The All India Association of Industries (AIAI) is a Premier Chamber of Commerce working in the interest of trade, industry and employment since 1956.Mr. Vijay G. Kalantri, President, All India Association of Industries (AIAI) said that in many of our earlier representations submitted to the Government of India we have stressed on the level of readiness that India at present stands in order to gain as an alternative to global trade.
Global connectivity in terms of global trade immensely helped the fragile Chinese economy to emerge as the new global super power. China built its position as a trade and industry super power due to its immense investment made in capacity building and infrastructure.
India’s walk towards this position however seems to have a caught a hare’s pace. And the, “ Is India Ready ?” slogan seems to be echoing from all the corners of the world map.
Global business is set to shift from China. However the destination still remains unclear. Six months back 18 MNCs left China however none came to India but established themselves in Thailand, Bangladesh and Vietnam. India’s strong bureaucracy, regressive laws and regulations have dithered away these businesses.
China overpowered global trade in terms of it price competitiveness and supply capacity along with varying quality at outstanding payment receivables . This was possible due to immense investment in capacity building and infrastructure that enabled China to achieve economies of scope and command world trade .Frequent quantitative easing and excellent liquidity management on the other hand ensured desired liquidity in cash flows which further strengthened debt management. Also at the same time China’s strategic planning led to many bilateral FTAs which could not be challenged by many multilateral FTA arrangements. These FTAs allowed free access and price competitiveness and most importantly immunity from WTO to regulate trade in its own favor. Also, China had simple taxation and company laws with no interference from bureaucracy and government . The Government’s interest laid only in returns on investment and not making hell the life of industry.
However the COVID 19 has shown China in face of a horrid monster so much so that , post COVID19 most of the super powers like the US, EU and Japan are openly evolving strategies to move investments out of China . They seem to be even more tormented then the COVID19 attack itself and aim for an alternate destination.
Many feel India could be the other option especially in the sector of finished goods like textiles and apparels, electronic and telecom items, Engineering Exports, Chemicals and dyes, plastic products , household items etc where China held its trade supremacy and mostly brought down these super powers to their knees to sign trade agreements in favor of the Chinese. However, as per global trade analysis India has been able to hold itself strong only incase of the Pharmaceuticals and IT sector. At the same time some of the raw material still needs to be imported from China.
In such grim scenario, it would be just shooting in the air to explicitly claim that India is ready to be the replacement. There also may be a case, the world may have to fall at the feet of China to meet their consumer demands as China has fully loaded capacity of its produce scheduled to reach foreign destinations. In such a situation China may even temporarily stoop down further in terms of prices to compensate for the negative global image that it has created for itself post the COVID19 apocalypse and gain its importance back.
Mr. Kalantri further said we observe that the Indian government has scheduled an announcement of a second stimulus package of Rs 1 lakh crore as relief to the MSME sector at a time when countries of lower value economy have gone ahead and already announced a package 2.5% of their GDP. At the same time, when the Indian businesses in all sectors are devising plans to stand upright the Ministry sources are publicly making announcements that break the moral of industry sector( in reference to the IT sector ). The IT industry exporters were called upon, “ not to take the support of the Government crutches”. At a time when the IT industry has been able to cover upto 95% of the ground within a fortnight and the government needs to strengthen the spirit if not in kind then atleast in words.
This second stimulus package poised to be announced shortly ,around Rs 1 lakh crore ($13 billion) will focus on help for small and medium businesses. The new package aimed at MSMEs could include increases in the limits of bank loans for working capital needs, hiking threshold limits for availing tax exemptions and relaxing rules for deposits of income tax and other dues, the sources said. Secondly, the government is also planning to partially clear tax refunds owed to small businesses within one month to provide some immediate relief. In addition to this, the Indian government will also release 180 billion rupees in tax refunds to small businesses and individuals immediately and impose expenditure curbs on a host of departments for the April-June period.
However it is important to note that such an arrangement would purely figure out as a stop gap arrangement and does not hold any long term vision as far as preparedness to avail the opportunity to replace China is concerned .Relaxed attitude of the government and large scale hype about Indian economy is certain to build negative impact in terms of ,
untoward impiety towards the country as a whole .
It will further re-advertise the weak business environment on the Indian shores to the global audience when the Indian industry will fall back on its face due to various business obstacles in the highly regulated business climate.
There is an urgent need to think beyond the horizon and above the parallels if India needs to secure the position of an alternate to China and act in a way that there is enough scope to grow out of the phases of COVID 19, slowdown and global recession .
India needs to thus prioritize on its reforms especially in sectors of economy that affect the business climate and environment in India and the major areas of concern are,
1. Rationalization of GST structure to 12% as the maximum rate (not subject to cigarettes and liquor and luxury automobiles which can be charged at 30%) and 5% for essential commodities. Petroleum and its products and real estate to come under the ambit of GST Since multiple rate GST implying input distortions. . This will not only ease business but also boost consumerism. At the same time simplification of the Online GST procedure especially that of filing returns.
2. Immediate lending at 3% for MSME where cases have been lodged at NCLT to clear dues of the Operational Creditors with an out of court settlement. And that for higher industries at 8%. Government to issue a circular in connection with the same.
3. All issues creating litigation such as the NCLT/IBC act of the Companies Act to be reviewed in favor of boosting industry by reviewing Section 7,9and 10 and Section 29A. Companies Act to be rationalized and reviewed for regressive stipulations and regulations with the omission of regressive clauses like Section 9A.
4. FTA s with countries to be worked out in favor of balanced trade with mutual benefits as most of the India’s FTAs are lopsided with benefit to other countries. Also, signing FTAs should mind tariff and non tariff barriers in true sense.
5. Import and export policies to be more sensitive to market demands with less rigidity towards its regulations.
6.Development of strong financial markets and compliances to b e more market and consumer friendly.
7. Creation of SEZs or special trade zones with additives supporting trade.where businesses can perform better in a organized environment.
8.Expediting the building of Delhi Mumbai Industrial Corridor(DMCC) and Delhi Freight Corridor. Industry which has suffered due to the slow implementation of this infrastructure will be greatly enabled due to this strategic imnvestment which will attract Japanese and other foreign investment.
Other than the above suggestions we also recommend,
Reduction in reckoner rate by 40% to ease real estate crisis. Government to acquire existed unsold real estate for the urban poor as an incentive for urban poor to stick to their urban employment . As there has been large scale migration due to the COVID19 fear.
Settlement of cases with the company given back in the hands of the original promoter if there are signs of oligopoly contradicting the competition act in the takeover. NCLT/IBC has become more of a takeover code than a resolution code.
Rs10 Cr to be made limit for admitting a case of Operational creditor with the NCLT.
NCLT/IBC to differentiate between Operational creditor and Financial Creditor.
The principles of Competition Act need to be adhered in case of NCLT/IBC in case of award of verdict.
Litigations due to tax disputes to be settled under the Sabka Vishwas scheme prudently barring prejudice of treatment.
Easy deemed online permissions by state and central government except for environment and pollution clearance as followed by many countries .
One window Centrally awarded permissions with inclusion of local permissions. The same to be mandated supremacy for any kind of eruption of local issues at later stage. Permissions should also be without any kind of riders attached to them.
Mr. Kalantri further said we hope our suggestions are accepted.