Adi Godrej, chairman of the Godrej group, says the passage of Goods and Services Tax (GST) will see India return to 8 per cent growth, in an interview with Namrata Brar on the sidelines of the World Economic Forum (WEF) meet in Davos.
NAMRATA BRAR: Do you feel India’s relevance has diminished this year?
ADI GODREJ: I would not say that the relevance has diminished, but perhaps because the reform process in India has slowed the last 18 months, excluding of course the last 3-4 months, I think the perception has changed, though only a little. Discussions on India may be less here, but I remember when I used to come here 20 years ago there were hardly any references to India. So, it’s a dramatically changed position since then. I think India will be discussed in many of the general sessions, and I also think the perception has improved dramatically in the last 3-4 months. I feel India is on the move again, and if goods and services tax (GST) is passed, we will be back to 8 per cent growth.
NAMRATA BRAR: What road map are you looking for on GST?
ADI GODREJ: It’s delayed, but I hear from the Finance Minister that he is quite confident of passing it during this calendar year. Also, I think it will make a big difference.
NAMRATA BRAR: So, it will be in action by 2014 start?
ADI GODREJ: I feel so
NAMRATA BRAR: So, now let’s move on to your interests as a business group. Talks are abuzz that you are looking for inorganic opportunities. Also, you did a recent acquisition in the UK at a time when companies are getting more risk-averse and looking at domestic growth?
ADI GODREJ: No, we are growing strongly in our domestic business. We are adding to that growth inorganically because many of our businesses work on negative working capital to generate a lot of cash. So, we have strong cash flows that allow us to go for inorganic growth. Our domestic organic growth is very strong. We have a strong growth plan called 10 by 10 – 10 times in 10 years – which means compounded annual growth rate of 26 per cent; and we expect to achieve that.
NAMRATA BRAR: So, are you looking at buying more companies?
ADI GODREJ: Yes, we are constantly looking at acquisitions.
NAMRATA BRAR: … and these buys will be mostly in the US and Europe?
ADI GODREJ: No, mostly in the developing world.
NAMRATA BRAR: Let’s go back to the conversation on the macro areas and the coming Budget. Would you want key things like customs and excise duties to stay constant. Also, there is a lot of talk on inheritance tax and higher taxes for the super-rich ….
ADI GODREJ: I don’t believe that the tax rates should be increased, whether it’s direct or indirect taxes. Tax rate increase in India has never worked successfully. When we had a high tax regime before 1991, collections were not very good. We should widen the tax net. Also, one of the most important issues is that first-time tax-payers hesitate to come in because they think their past might be a problem … we must find solutions for that and widening the tax net is a solution. I hope we don’t do anything where perception is affected, and I think increasing tax rates would not be very good for the country.
NAMRATA BRAR: Back to India growth story … we got too little too late. What do you think the government should do to help the private sector?
ADI GODREJ: I think the government has done well in terms of taking the reform process forward. By postponing GAAR, and many other things, the message perhaps is clear. Besides, subsidies have been reduced and I think it is moving in the right direction, and this will bring in more investment and boost growth.