The government should provide a strong stimulus package for the economy: Kumar Mangalam Birla
New Delhi, December 6 () Aditya Birla Group president Kumar Mangalam Birla said Friday that 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.
To begin with, I am not an economist, but I think we are getting closer to the bottom ... I do not see the growth of credit so that large corporations recover in the short term. The majority are still receiving large debts in their balance sheets, which I think I think there is a case for the government to provide a greater fiscal stimulus to the economy. However, the FRBM Law (Fiscal Responsibility and Budget Management) provides a deviation of half percent, Birla said at a press 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 exemptions, it will be very welcome. They increase our cash flows; They give us more room to grow. The government has done a lot. I am not taking that away from that. One of the things that I could also do is give a 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 cannot get out of this through a history of consumption because as of now, people do not want to spend more, income is low. Unemployment is occurring. The best way out is through the fiscal stimulus. If the goods and services tax (GST) is reduced to 15 percent, that would be a great stimulus, he said.
The president of the Aditya Birla Group also said that the increase in government spending on infrastructure will have an impact that would be quite incomparable.
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, saying there were several clauses in the pact that went against the country's interest. PRS HRS