Girdhar Vyas, who claims to sport the longest moustache in the world, after casting his vote in Bikaner. Photo : PTI
A fractured mandate from voters in the national elections
next year will be the biggest risk for India Inc, according to most chief executive officers (CEOs). Of the 40 CEOs polled from across the country, 60 per cent identified this as a bigger risk than trade wars, volatile oil prices, and inflation.
Political risks notwithstanding, 75 per cent of the CEOs polled said they would invest more in 2019. Capacity utilisation of the manufacturing sector crossed the 76.1 per cent mark in September 2018. Most CEOs also expressed their approval for the economic policies of Prime Minister Narendra Modi’s government.
About 43 per cent of them said they did not expect interest rates to go up and this would help them make investment plans.
“The biggest success was elevating the quality of life of rural masses with the help of bank accounts, cooking gas supply, electricity connections, insurance, and health schemes. The area of concern is distributing large amounts of money at the cost of huge deficits,” said Raghupati Singhania, chairman and managing director, JK Tyre & Industries.
Another area of concern in 2018 was the frosty relationship between the Reserve Bank of India
(RBI) and the government, with Urjit Patel quitting as governor of the central bank before the expiry of his term. Most CEOs are hopeful that the Bimal Jalan committee would be able to resolve the contention in 2019 over how much of its reserves the RBI should hand over to the government.
Asked about the failures of the Centre this year, most CEOs pointed to the debate over the RBI’s autonomy, the infighting in the Central Bureau of Investigation, and senior judiciary raising an alarm over the distribution of cases in the Supreme Court (SC) in an unprecedented news
conference. CEOs were also of the opinion that “tax terrorism” had aggravated. At least 40 per cent of them replied in the affirmative, while 15 per cent declined to comment.
They also said the implementation of the good and services tax — rolled out in 2017 — was less than favourable. Many small companies were still not getting input credit on time, leading to delay in their working capital cycle, said the CEOs. “Infrastructure development and cutting down inspector raj should be the top priorities of the government,” said the CEO of a large finance company, asking not to be named.
His peers at other companies said job creation should be another top priority of the government that will be elected in 2019.
“The new government must give a push to the manufacturing sector, resolve issues in the power sector, create an atmosphere for lending, and continue with the consolidation of public sector banks,” said the head of a large asset reconstruction firm, who also did not want to be named.
When asked where they expected the BSE Sensex to be by the end of 2019, most CEOs (65 per cent) said the bourses would end the new year just short of 40,000. The stock markets ended 2018 as the best-performing Asian market and the best-performing major global market after Brazil. The Sensex closed on Monday at 36,068, up nearly 6 per cent this year.
On the performance of the rupee versus the US dollar, 67.5 per cent of the CEOs polled said the Indian currency will remain in the Rs 70 to Rs 75 versus a dollar band. About 20 per cent of the CEOs said the rupee would fall to 75 a dollar.
CEOs also said the implementation of the Insolvency and Bankruptcy Code (IBC), 2016, was a success, despite many changes in the law in 2018 that led to legislation and many high-profile cases landing in the SC.
“While the intent of the IBC was good, the law was changed so many times that everyone is confused whether their bid will succeed or not,” said a CEO of a large conglomerate. Bankers, however, said the fear of the IBC had led to higher recovery of loans from defaulters, who were earlier not willing to settle their debts.