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Gloom To Deepen: India Inc

IPA Staff by IPA Staff
May 15, 2012
in Uncategorized
3 min read
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India Inc expects the economic climate to turn worse before its gets better, with a deteriorating fiscal situation and a drop in foreign investments likely to define the country in the medium term, an ET Poll of CEOs to gauge business confidence has revealed.
Along with dimming confidence in the government’s ability to steer the country out of the economic morass it finds itself in, the poll of 50 bosses of some ofIndia’s most respected companies shows surprising patience, even sympathy, for the UPA, with more than half the respondents expecting it to retain power in the next general elections in 2014.
Finance Minister Pranab Mukherjee, under whose watch the economy has slipped and who has been criticised by some for presiding over a bad fiscal slippage, high inflation and slowing growth, emerges from the poll looking good.
On a scale of one (very poor) to 10 (excellent), Mukherjee is rated six and higher by as many as 29 CEOs. The UPA’s troubleshooterin-chief also gets the most votes – at 16 – as the best finance minister in the present situation, 10 more than his predecessor P Chidambaram and far higher than his boss Prime Minister Manmohan Singh, widely viewed as the father ofIndia’s economic reforms.
Mukherjee also ranked higher than Singh and Gandhi family scions Rahul and Priyanka as a possible prime minister. Most poll participants chose to remain anonymous.
While all this may be music to the ears of the septuagenarian parliamentary veteran, what will not be is the finding that the government’s policies and the prevailing economic environment do not inspire too many corporate bosses to step up investments. Twenty-four of the 50 CEOs polled said they were not planning any capital expenditure inIndia.
Some are actively considering investing overseas, a prospect that should worry Mukherjee. Harsh Goenka, chairman of conglomerate RPG Enterprises and who was willing to go on record, sums up the mood. are increasingly investing outsideIndia.
The US andLatin Americaare much more business-friendly,” he says. While India Inc looks overseas, the government will not have the comfort of foreign investors looking favourably atIndia.
A resounding majority – 39 CEOs – said they expected foreign direct investment flows to slow down, the government’s recent attempts to soothe frayed investor nerves by putting on hold some of its recent controversial tax proposals having no impact on sentiment.
India’s attempts to retrospectively tax past overseas M&A transactions and impose an anti-tax avoidance regime have been slammed by foreign investors and governments, many of whom have warned of damage toIndia’s image as a stable and friendly place to do business.
The ET Poll showed a majority of CEOs agreeing with that assessment, with a majority of participants of the view that the government was ‘going after’Britain’s Vodafone Group Plc.
However, a significant minority – 19 CEOs – disagreed with that view, an indication the government’s efforts to force the UKbased mobile phone giant to stump up thousands of crores in taxes were not being universally de
West Bengal Chief Minister Mamata Banerjee, however, is evoking some derision, with as many as 25 CEOs casting her as the biggest stumbling block to growth.
Talk about contradiction and the lack of alternatives. An ET Poll of 50 CEOs, across sectors, shows they have essentially given up on this government’s ability to grease the economy. It’s not bureaucracy, they say, but messy coalition dynamics that is the deal breaker. Forget reforms, forget investments, forget new projects for now. It’s a performance that would see CEOs hand out pink slips in their own companies. Yet, they feel, though in a slim majority, that the ruling Congress may still return to power. Pranab Mukherjee is still popular as a finance minister in this government and their choice from the Congress for prime minister in 2014. Business confidence is low and the future hazy.
Banerjee, a key UPA ally viewed lately as a thorn in its flesh, was notable in her opposition to opening upIndia’s supermarket sector to foreign players and has opposed several other reform moves.
By becoming the lightning rod of industry criticism, she has managed to help the Congress look good, despite its problems with corruption scandals, leadership crises and governance issues.
As many as 26 CEOs said they saw the Congress retaining power in the next general elections, largely because of a lack of alternatives. Asked by ET what the government could do to regain the initiative and spur investor confidence, each CEO had a different prescription.
The common wish-list was for coalition politics to work better so that national concerns such as corruption, Maoist violence and the Lokpal Bill are sorted.
Some wanted urgent reforms in banking and insurance, power and taxes, while others want FDI in multi-brand retail and aviation to be allowed.
Rajiv Lall, MD and CEO of IDFC, said the government should introduce administrative reforms that will improve the delivery of public projects and services. “Remove hurdles that are before big projects.
Some of the environmental groups need to be investigated and punished. They should not be tolerated and they are harmingIndia’s interests,” says Raju Shroff, chairman of chemicals firm United Phosphorus.

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