What has stood out to you most when it comes to the Prime Minister’s Independence Day speech because lots of sectors could be in focus – deep tech, defence, green energy, power, renewables and others. Where could the next big fillip from the government come from?
Mihir Vora: It was a speech which broadly captures the broad government thinking which is the fact that we have done a lot already in terms of tax reforms, direct, indirect, and other policy reforms. But now we need to improve and refine upon what has already been done. In my view, the tax rates — whether direct tax or indirect taxes – are reasonable and there is not much left to do in terms of bringing down the rates etc.
There are some of the highest slabs which the prime minister hinted at, which might be brought down for consumption purposes. Some of the items like cars are probably taxed too high, like luxury goods. So, some minor tweaks are required, but broadly speaking, direct and indirect tax rates are kind of normal. The problem has always been in the implementation, interpretation, ease of doing business and the complexity of the education as well as the complexity of the way the laws are drafted – not the new ones probably but the legacy laws and legacy rules.
The government has understood that the easy part has been done, rationalisation, reducing tax slabs, a lot of it is done, both direct and indirect. But now the idea is to make sure that the benefits of the lower rates, etc, flow down and they should not create hurdles for the industry, especially the MSMEs, in terms of ease of doing business. So that acknowledgement is sinking in that we need to improve the ease of doing business, reduce complexity of doing business, reduce the time for compliance and the resources needed for compliance of so many laws, etc, not only tax laws but also labour laws etc, etc.
So, on the ground, ease of doing business is something the prime minister is trying to address, and that is going to take a while but it is a step in the right direction. Immediately, if I were to look at what is likely to impact the market, it is the announcement about bringing down GST rates in some of the consumption segments for the lower income categories, and that is a welcome step. We have seen a slowdown in consumption in the urban side and we do need some kind of incentive for consumption boost.
This is becoming even more important given the current geopolitical situation where there is a lot of uncertainty regarding exports. We do not want to lose exports and if we do, there is going to be a lot of impact on the exporters. So to counter that, obviously we need to boost domestic demand and reducing taxes is one way of doing it, and that is immediately something that I can see as an advantage. However, I hope they have thought this through in the sense if they are going to reduce GST for consumer items, they should do it faster rather than later because if the expectation builds up that rates are going to be cut, then you might see people postponing consumption for the next one or two months and wait for Diwali.
So, if they want to do it, immediately is better, otherwise you might have some kind of a postponement of demand just to take advantage of lower rates and that is something, but it is a step in the right direction. The other broad things that the prime minister highlighted were the need for reliance especially in defence, the need for self-reliance especially in semiconductors and my guess is that apart from the PLI schemes that have been insured, there would be some more steps to encourage domestic production of semiconductors, etc.
In defence, of course, the urgency is increasing by the day, again given the geopolitical situation, so the prime minister talked about jet manufacturing in India and we know what kind of problems we have faced in supply of jet engines. All those things are coming to a head and the country knows that the government has all these things in its priority list.
On renewables and nuclear, a lot of work is being done. The prime minister highlighted that fact. Employment is one of the key areas. So, there has been an announcement. I do not know whether it is an incremental new announcement or a reiteration of what was already announced in the budget – of Rs 15,000 being given to those entering the workforce first time.