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Confederation of Indian Industry (CII) on Friday termed the budget presented by the Tamil Nadu government as ‘historic’, ‘transformational’ and ‘growth oriented’ with thrust on ‘inclusive development’.
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Addressing the annual session of the Confederation of Indian Industry (CII), Sitharaman also said the government and the RBI will both push growth and take all necessary steps to keep inflation contained.
“Government’s commitment to recovery is shown in so many different ways and we are going to continue doing that because recovery and its sustainability is something which the PM is very keenly invested in,” said Sitharaman.
“I am not looking at growth versus inflation. We shall attend to inflation and keep it contained, take all the necessary steps but never forget the fact that growth is that will make all the difference to the economy’s revival, growth will eventually remove poverty and bring in a level-playing field for all Indian citizens,” FM said, adding that both the Centre and RBI are working as partners to address issues linked to the economy.
She said the messages and the indications that are coming in are very clear that the economy is revving to come out. The FM said the financing needs of the growing economy have been successfully met by the over Rs 5 lakh crore of capital, which was put in the hands of various stakeholders through the credit outreach programmes of the government.
Sitharaman also said the economy has not reached a level where the liquidity which was pumped in during the pandemic can be pulled back.
“I don’t think we have reached that level and I am glad that RBI has been voicing that understanding that too quick a retrieval or sucking out of the liquidity from the economy may not do the necessary stimulus, which is required. I am glad that RBI has kept that understanding and they have not given any indication about wanting to suck out the liquidity which is available there,” the FM said.
Sitharaman cited the passage of crucial bills in Parliament in the just concluded monsoon session as the government’s commitment to push ahead with reforms. The FM made it clear that the government will push through stake sales in all the companies such as Air India, BPCL this year as well as proceed with the asset monetisation plan. “Policy-driven disinvestment and privatisation will continue with the same fervour,” said Sitharaman, adding that “necessary rigorous work is going on and the government is committed to the disinvestments announced in the budget.
The FM urged the industry to venture into new areas and take decisions to expand.
“I thank the Indian industry for being very level headed to face the challenge of the first and even face the challenge of the second wave of Covid-19 when many countries are still wondering how they would face their economy and pick the economy from where it is left behind,” said Sitharaman.
“Indian industry is moving into totally new areas. It is time for the Indian Industry to come around in a big way and it is time to show its risk-taking capacity”, said Sitharaman, adding that the stock market was showing the way. “Please do follow it,” said the FM.
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The Reserve Bank in its circular on April 27, 2021 imposed various restrictions on appointment of auditors by banks and NBFCs and prescribed a cooling off period for re-appointment.
Urging the RBI to review the circular, the Confederation of Indian Industry (CII) said the proposals “will cause significant hardship to the companies, its stakeholders as well as industry in general”.
The chamber said that few matters that warrant an immediate attention of the RBI include a clarification that the circular is only intended to cover banks and NBFCs and their respective audit firms.
“The RBI may not apply the same principles to the commercial banks and NBFCs, including in respect of cap on maximum number of audits, mandatory joint audits, and rotation/cool off principles. The NBFCs may continue to be governed by the Companies Act, 2013,” it said.
It also suggested to re-consider severe restrictions on capacity and eligibility requirements, limit on number of audits, maximum engagement period of 3 years and 6 years cool off period after rotation.
“The RBI may consider aligning them with the provisions in the Companies Act, 2013. The RBI may still achieve its objectives, without diluting any of the principles,” it said.
The chamber further asked for review of definition of related parties, which as per the circular include the group entities using a common brand name as this has far reaching implications and unintended consequences; and restrictions on audit/non-audit services during one year before/after the appointment as auditors of a bank/NBFC, covering the entity and its group entities.
“These provisions may create severe capacity constraints, without adding any qualitative parameters,” CII said, requesting the RBI to help in facilitating an effective implementation of regulation, without disrupting the ease of doing business.
It also said that a sudden change in major policies, without any reasonable transitional provisions, is bound to create several practical challenges in successful implementation.
“It should also be noted that appointment of auditors is a critical and important process for an organisation and merits right level of attention especially from senior management, board and audit committee, and approval from RBI,” CII said.
It added that all these amendments will create inconsistent policies without adding any qualitative parameters.
“It is all the more challenging in present times, severely impacted by COVID-19, to implement these requirements without any transitional provisions,” it said.
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Instead of setting up just a single bad bank, the Centre should consider floating multiple such outfits in the form of Alternate Infrastructure Funds, Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank, and President, Confederation of Indian Industry, said. The veteran banker also suggested the setting up of a development financial institution for infrastructure, while speaking at BusinessLine’s Countdown to Budget 2021 event on Wednesday.
“One of the suggestions we have made from the CII is rather than thinking about just one single bad bank, where you have a big challenge of clearing price, allow floatation of multiple bad banks in the form of Alternate Infrastructure Funds registered under SEBI. They should also be allowed to buy, in addition to securities, loans from banks and NBFCs balance-sheets and to be considered as part of the permitted activity for AIFs,” Kotak said while delivering the keynote address at the HDFC Bank powered conference themed ‘Unleashing the animal spirit in a pandemic hit economy’ .
He also suggested setting up of a development financial institutions.“The reason is if you look at NABARD, which has been a success in rural and agriculture, or SIDBI in the area of MSMEs, the time has come for a massive infra push for India’s growth transformation and through that creating a reverse demand for various other products and services. A DFI, with a creative way of funding that institution with long-term money, is something that may be appropriate,” he said.
Budget 2021-22, which is being presented amidst the Covid-19 pandemic, is not just about arithmetic but also about being a policy document that spells out a new future for the country, Kotak said.
“We are in the best of times, the worst of times…the pandemic is a once-in-a-hundred year event. For all the challenges it has created to lives and livelihood, it is also the best time for us to grasp the opportunity of a transforming world economy, Indian economy, and society,” Kotak said.
He underlined five key focus areas that the Budget should focus on. These include infrastructure, healthcare, education, sustainability, and defence. Additionally, there is a need for a continued push in three areas of private investments, jobs and digitisation.
Finance Minister Nirmala Sitharaman, who will present the Budget on February 1, has promised a “never before” like Union Budget as the government looks to boost growth amidst the pandemic.
“I genuinely hope this Budget will live up to the expectation that it is a Budget like never before,” Kotak said.
He also called for a gradual normalisation of the fiscal deficit over a three-year period and recommended a stable tax and interest rate regime.
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