New Delhi: The economic slowdown and a series of controversial decisions is exposing the Narendra Modi government to criticism from unexpected quarters – generally restrained business leaders and analysts and prominent social media influencers who have traditionally backed the ruling BJP.
Their public questioning of the government is seen as a result of the sharp slump in investment and consumption which has hurt corporate outlook and sentiment.
To top it, Finance Minister Nirmala Sitharaman’s move this week to introduce penal provisions for failing to comply with corporate social responsibility norms baffled most observers. The government has already drawn much criticism from former RBI governors and civil servants over its budget proposal to issue overseas bonds.
The latest penal trigger has only pushed traditionally reticent corporates as well as ideological supporters to publicly voice their disappointment with the government.
Also read: Why companies can no longer get away with ignoring CSR
India needs ‘luck’
On Thursday, L&T Group chairman A.M. Naik said India will be “lucky” if it grows at 6.5 per cent in 2019-20 as against the 7 per cent projected by the government. He said India faces a challenging situation when it comes to data credibility, and rued the fact that it is not being able to capitalise on the ongoing US-China trade war and attract industries moving out of China.
Naik also pointed out that the private sector is unlikely to start investing in these tough times. He urged the government to keep its election promises.
The Indian economy slowed to a 5-year low of 5.8 per cent in the quarter ended March. For the full year, the economy slowed for the second consecutive year to 6.8 per cent in 2018-19, from 7.2 per cent in 2017-18 and 8.2 per cent in 2016-17. The future also appears bleak with many data points including sales of automobiles and fast moving consumer goods indicating that the slowdown may be prolonged.
Naik is not the first to openly state his grievance with the government. Kiran Mazumdar Shaw, Biocon chairman and managing director, also flagged corporate India’s concerns about the economy. In an interview to NDTV, Shaw said alarm bells are ringing and India cannot be in denial mode any longer. She added that the government is distancing itself from Indian companies, which are key contributors to the country’s growth.
Economic slowdown snowballs: Does government have a plan?
"I am an optimistic member of India Inc. I feel that India has this huge opportunity to boost economic growth": Biocon Limited chairperson @kiranshaw on @LRC_NDTV
Watch LIVE now on https://t.co/Fbzw6mR9Q5 and NDTV 24×7 pic.twitter.com/jRLKiJLx8g
— NDTV (@ndtv) August 1, 2019
Last month, Godrej group chairman Adi Godrej too warned that economic growth could be hurt on account of rising intolerance, social instability, moral policing and hate-crimes. He also flagged the rising unemployment levels in the economy.
Latest trigger
The government is also facing a severe backlash from prominent social media influencers who have been strident supporters of Prime Minister Narendra Modi for its recent amendments to the Companies Act, dealing with mandatory enforcement of corporate social responsibility.
The amendments seek a transfer of unutilised CSR funds (2 per cent of net profits of a company) to an escrow account at the end of the year and eventually to government administered funds at the end of another 3 years. The changes also bring in a penal provision wherein companies can be levied a fine of up to Rs 25 lakh for failing to transfer the funds and company officials can be sent to jail for up to 3 years.
Mohandas Pai, chairman at Aarin capital and co-founder of Akshaya Patra who is known to be sympathetic to the Modi government, sharply questioned Finance Minister Nirmala Sitharaman over the amendments.
“@nsitharaman Madame Gandhiji never said that you could be criminally prosecuted if you do not do this? Is this fair? Why have you made CSR a criminal law? This is a bad legislation which will only lead to more harassment? Is criminalization the only way?
@PMOIndia @narendramodi”
Nupur J. Sharma, editor of Right-leaning news portal Opindia.com, took everyone by surprise when she published an article titled, “Surcharge on rich was wonky, new CSR norms are beyond ridiculous”. She also tweeted her views on the issue, writing that profit is not a dirty word.
“CSR starts and ends and paying honest taxes (sic). The govt should do everything it can to ensure taxes are paid on time in full. Anything exceeding that is penalizing companies,” she added.
Similarly, Shefali Vaidya, a social media influencer who has been an all-weather supporter of the government, posted a sarcastic tweet on how Sitharaman is squeezing businesses.
“Collect taxes from citizens like a Bee collects Honey from the flowers – quietly without inflicting pain.’ – Chanakya
‘Tax anything that moves. If it still moves, tax it some more. If it still shows signs of life, ask it to 4 CSR and penalise if it doesn’t.’ – @nsitharaman”
‘Collect taxes from citizens like a Bee collects Honey from the flowers – quietly without inflicting pain.’ – Chanakya
‘Tax anything that moves. If it still moves, tax it some more. If it still shows signs of life, ask it to 4 CSR and penalise if it doesn’t.’ – @nsitharaman
— Shefali Vaidya. (@ShefVaidya) July 31, 2019
In a tweet earlier Saturday, Vaidya however posted a picture with Sitharaman, saying that the FM is open to “course-correction”.
Was privileged to be a part of a small group of people who were invited to have an informal discussion on a range of issues with @nsitharaman ji. This is a govt that listens, accepts feedback and is open to course correction! Nirmalaji was candid and articulate as always!! pic.twitter.com/OUf7x9k38k
— Shefali Vaidya. (@ShefVaidya) August 2, 2019
R. Jagannathan, editorial director of Swarajya magazine, called the CSR move “foolish”. Prasanna Viswanathan, CEO of the same magazine, labeled the idea “atrocious” in another tweet.
Threatening promoters with jail when they may not have bandwidth to do CSR foolish.
We need private social entrepreneurship/ money from wealthy going towards fulfilment of social goals and incentivising it through tax rebates better than both CSR or tax https://t.co/6ZfeCUyo2S
— Prasanna Viswanathan (@prasannavishy) August 1, 2019
Tax terrorism
The suspected suicide of Cafe Coffee day founder V.G. Siddhartha this week has also led many corporates to criticise what they call the “tax terrorism” that has been unleashed on taxpayers by successive governments, including PM Modi’s.
In a bleak letter he allegedly wrote days before his death, the CCD founder had pointed to harassment by the tax department.
Mohandas Pai said political leaders have failed corporate India, as he called taxmen’s operations an abrogation of people’s rights. He urged his peers to stand up and voice their protest.
“We should never live under fear in a democracy,” he told The Quint.
India's Tax Assessment System is Broken: Ex Infosys Director Mohandas Pa… https://t.co/mLVOTOMlUY via @YouTube
— Kiran Mazumdar Shaw (@kiranshaw) August 2, 2019
Kiran Mazumdar Shaw is chairperson and managing director of Biocon. She is among the distinguished founder-investors of ThePrint. Please click here for details on investors.
Also read: ‘Fudge Corp of India’ – How Modi govt uses FCI to keep fiscal deficit artificially low
There are many companies who are spending CSR funds on the environment, rural welfare, education etc . The Centre must take them along and encourage them. They have to find persuasive means to get the defaulters to spend , if need be by fining them. Crminalizing simply spreads a pall of gloom over even the sincere corporates and this has been pointed out by Mohandas Pai and others. The gloomy atmosphere can very easily be reversed by Modi and the FM changing their habitual grim looks, tweaking a few bad budget decisions and taking corporates along with them. But are their personalities geared for this cooperative approach ?
Does anyone think that Sitaraman would have done all this without an yes from Modi? They can’t even p i s s without his permission.
Poor socialist Modi is desperate to finance his welfare schemes through bunkum economics
I was aghast when someone informed about Indian Cos with Production Units in China. Compare this with Trump ensuring US cos manufacture in The US else punitive taxes.
Admitting that we need a small step to go in for more pro investment labour reforms , 100% FDI ( with adequate safegusrds) in Multibrand retail et all , but to believe ( if true) our own up there manufacturing in Chinaaaa?? Vandemataram
BHAKTS are never blind …… its the PIDDIS who are enslaved by the DYNASTY. Modi supporters were always skeptical about Mr Jaitley and his team , u might also have heard harsh criticism from Swamy on core economic issues. Nirmala is a stooge of Jaitley and his team, who belongs to the DU school of economics which is statist and conservative. Jaitley has a very good political acumen which is why he is trusted by SHAH and MODI. However, MODI in his 2nd term does not need political economics , what he needs is a competitive market or a virtuous cycle stated by economic survey. He needs a good economic team like Panagriya , Surjit bhalla or may be Rajan too. MODI believes in results (at least what we gujjus think) and if Nirmala (read Jaitley) doesnt deliver in upcoming months she will surely be removed.
Just removing people like Trump does, may not help. It is the willingness to listen to the top experts whom you have named, which is in doubt . And please don’t blame only SItharaman for that.
At least now, blind supporters of the present regime, should realise that it is headed by an extreme left wing Marxist, who makes past socialist governments look right wing. Just like in the past, the present government too wants to run businesses, banks, temples, etc. Like past governments, it treats non government businesses as criminals and still relies on the same old tools of coercion and penalties. The more things change the more they remain the same.
We need a C D Deshmukh like personage to head the economic team. 2. We all prefer bouquets to brickbats, provided these are deserved. All criticism, from Day One, ought to have been heard intently, acted upon where useful feedback was being provided. Instead, ad hominem attacks, even when the people who spoke up had built up their credibility over a lifetime. One feels happy that people who cannot be accused of being biased against the establishment are voicing their concerns and disappointment. 3. With President Trump declaring that he will impose 10% import duty on $ 300 billion of Chinese exports from 1st September, expect the global economy to slow, the external environment for India to become less favourable. Less investment – across various formats – flowing into the country.
India can borrow in Foreign Currencies,especially from he Eurozone [ that is in Euro[ to IMMEDIATELY pay back the US Dollars 105 Billion Loan at 9.5 percent.[This is a varying rate and India had been charged around 16 percent in the 1970s].India’s US Dollars 138 Billion US Treasury Holdings feteches a mere 2 pwercent.Thaat is India is losing more than rs 50000 Crores per annum by the carry Trade.Since the World bank is owned y the USA,mostly,India literally is giving rs 50000 Crores from 2014 to the USA,just like that..Since the World Bank loan in US Dollars the Loan from the Eurozone will face almost same Currency Fluctuation risk as the World banl one.India should also stop taking Loans from the World bank in future at such HIGH rates.
Similarly in the Bond Issue at 6.5 percent India is losing rs 5000 Crores per annum,viz-a-viz the US Treasury Holdings.
The Finance Ministry can use Computers to study the LOSSES/GAINS,if any via arbitrage and take appropriate action..
The US Dollars 105 Billion,LOAN, in US Dollars,at 9.5 percent currently,is from The World Bank.