Can India become a $5 trillion economy? - BBC News

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hello namaste and welcome to delhi i'm

davina gupta and this is what life india

on the BBC the show that looks at all

things to do with money the work we do

and the lives we lead now Prime Minister

Narendra Modi's government has presented

its first budget after being pre elected

the government has set an ambitious

target of transforming India into a five

trillion dollar economy over the next

five years that's more than the current

size of economies of Japan and Germany

but with weak economic growth high

unemployment and increasing trade

tensions is it realistic so we're asking

is this a budget for growths

we're India's first full-time female

Finance Minister Nirmala Sitharaman

spoke in the parliament

there were many expectations of big

ticket announcements to deliver on the

election promises that the ruling party

and the party has made so mainly more

jobs faster growth and a better deal for

farmers so what does the government's

economic roadmap look like has enough

been done to return India to high

trajectory croats

what further hits what were the misses

to talk all about it we have with us a

great panel starting with Cyril who is

the founder of Shiraz welcome sorry and

on a scale of one to ten thank you thank

you for having me here it's a I think

it's a good budget I'd rate at seven

point five two point five not cut we'll

get to know why we also have with us

Rana Coley who's a renowned economist

Rana for you what are the concerns from

the budget and again one to ten ten

being the highest what's your rating

thank you for the opportunity to speak

at your channel I would rate it

somewhere between five and six and the

reason is it takes oh my god yes no well

I mean the nice side is that it makes

all the right statements of intent and

so on but then on the other side is that

you know whether these are matched by

the commitments I have reservations so

on that side because you know while the

continuation of all those things in the

past is good and scaling up

infrastructures also eat very good and

it will boost but you know it's not

possible to know exactly the extent of

stimulus it is giving to raise growth

all right we talked more on that and we

also have Vikram kirlosker who's

representing the industry voice here he

is the president of confrontation of

Indian industry also vice-chairman of a

leading auto company Toyota kill Oscar


welcome Vikram and are you gonna rate

the budget laughing all day I've been

asked that I don't want to rate the

budget thank you for inviting me to join

you on this show this has been an

exciting day lot of talk on what's going

to happen my feeling on the budget is

that over the last five years

the Modi government has put a good

foundation and a good foundation in the

sense at the bottom of the pyramid and

that's why he's got elected whether its

water whether its toilets whether it's

electricity gas and it has gone to the

bottom because that's the reports I have

got this time I think it is a growth

it's a vision for growth and it's a

motivational idea when we do our budget

or when we do our planning in companies

as well we we put a high motivational


it doesn't mean we'll exactly reach it

but we hope to reach it and then we

start making a plans around how we will

reach it and I think to some extent

that's the kind of feeling I got in

today's budget speech well do you agree

no it's like you aim for the moon but

you fall on the stars of five trillion

dollar economy in the next five years

no I mean I am all for aiming at the

moon I mean aspirations are very good

and why not it should be there I only

said that Express reservation about the

steps to get there for you know to

illustrate through a specific example

for example hundred trillion of

investment in infrastructure over the

next five years now what are the steps

that will take us there on that there is

you know the allocations are not are

unclear and the government is going to

you know it is a private investment is

going it's the good thing is that is

going to set up a credit guarantee

credit guarantee enhancement fund defray

the risk and that we hope that it will

elicit private participation the other

side is going to set up a committee to

examine the scope for long-term

financing so part of the private

participation we have two people here

who are actually running businesses

quite successful at that let me come to

you sorry first when we talk about

investment in India why is it that we

are concerned where private investment

is not picking up well I I'd like to

look at India as a giant startup and I

think look at the country we have huge

ambition and we have all the right

framework in place you know our younger

population or geopolitical openness our

technological stance our ability to

create IP I think we have a lot of

things going for us you know sometimes

you have to do a lot of groundwork

before you know you get funding in our

startup I really feel India's like that

we have a lot of things going for us our

framework is very much on place a lot of

detail needs to come into the you know

into the framework as well which

includes execution which includes the

rice policy framework you know the right

kind of you know fiscal framework as

well but look this this is this is a

rare and a large opportunity

India is an opportunity for the world as

well and investments come in where you

know the the the stage is set and I do

believe they will come in and we do need

to work harder we need to we need to

invest in the right infrastructure but

to me it seemed Vikram that there was a

good selling pitch for India when the

finance minister took the floor she said

India will be a three trillion dollar

economy this year India will actually

grow more than 7% this year the numbers

however were not mentioned which is a

departure from the past on the revenue

collection on the expenses and

allocation for different policies but

one concern still remains is India Inc

now ready to lose their purse strings

for this growth story well you know the

some things in what she spoke you know

was really heartened me

one is she spoke on trust because for

the last month I've been talking about

lack of or less trust between industry

and society industry and government and

I think that's causing a deficit in the

in the growth story because of

over-regulation due to lack of trust and

she spoke on trust in the beginning some

actions also she suggested on improving

trust such as faceless income tax all

GST cases to be disposed off quickly and

there were several other things so GST

being the goods and services tax so so

so trusted I think is a very very big

issue and all my meetings in the past

couple of weeks past week especially

with the new ministers we have talked

about the trust deficit and all of them

are saying no we will attach attack this

and we will sort this out which which

gives me a very positive

so there's a distrust within the India

ink no you know this general this for a

developed country if you look at what's

the difference between a developed

country and developing country is trust

between institutions in society okay

it's a high level of trust higher level

of trust between government and society

government and industry industry and

society and we have to increase this

it's it's not just the government it's

also industry and I'm I'm taking action

in requesting our members in CII to make

sure we sign governance so pledges that

we follow certain minimum standards of

governance we have to be transparent for

the government to be transparent and I

think they're also taking the right

steps to to open this up and we are also

trying our best true so when you say

there is no trust oh it's it's a lack of

trust or lack of trust can you give us

examples it's why do you feel that well

you know you end up why do you end up

with over-regulation okay because

someone is doing what in India a lot of

people say jugaad okay that's that's not

good so you end up with regulation maybe

one exactly so the so you end up

creating a policy for everyone or you

end up creating a regulation for

everyone based on very few examples and

which have happened so we have to get

over that all right sorry you had a

point to make and I also want to ask you

this because this particular budget hell

actually announced some policy

initiatives yes one of them is have a TV

channel for startups so program perhaps

on the line of this popular program

shark tank where you have startups

coming in and pitching and then capital

is giving them money there was a program

which was given by the government

earlier in 2016 or startup India where

certain money was allocated for funds to

be by a venture capitalist funds to give

it to startup like yours now do these

policies actually make a difference so

right so I think what's interesting

about this government is and you know

going back to what Vikram said this is a

government that listens okay and that

takes a lot of feedback and that you

know and she even mentioned in her

speeches crowd-sourced suggestions and I

think that's a wonderful thing in

building running closer institutions and

as a start-up founder I've personally

sort of witnessed it we've been part of

the story there's a lot more dialogue

with this come and then with any other

comment field ever had I don't know

whether we need a TV channel I'm not

sure of that

but the fact that we're putting startups

at the center we are saying there's a

capital allocation clearly this is not

the capital allocation that's gonna make

you know startup magic happen but it's

an intent it's you know throwing your

hat in the ring to say hey we are

watching we're gonna sort of look at

what's going on here it is an important

area of focus for the first time a

government has gone out yes you know

focused on startups in such a big way

there are other governments have done

this and you know Israel and Singapore

and us of course but is it enough to

create jobs Rana because India is

looking at a record 45 you're high

unemployment yeah that's a very good

question because you know the scale or

the extent the magnitude of startups and

their contribution to GDP is I think

currently very low I'm not aware of the

exact magnitude though so you know let

me get back to the point and I tend to

look at the budget as setting fiscal

policy for the year and we have two sets

of main macroeconomic policies on one

side is monetary and on the second side

is fiscal policy fiscal policy is all

about changes in taxation and spending

and I I just look at it from that

perspective as an economist so what are

the changes in taxation and other

changes in expenditure and are those are

those changes going to stimulate growth

or not to answer your question now on

the changes on taxes taxation side there

there are some highs and lows I would

say one is definitely which I would like

to flag is this tax incentives for

affordable housing in just going through

intense demand crunch on the housing

sector side and casual I mean many

reports say estimate the stock of unsold

homes at somewhere between 1.3 million

or so

definitely their electricity is there as

well internet connection for rural areas

is there there's a talk about not using

fertilizers for farmers and

incentivizing them for it so that they

don't spend money on that but at the end

of the day do we have high-paying jobs

in India and was there a way forward in

this budget for that and that being the

isolate housing because that is part of

real estate and construction industry

the employment elasticity's are very

high and construction is by far one of

the biggest employer or job creator for

you know the unskilled labor as it were

it has in the past it has lifted a lot

of farm surplus labor which is what

India needs so you know the electricity

fertilizer etc are separated yeah so

housing has been in the or precise

deconstruction has been in the doldrums

for more than five years long now and so

we need to see whether there's

sufficient to boost demand for housing

and this and so inventory takes off so

again the question remains this Vikram

let me take this to you because you're

representing India Inc which employs the

skilled labor from India now one of the

observation by a Swami Netanyahu is a

renowned economist has been that this

budget actually has not done much in

terms of announcing job opportunities

for the young people do you agree well I

I think what she's tried to do is figure

out try to look for knots of the economy

when I look from my factory viewpoint

when I have a problem I don't have

enough money and demand is going down

what do I do I start looking for all the

bottlenecks and try to remove

bottlenecks we have a situation in India

for example in the textile industry

textile machinery is exported a lot of

it from India to countries were

competing with us we also export cotton

and they're able to make a shirt at a

lower price than us so there's something

wrong in yeah we are competitive on the

machines they're competitive on some of

the parts of the value chain but we are

not able to compete finally on the end

product and we are losing factories and

employment on that so I think we have to

look at the value chains and the supply

chains in in these major job-creating

industries no that's construction

whether it's textiles whether it

Otto or many others and see which parts

are competitive or not competitive and

remove the bottlenecks in them yes the

other thing that has been done in the

budget clearly to incentivize corporates

is to reduce corporate tax now we've

seen similar move being done in the US

where corporate tax was lowered it was a

controversial bill to 21% for 99.3%

companies what the finance minister said

the corporate tax will now be 25%

now does this incentivize corporate like

it certainly I'll tell you in the auto

sector which I am involved in yes if I

look at my tier two suppliers I don't

think tier 1 the tier 1 suppliers may be

much larger than the 400 crores but

certainly a lot of the tier 2 supplies

for them this would apply and I'm sure

in a lot of the industries again tier 2

supplies it would apply but what about

labor force participation sorry because

you're in a space which is looking at

women entrepreneurship female labor

force participation has clearly been

below 30 percent and this is the first

time we've seen a full dumb female

finance minister we've seen women vote

as much as men have in this election

there are 78 member of Parliament's for

women which is also a highest number did

you feel that was a Miss it is a big

mess clearly and I think going back to

what Vikram said unemployment I really

feel in your needs to find far more

aggressive solutions on fixing

employment issue and look at industries

which are newer high-growth I do fail

digital tech driven businesses

healthcare education

these are sectors consumer brands a lot

of opportunities will arise but I think

we also need to as a country look at

what is happening from from a shift

perspective while I know former

corporate sector jobs are not growing

manufacturing is not growing and I saw a

mention of manufacturing in the

agriculture and their artisans and their

but we do need to sort of look at newer

models whether it's gigs micro

entrepreneurship empowering more and

more people to be self-employed whether

it's more retail more more more

hub-and-spoke models because I think a

lot more of this is happening globally

suretrend new job creation is not

happening in traditional industrials but

thus do the jobs yes I was just coming

to your ready to do these jobs actually

now come from say foreign investors who

have now been promised that they will be

able to invest in sectors like aviation

media is also one of them insurance will

also see higher foreign investment once

the government comes out with a

blueprint do you think then we can have

a spot of growth in India two things one

is I wish to you know sort of add to my

panelists remarks on self-employment and

think III slightly deviate from that

because India's always had

self-employment and the worst segment

which is about forty five percent of the

economy which is so the so called

informal sick economy is basically self

and self-employed people these people

are self-employed and they've started

their own businesses because there are

no jobs so the easiest thing to look a

paddle low productivity low skilled jobs

those have always been there and the

size of that has introduced meaningful

absolutely absolutely you know they have

no other options so you know I would

like to put that into perspective second

is that a hundred percent FDI in media

insurance aviation now what is the

employment potential there but first of

all the government has said it will

examine mmm-hmm right now that when the

examination will take place and then the

hundred percent ceiling will be

announced oh sorry the relaxation will

be announced and then we will explore

FDI aviation is a small sector it has

been going through a lot of trouble and

so it's all up in the air and the

employment creation potential would be

on the higher skilled side because

insurance sector or media or for that

matter aviation all require you know

highly-skilled you know require pilots

and your ground staff and so on you've

got to be very capable absolutely so

Vikram do you agree then the budget has

been high on making promises but when it

comes to solutions where is a solution

because you've said that you have issues

when it comes to raising capital for

latest technology and there are

companies which would like to hire

skilled labor but clearly doesn't have

enough demand which

giving them money again again I look at

the last five years you know when mr.

moody talked about the same like toilets

or water or gas lot of people didn't

believe it but finally they did act on

it and again I repeat that that's you

see it in the votes you see in the in

the mandate that they demanded was for

growth's the mandate but you do see yeah

but you do see a huge growth if I look

at the last five years in the auto

sector it's only the last six eight

months maybe we've had a tough time but

the rest of the four and a half years is

very very it was very good we were

growing very very fast and investing a

lot and I think we'll continue our

investment there's still a lot of

headroom for the auto sector I the

reason for dip is I'm not sure what the

reasons are but some of the reasons I

feel are also 18 cities are with metros

as opposed to two five six years ago hmm

shared mobility big increase in the

number of riders because factor sales

there are down by about fifteen point

seven percent and this is a very

important parameter it's pretty much

every year this happens people a monsoon

this happens alright so you were saying

that demand is intact would you agree

with that sorry because you deal in

purchasing go up look a lot of things in

the budget or overall at a economic

policy level should be seen with a five

year view and some things are definitely

here - you're so right

you know budgeting of you know physical

fiscal deficit and you know the leisure

is really you know an annual exercise

but a lot of these things one need to be

continued continually is a good thing

for the framework and second of course

you know having the right measures in

place as a country as a as an economy we

do have Headroom for growth I don't

think they there's any one question here

that creating triggers for that and I

think creating more hackable triggers

for that and is hackable triggers you

know triggers what is the magic wand

well I would I would trade

as you know the base and the top I you

know investing in grassroots is

inevitable and undeniably the most

important thing we need to do and I

think that's happening and investing in

high-tech high-tech global innovation

you know India needs to stay ahead of

that absolutely technology

infrastructure those are two key points

that we talked in this budget but the

third point and I want to come to you're

ready for this is protectionism now

that's the word that has created trade

tensions all over the world

the US has accused India of having

something called a Harley tax which is

taxing them imported motorcycles of

Harley Davidson this particular budget

also we saw custom duty that was imposed

highly on the metal certain phosphorus

vinyl flooring auto parts as well do we

see that that India is also trying to

now get into this protectionist fear

which could hurt its own growth when it

wants to attract foreign investment I I

saw the list but only scanned it heard

it from the budget speech and it's a

revenue mobilization measure along with

you know along with the customs duty

they've also raised the excise on a

special excise duty on this definitely

it is it is on the protection side but

this is not new I mean last five years

we've seen you know safeguard duties

being raised upon now upon steel rolled

coil and so on so it's been going on is

that separate from the you know what the

US president has said well I mean we are

India is currently it has retaliated and

you know after holding on for both if

you have the u.s. taking India to the

Organization for a trade dispute on

aluminium and steel tariffs but very

quickly are very less time but I want to

give the last comments in vain you

starting from you

what is the miss in this budget and what

could be the fix for the economy miss I

think going back to the pre budget


expectations were that you know there

will be a sufficient attention given to

demand-side on consumption and

investment side would have been

decelerating in the last thing you know

the growth for at five point eight

percent in the last quarter was their

pouring water low so I think in that

context it's hard to figure out exactly

what the demand impulses so Vikram do

you think India is poised to take over

China because that seems to be the

favorite favorite Sri watch us and what

has been the miss and the fix okay I

philosophically I talked with again the

government guys the last few days I said

how can you grow the economy on high

debt we want to reach five trillion it's

fantastic but debt is not the solution

to grow the economy we need to grow

equity so encourage equity I think I

think taxation on equity is too high if

I if I want to invest in a company I

think my taxation on equity and the

returns are close to 60% my backs on

income is 35% I rather be a bubble right

and you have a super-rich tax now on

people who are earning more I'm sorry

I'm afraid I'm out of time completely

but sorry we stick with your 7.5 or an

10 and India has been called the bright

spot of the global economy but for that

to continue its young population needs

jobs businesses need more incentives to

grow and rural India needs to be

uplifted thank you for joining us on

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