‘This is best time for big bang reforms’

The Budget bet for 2016 appears to be veering around big bang reforms. Speaking Bloomberg TV India, Wockhardt Group Founder Chairman Habil Khorakiwala says this is probably the last opportunity for this government to come out with big bang reforms, improve the ease of doing business and streamline the tax structure. The Budget must also encourage higher investment in R&D to ensure the success of Make in India, he said

The direction the government has taken is right and this is probably the last opportunity for this government to come out with big bang reforms.

A big bang reform means you are bringing in significant changes — a mini revolution — and it means you are prepared to take risk, both politically and economically. Only then a big bang reform is possible.

But I think it is a very historic and important opportunity for the government to do that. Today, India’s growth is 5 percentage points faster than the global GDP growth and US growth. Today, the size of our economy is $2 trillion while the US economy is $17 trillion.

We are one-eighth of US and in 12 years we could be one-fourth and in 30 years it would be half of the American economy.

That is the significance of faster growth and that cannot come without significant changes. Small and incremental changes are good. But that is not going to take us very far.

How critical is investor sentiment to boost the economy?

In my view, it has to be a very historic Budget because it is the third year for this government and this is the only opportunity it has to make significant and major changes.

It is not only the Budget exercise but also the Prime Minister and Finance Minister making a major policy initiative and improving the ease of doing business. The government has been talking about ease of doing business and needs to demonstrate very clearly how this is going to be accelerated in the next two-three years.

Actually the Finance Minister can begin with himself.

A new accounting system is coming from the next financial year for declaring results and everything for the companies. But for income tax purposes, there is an entirely different way to calculate. I think these are unnecessary. There are so many areas, both at the Central and State level, that one has to bring about significant changes.

One thing that we have been speaking about for a while is the tax rates. But most argue that it is not just lower taxes but absolute clarity on tax matters that India Inc wants. Where do you stand on that?

I think there are two aspects in terms of tax simplification. I think there are a lot of incentives given to the corporate sector, which are unnecessary and should be dealt away with as soon as possible and bring down the tax level.

The government is talking of 25 per cent of corporate tax level. But it has to be net 25 per cent and not 30 per cent plus — it is 34 per cent today.

The other area which is important to keep in mind is this Make in India campaign, which the Prime Minister has initiated rightly and has taken lot of initiative in FDI and other things. One of the important aspects of making Make in India successful in a globally competitive world is to get additional technology in India, bring innovation and encourage companies to invest in R&D.

We need to be competitive and invest more in R&D. From that perspective all governments in western countries like the UK and Canada have a special approach to make research successful.

The Indian government must act upon this quickly — not just continue with the current status but invest more into this space.