CII chief Vikram Kirloskar calls for tax cut on equities

New Delhi: The new government must lower taxes on equity, including dividends and capital gains, to boost the entrepreneurial spirit, CII president Vikram Kirloskar has said. Kirloskar is looking forward to measures that can enhance farmer income, focus on investment revival, job creation and improved consumption, as these were key to driving the economy growth above 7.2% this fiscal.

The chairman and managing director of Kirloskar Systems Ltd and vice-chairman of Toyota Kirloskar Motor took charge of the Confederation of Indian Industry (CII) in April. He said there is a need to make investment in equity more attractive to boost investment in the economy.

“Equity is overtaxed. Why would anyone invest in equity and assets at the (existing) tax levels on equity,” Kirloskar told ET. He pointed to the high deposit rates being offered by government schemes as one of the reasons why interest rate cuts by the central bank are not translating into lower borrowing rates for lenders offering lower borrowing rates.


“Post Office savings and other government savings are at 8.5%. So, banks have to compete with that to get deposits,” said Kirloskar, adding that the banks’ cost of funds has not reduced which has affected the transmission of rate cuts to borrowers.

The Reserve Bank of India (RBI) has cut interest rates by 25 basis points thrice within five months to boost consumption and economic growth (1basis point is one-hundredth of a percentage point). The CII president also asked banks and the finance ministry to address the issue of high real interest rate in the country.

On the employment front, Kirloskar stressed on consistency in policies and suggested that the government appoint chief executive officers (CEOs) with domain knowledge to remove bottlenecks in high employment generating sectors such as textiles, tourism, auto, agro products and construction.

“Like Aadhar was done with a CEO at the helm with fantastic domain knowledge (Nandan Nilekani), we need to look at the value chain and find out the weaknesses and suggest the ministries policies to correct those,” he said.

GROWTH, REFORMS
While the industry chamber expects the economy to grow at 7-7.4% in 2019-20, monsoon remains a key factor for this. “Rural demand is an important driver for the rest of the economy. If the monsoon turns out to be normal and well distributed, we could reasonably expect growth to accelerate to 7.2% or higher,” Kirloskar said. He stressed on the USChina trade war as a cause for concern.

He said the government has been following a good budget policy, but land and labour reforms were needed to boost manufacturing and employment.

The government has met its fiscal deficit target of 3.4% of the gross domestic product (GDP) for FY19 after a sharp spending cut towards the end of the financial year as revenue fell short of estimates.

Kirloskar said the industry hopes for a land reform bill in the next five years to make it easy to procure land for greenfield investments and key labour reforms to encourage fixed-term employment, social security and flexible timings.

He mentioned that the industry was not looking for the right to hire and fire at will.