India Inc needs to be more realistic in its outlook
If even a West Bengal can get over R1 lakh crore in investment intentions on the first day of its economic conclave, it is not difficult to see why a progressive state like Gujarat should get investors to talk of sums several times this amount. Indeed, such is the nature of investor melas, even a Reliance Industries Limited has committed to invest over R1 lakh crore in the state in just the next 12-18 months—Reliance’s capex was R32,000 crore in FY14 and its chairman had spoken of a R180,000 crore capex over 3 years in June. But why blame Indian investors alone; while cumulative US investment in India is under $30 billion, the USIBC still said its members would invest $41 billion in India over the next 3 years.
Even so, India Inc would be well advised to be a bit circumspect before going around making wild investment promises. There is no doubt the government has done a lot, whether in terms of opening up the defence sector or in terms of trying to undo the knots created by the UPA’s land acquisition Act. But it is equally true that a whole lot needs to be done, and in certain areas, the government has even slid backwards. Pricing of natural gas is a good example, and whatever the government’s views on how unreasonable private gas producers are being, it remains true that exploration activity has come to a standstill. The issue of telecom is even more curious since, after the defence ministry finally agreed to the proposal to swap 15MHz of critical 3G spectrum, the telecom ministry doesn’t want to put it on auction, putting all telco balance sheets at serious risk since auction bids will go sky high. While the issue of tax terror still remains in the sense the retrospective tax statute is still on the books, the Economic Times has reported the tax authorities issuing show cause notices to FIIs, asking why a MAT should not be levied on them. In the case of a company like Cairn, matters are even worse since, while the company has not been served a tax notice under the retrospective law, its shares remain frozen since the taxman wanted to issue it a notice under the law, but hasn’t done so—and, completely without reason, the government is planning to hike its share in Cairn’s oil/gas fields as a quid pro quo for extending its licence-period, thereby sending a signal to all oilcos that they are not going to get a fair deal in India. And while the government has done well to pass an ordinance on the land acquisition Act, it has to be kept in mind, there has been no relaxation when it comes to acquiring of industrial land. If the government is in danger of beginning to believe in its own rhetoric—until government shareholdings in banks don’t fall below 51% and banks aren’t able to take over defaulters’ assets, little is going to change on the ground despite all the talk of no calls from even the PMO—India Inc has to bear a large part of the blame for not talking straight.