of the day, we will have rating agencies pouncing on us and we also have to look at the sustainability of debt as well?
Consumption is a big challenge. Demand creating demand is a big challenge and personally I believe we should be focusing on investment and exports because those are the two areas that can start help to revive the investment cycle and the economic cycle.

Without investment, demand or consumption can’t be raised. Kick-starting the consumption cycle would depend on the investment cycle getting revived and that is where we have the biggest challenge in the economy today. I hope the finance minister will focus on many of the incentives that we are talking about. We must bring back fixed investment which has sharply declined over the last two years.

Government infrastructure is a very important area where you need to increase investments. But then look at the other private sector investment needs where it is not happening. Let us take for example our own business, which is the pharmaceutical industry. The bio pharma industry is very capital intensive but they are also creating jobs and they are also export oriented.

Some of these sectors are extremely important when it comes to really announcing investment incentives so that is where I hope that we will see some of those measures being taken. We need tax holidays and we need the SEZ sunset clause to be extended by another five years. These are some of the low hanging fruits available to us to get the investment cycles going.

Then there is the need for export incentives. There are a lot of anomalies that need to be corrected in terms of the way we are going about our export production. Manufacturing is another big opportunity where it needs investment and incentives. Otherwise, you are not going to see manufacturing deliver on the promise. That is the way to look at it and of course, consumption has other kinds of quick fixes, but it is not a sustainable option if you are not creating jobs or investment cycles. It is all very interconnected. How are you going to get those wheels turning? To me, the way you get the first cog moving is investment.

Would you say that in this Budget Finance Minister Nirmala Sitharaman has to do whatever it takes to restore confidence among private players?
Absolutely. We need to bridge the trust deficit and we need consistency in policy because I do not think we should be flip-flopping and that is what investors want to see in any economic climate.

The other thing I also wanted to say was that government infrastructure spending is extremely important in terms of creating credible and trust filled PPP models. The government has to release the money to invest in infrastructure which I think is key to getting the whole revival cycle going in infra.

But on the other hand, they need to partner with the private sector by giving tax holidays to private partners to co-invest in creating big infra projects. I completely agree that infra development in India is going to generate jobs and it will be very good for all the ancillary industries that are supporting infrastructure building right from the engineering companies to steel and cement and everything else that goes with infrastructure.

This is a no-brainer and the government must treat this as a low hanging opportunity. The export opportunity for India is huge and we must leverage the weak rupee to further become more competitive in exports. We should not try and artificially bolster the rupee. We should let it get to even 80 rupee level so that we become far more competitive. This is not a time when we need to really look at all those elements because we are clearly seeing that the fiscal deficit is something that might need to be stretched a bit in order to address all the kind of economic revival plans that we have.

From that point of view, I would not really worry about where the rupee really floats. Personally, this is a huge challenge that can be addressed through some very innovative financial thinking and tax plans that can incentivise people to invest.This is key to get the economic cycle moving again.

If you have to give one piece of advice to the finance minister now, what is that going to be?
I do not think I can give advice at this stage but we have all given a large number of suggestions to the finance minister and I hope that many of them are considered and announced. I think we have opportunities to address the investment needs, the needs to basically revive the economy through various measures and one big advice would be please focus on public sector disinvestment as fast as possible because the government needs to free up capital to investment in infrastructure. That to me, is one of the biggest opportunities that we have to revive the economy and I hope that that is being thought of.

The private sector also needs to focus on partnering the government in infra development and for that I hope there are some fiscal incentives with an invite.