Giving a wrong medicine for a severe illness was a fallacy of the Indian government, while tackling the economic slowdown in India. But today, despite all the measures, the economy has not seen the boost.
Looking at the economic conditions, Hiranandani Group, Co-Founder and Managing Director, Niranjan Hiranandani states desperate times call for radical measures. Speaking to Free Press Journal’s Jescilia Karayamparambil, the new President of the Associated Chambers of Commerce & Industry of India (ASSOCHAM), Hiranandani shares a three- point perspective to improve the economy.
Edited excerpts:
Last year was not so favourable for the Indian economy. How do you see the economy improve this year?
The low and high in the economy is not an Indian phenomenon but a global one. For instance, the disruption that took place due to the US-China trade war; UK-EU’s Brexit; recessionary trend across the Middle East and Europe and other geo-political tensions, etc, hurt economies around the world.
While the United States continues to do well, other countries including India witnessed a drop in their GDP growth. At present, India is growing at 5 per cent or so. But to achieve the five trillion economy target, our GDP growth should be double digit, if not 12 per cent.
There are three aspects to the economic situation: supply side, demand side and liquidity position. In order to tackle the supply side, we have recommended that the corporate taxes cut of 25 per cent be extended to partnerships, LLPs and individuals. We hope the government will do that in the present budget.
There is a serious lack of liquidity in the marketplace — started with demonetisation, went on with GST, RERA, NCLT, and IL&FS (the last death nail). While NBFCs have no money, banks have too much money — Rs 2.75 lakh crore of excessive liquidity.
With recession, even companies with positive net worth are unable to repay as there is a temporary lack of liquidity. Like 2008 (during the Lehman crisis), there should be a one-time rollover of banks limits. We have raised this demand with RBI and the Finance Ministry.
To kickstart demand, we are suggesting something radical. If that demand is met, it will be useful to the economy. We are asking the government to reduce GST by 25 per cent for a period of six months, which means we are talking about Rs 20,000 crore per month and for six months is means Rs 1.20 lakh crore.
To boost demand, we had asked the government to increase their spending as well. This demand has been fulfilled recently by the Finance Ministry as well.
Do you think the GST council would agree for this 25 per cent reduction?
We are suggesting deficit financing. We are not suggesting that the states should take the hair cut. Our view is that you basically fund it by deficit financing. It will not affect the public
This move will increase the deficit financing slightly. Such move in a recession will make no difference. If this is implemented expect double digit growth in GDP by next June.
Do you think any of your recommendations will be implemented during the upcoming budget?
n The government has no choice. They will have to implement it. If their solutions were working, there was no need for us to share the suggestions. They have done so much, yet…
We are trying to be helpful to the government. We are not trying to say that we are the government or are the sole repository of all knowledge. It is our belief that if they consider our suggestions, it can turn around the economy.
Investments coming into the country has declined. But in the real estate sector there are some investments coming in. When do you see other sectors pick up?
we too believe that investments will come in. FIIs have been pulling out money but FDI is coming in. A company like Brookefield has invested USD 19 billion into India. So, we expect many such investments.
Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) took some time to normalise. Do you think everything is sorted?
n The taxation issue with REITs has been sorted (which was the hurdle). If you transfer the assets to REIT, there is only one time tax now. REIT is a full pass through. One REIT has taken place, two more can be expected soon. There is a lot of growth expected in this space.
There are talks about IPOs as well. Do we see that happening?
IPOs are also expected. But I doubt if it will hit the market now.
How much investment are you expecting in the real estate sector in this financial year?
Last year, the real estate sector attracted USD 40 billion. I think at least an equivalent amount will come this year.
Another issue in this segment is unsold inventories. Do you think there is scope for a correction in the segment?
The price correction has already taken place. Many properties are available at a lower price compared to what it used to be. At some places, the demand has picked up. The demand and growth in categories such affordable and rental homes, will be huge.
Do you think RBI will go for a rate cut again?
There is no option but to cut rates. It is not a question of whether RBI will cut or not. The regulator will have to cut rates. If you need to kickstart the economy faster, then you cannot have these rates.
Transmission does not seem to happen. Do you feel RBI has to take stern steps here?
Banks will have to transmit. The banks have been given necessary directions already by RBI. We are hopeful the transmission will happen soon.
For a brand like yours, it is easy to raise money. But for many new or SME developers, raising funds is an issue. How do you plan to resolve that issue?
That is my job as Assocham head. I am constantly fighting with the bureaucracy, banks, and RBI for the same.
Manufacturing sector had been a major growth driver in the country, but it is shrinking due to varied reasons. How do you see things improve there?
I do not agree that only the manufacturing sector was the reason for growth. I think the service sector was the bigger reason for growth. The service sector consisting of IT, financial services, entertainment, publication, etc. are growing much more than the manufacturing sector.
The manufacturing sector has seen growth, however, it has come down lately. I think the potential for growth is tremendous for this sector. By bringing down GST, the sector will get a boost and can be revived.
Blackstone and your subsidiary have entered into joint venture (JV). What is the progress there?
The JV with Blackstone is a 50:50 venture. We are looking at an investment of Rs 2,500 crore in the next two-three years. We have acquired three land parcels immediately. We will acquire more parcels based on the need.
Your group in known to venture into areas where there is future (way before others do). Do you think there was a delay in the case of entering into warehousing space?
No, I do not think so. We are on time. GST has been implemented, e-commerce business is growing, tolls are removed, etc. so this is the right time.
Earlier, we had bad quality warehouses but today, it is a different animal completely. It is a space with sophisticated systems.
Warehousing and industrial township are coming up. We are putting up one of the largest one in Pune (250 acres). We have one each in Chennai (110 acres) and Nashik (77 acres). In three other cities too, we are in the process of acquiring land.
We will continue to evaluate the demand. Based on demand, we will go ahead with our acquisition plans. Is the worst over for real estate?
The answer is yes and no.
For the individual or institution that was unable to cope with the changing policies and circumstances, the survival chances are less. However, the overall direction of the sector is right.
In the case of our group, we have seen pick up in demand in some of our projects.
I am optimistic market will grow but the question here is how fast can it go up. And only time will tell about growth and double digit growth.
