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CEOs say NDA reforms on right track, barring some misses

Global outreach aiding foreign investments, improved inter-ministerial co-ordination, well implemented initiatives (Make in India, Skill India etc.) and well-deserved focus on vital sectors like infrastructure, defence and railways; these are among the few top achievements of the Modi government as it completes two years in power on Thursday, say experts.


Early this month, CNBC-TV18 in partnership with BMR Associates did a comprehensive anonymous poll of CEOs and CFOs of large multi-national companies to assess their mood on the developments and disappointments in these past two years.


While a large percentage of business leaders polled seemed to be happy with steps taken to improve business climate in the country, inaction towards clearing tax uncertainties was pointed out as a pain point. Delay in Goods and Services Tax (GST) Bill rollout, disinvestment target miss, privatisation of railways, labour law reforms etc were also pointed out.

Power Minister Piyush Goyal, Transport Minister Nitin Gadkari,  Defence Minister Manohar Parrikar, Railways Minister Suresh Prabhu and Finance Minister Arun Jaitley bagged recognition as the top-performing ministers.

In a panel discussion with CNBC-TV18,  Gokul Chaudhri, Partner – Direct Tax, BMR & Associates LLP  and Rajeev Dimri, Partner – Indirect Tax, BMR & Associates LLP, the driving force behind the poll shared their observations. Other guests included FICCI President Harshavardhan Neotia, Chairperson of Max Financial Services Naina Lal Kidwai, and Managing Editor at Forbes Sourav Majumdar.


According to Kidwai, regulatory overreach could also be a hurdle as the process of interpretation of the impact of newer regulations is time-consuming. She pointed at some sectors like pharmaceuticals which have been affected.


Neotia says the seeds for growth have been sown but might take a while to bear fruit, talking on the effectiveness of the Make in India initiative. In the global context there is overcapacity and companies may not immediately get wooed into investing in India until global economy stabilises, he adds.


On FDI, where over 40 percent of the participants cited exemplary international diplomacy, liberalisation and the Make In India as key driving force, Kidwai believes the FDI we are seeing right now is just the tip of the iceberg.
Below is the verbatim transcript of Naina Lal Kidwai, Sourav Majumdar, Gokul Chaudhri, Rajeev Dimri & Harshavardhan Neotia’s interview with Shereen Bhan on CNBC-TV18.


Q: Take us through the methodology, the time spend on conducting this poll. This poll was completed before things like the bankruptcy code were passed through by the Parliament, so that perhaps is not reflected in the poll.


Chaudhri: You are right. We did this poll over a period of three-four weeks and that ended up two weeks ago. This was just before we had the Parliament passing the bankruptcy code, which was much awaited and also before the Mauritius-India protocol got signed, which has led investors to find greater certainty as far as the treaty is concerned. So those announcements happened after the poll was done.


Q: Do you believe that the poll would have reflected very different numbers or would it be along expected line, which is what the key finding seems to suggest?


Dimri: It would not have materially altered, so while these are two important developments as Gokul is talking about but they would not have materially altered the overall sentiment. However, for few investors these are extremely big events but in a sense it passes certain message in the market, so I do not think the findings of this poll are materially different from what we would have expected.


Q: Let’s get to it now. The first question that we ask as part of the CNBC-TV18 and BMR CEO Poll, are you satisfied with the steps that the government has taken to create an attractive business environment. A resounding majority 67 percent saying yes, 29 percent saying no and about 4 percent are undecided.    


If one would have talked to industry leaders in private, at least at the start of the year the sense was that there should be much more momentum but that feeling now, I get a sense, has changed; there is now perceptible difference when one talks to business leaders. There is a sense of confidence about the turn that the economy seems to be taking. So, your comments on the two years that have just concluded and the attractiveness of the business environment today.


Neotia: I think they have been rather good two years of the government from an economic standpoint. I think the government started off with a very clear vision of trying to build the foundation of what they thought would be a robust economic future for the country and they looked at ease of doing business, they looked at investment in infrastructure, they looked at various other issues that are critical for building blocks of the industry and development and all of that and whether it’s the fiscal deficit target containment or looking at taming the inflation numbers etc. So I see that all these different activities that have happened over these couple of years are now coming to a point when they should start yielding fruits. It’s like the tree being planted and then takes a while to grow and then the fruits to come. We have had two bad monsoons, so that has been a bit of a dampener. God willing this monsoon, hopefully as it seems to be predicted, would be normal and if that is the case I do see a very strong uptick happening from October onwards.     


Q: So you are expecting a significant liftoff in the economy starting October and that is the sense that we are getting from other business leaders as well. You just heard what Mr Neotia had to say. If I were to ask you to summarise for us how you would assess the performance over the last two years, on the macros, clearly, the government has done a lot of costs supported by the fact that oil prices have come off significantly and also, in terms of long-term structural reforms, perhaps not visible in the short-term but the foundations have been laid, how would you summarise the performance?


Kidwai: It is in your question and I would agree that the foundations are actually well set. Initially, a lot of announcements and some disappointment in the early period that things were not happening fast enough, but I do believe we are beginning to see the outcome, all of which are happening now in terms of the very significant development on the bankruptcy bill, the real estate bill also is important in terms of creating a very healthy real estate environment going forward. The bankruptcy bill itself will play out over time, but directionally right. Clarity on Mauritius, which was looming large and its good that we have got that out of the way and infrastructure which fortunately, now at least we are seeing some parts of infrastructure moving ahead. Roads is of course a great story, rail coming back on track and in fact, looking quite interesting going forward in terms of private public partnerships (PPP) that may come up there and the power sector, where whether it is renewable or indeed traditional power, there is movement ahead. And all of this leads and contributes to growth going forward.