The government should provide a strong stimulus package for the economy: Kumar Mangalam Birla
NEW DELHI: Aditya Birla Group President Kumar Mangalam Birla on Friday he said the government needs to do more than cut corporate taxes and provide a strong Fiscal stimulus for the economy
He said that fiscal prudence should be shown in business, but a fiscal policy is also required in the year of deceleration to counteract its impact.
"I am not an economist to begin with but I think we are nearing the bottom...I don't see credit growth to large corporates to pick up anytime soon. Most are still getting large debts in their balance sheets which I think they need to lop off. I also think there is a case for the government to give greater Fiscal stimulus to the economy. Anyway FRBM Act (Fiscal Responsibility and Budget Management) provides half a per cent deviation," Birla said at a media event here.
The Reserve Bank of India (RBI) on Thursday reduced the projection of economic growth for the current financial year to 5 percent from 6.1 percent earlier, due to weak internal and external demand.
Birla said the government needs to do more than a corporate tax cut.
On September 20, the government announced the reduction of the basic corporate tax rate to 22% from 30% for companies that do not seek exemptions, and reduced the rate for some new manufacturing companies to 15% of 25%. Including surcharges and terminations (levies to raise funds for specific purposes), the effective corporate tax rate will decrease by almost 10 percentage points to 25.2 percent.
The corporate tax cut followed other government measures to accelerate the slowdown in GDP growth. These include efforts to reduce bureaucracy and boost foreign direct investment (FDI), and plans to consolidate state banks.
"Tax cuts are always welcome. If the government decides to give us more tax breaks, that will be most welcome. They increase our cash flows; give us more elbow room to grow. The government has done a lot. I am not taking that away from that. One of the things that it could also do is to give stronger Fiscal stimulus ," Birla said.
He also said that some companies would like to use the package to pay off the debt and others would like to use it to expand capacity.
Birla minimized that boost to consumer spending by cutting the income tax rate that would help the economy in the current scenario.
"We can't come out of this through a consumption story because as of now, people don't want to spend more, incomes are low. You have unemployment happening. The best to get out of it is only through Fiscal stimulus . If GST (goods and services tax) is brought down to 15 per cent, that would be huge stimulus," he said.
The Aditya Birla Group 's President also said the increase in government spending on infrastructure will have an impact that would be quite unparalleled.
In response to a question about the global economy and the impact on the group's business, he said that the world economy is already in a bad mood, but two of the group's foreign subsidiaries due to its location have been able to mitigate the impact on the business.
He said that now, countries seem to be moving away from globalization.
From now on, it seems that we are moving away from globalization. Some economists call it 'slow globalization'. They are having a phase where they see more localization and regionalism. A global company must also focus on each region by itself and even within the focal market. Regionalization seems to be the order of the day, Birla said.
While supporting regional trade pacts, Birla defended India's position to reject the signing of the proposed Regional Integral Economic Association (RCEP) by saying that there were several clauses in the pact that went against the country's interest.