People complying with tax regime should be incentivised: Pankaj R Patel, Ficci president

The next budget should focus more on public spending to push demand in the market, said Federation of Indian Chambers for Commerce and Industries, said its newly elected president and chairman of Zydus Cadila, Pankaj R Patel. We need faster and better implementation, said Patel in an interview with Economic Times. Edited excerpts…

What impact will demonetisation drive have on the economy?
What impact will the demonetisation drive have on the economy?


It is a game changing initiative. It is something which will have a long term impact on the economy. It would certainly swell the tax kitty of government as more people are likely to come under the tax net. It will leave the government with more space to enhance the public spending. We are already seeing banks reducing lending rates. Housing will see a major growth and also companies will benefit from cheaper credit which increase their competitiveness.

Demand took a major beating in the last two months especially in rural areas and it reflects in the auto data as well. When do you see demand coming back?

I think many sectors are not impacted as much as predicted earlier. Some of the sectors such as tractors, two-wheelers were impacted but I believe they (the problems) should be over in the next quarter or so. People who had deferred their spending would start doing it now. And also we see several states releasing their seventh pay commission awards. That will also have a positive impact on demand.

The GST roll out won’t be possible by April 2017. How do you read that?

It should happen before September 2017. It is written on the wall and nobody can stop it. The only thing is that we need the rules to come in soon and some time would be required for the industry to adapt to it. First, we need to know what exactly the law says and accordingly we need to setup a system for the industry and trade compliant to the regime. I would like the council to come to definite conclusions as soon as possible so that it can be smoothly implemented. It is definitely a major thing and GST will make a huge impact on the future of our country.

What are your expectations from the impending budget?

We expect major tax reforms. The government would most probably focus on more demand generation. It would mean more money in the hands of the people. And people who comply with the tax (regime) should be incentivised. Some amount of easing out of tax laws, easing out of certain regulations should be taken care of in the upcoming budget. We have requested the Finance minister to revise the current income tax slabs and bring them at par with international standards

Are you happy with the pace of reforms under the NDA government thus far?

Yes, I think they have done a good enough job. We would like to see more reforms in other areas which are left out now through more public spending in the budget. Off the top, in the last budget, they eased several taxes. Refund was a nightmare, which has been simplified. GST legislation passing through was a big thing for our country. Apart from that, major announcements in the infrastructure have been significant. External financing for infrastructure projects is another important step.

What are some other ways you would suggest to boost demand, apart from increased public spending?

The catalyst can be public spending, not only announcement but the pace of spending. We need better and faster implementation of existing schemes.

How do you think the government’s ease of doing business strategies have fared for the industry?

We have been telling this government that you have done ease of doing business ‘phase one’. Time has come to start phase two. There should be lesser regulations with respect to licenses and approval processes and more approvals through digital medium, online applications and clearances. Some of the redundant laws have to be removed. A new boost to the ease of doing business is required.

Corporate investment remains subdued in many sectors. When will this pick up?

When the demand picks up, investment will come. It is not like the corporates don’t want to invest, but overall demand has to come. Why do you invest, you invest if you can sell your product. I think in about six months, we should see the demand coming up. So much money in the bank, it has to be spent.