CII Shows Positive Feedback on Reform Process

New Delhi, Aug 20 (UNI) The broad-based economic reforms initiated in 1991 have been beneficial for the country. This has been the verdict of India Inc, through a country-wide survey conducted among the leaders of Indian Industry by CII.

However, it pointed out that the success of the reform has been substantive but a lot more needs to be done, the chamber said today.

The survey was structured around the sections containing Industry, Taxation, Financial Market, External Sector, Infrastructure and Major Areas of Reforms going forward.

The survey was carried out by CII to mark the completion of 15 years of Economic Reforms and Liberalisation that commenced in July 1991 to gauge the perceptions of Indian Industry.

Industrial reforms: In this space, the abolition of industrial licensing was considered the most successful measure with 72 per cent of the respondents rating it at four and above on a scale of five.

However, only five per cent of the respondents felt that reservation of items in the Small Scale Sector as well as ivatisation of Public Sector Enterprises had been to their satisfaction. In the case of Privatisation of PSEs, an overwhelming 81 per cent of the respondents felt that the reform process has been inadequate and below expectations.

Removal of Investment controls through the repeal of the MRTP Act and opening up of sectors for Private Sector participation were rated as successes by India Inc.

Taxation: In the area of taxation reforms, the highest ratings were given to rationalisation of customs duty as peak duty was reduced and number of slabs was brought down. Sixty-four per cent of the respondents gave a rating of over four for this. The introduction of VAT finished a close second with 63 per cent. However, in the case of VAT, 65 per cent of the respondents felt that more needs to be done for the reform to be complete.

Simplification of Central Excise, with reduction in slabs to three also elicited positive response. Other measures in taxation such as reduction in corporate tax and introduction of service tax received average ratings.

Financial sector reforms: Financial sector reforms were considered by most respondents as being beneficial to the growth of industry. Among these, the highest ratings were given to the entry of private sector banks in the financial scene, and the enactment of the Depositories Act in 1996, allowing dematerialisation of securities. These measures received high rankings of 69 per cent and 63 per cent from the respondents respectively.

The entry of Foreign Institutional Investors (FII), establishment of SEBI, and the introduction of rolling settlements also received favourable responses from industry. However, less than half the respondents felt that the progressive reduction in interest rates over the years had proved to be useful. Over 75 per cent of the respondents felt that there was scope for further reduction in the interest rates.

External Sector Reforms: 70 per cent of respondents felt that the progressive elimination of import licenses had been critical to the reform process. The replacement of the Foreign Exchange Regulation Act by the Foreign Exchange Management Act 1999 as well as the encouragement given to FDI and reduction in FDI sectoral caps also received kudos from industry, with 57 per cent of respondents in favour.

Average ratings were given to current account convertibility and LERMS (Liberalised Exchange Rate Management System) as less than half the respondents felt that this measure had been successful.

Sixty per cent expressed the need for further improvement in this field.

Infrastructure: In this sector, the telecom policies were given the highest success ratings with 79 per cent of respondents giving it positive replies. The Broadband policy was given average response, while the implementation of the Electricity Act 2003 was considered incomplete. Almost 90 per cent of respondents felt that further electricity reforms were needed.

Further reforms: Regarding priority sectors for further reforms, the respondents felt that the sectors of Education and Labour required the highest attention from policy-makers. Almost four-fifths of respondents believed education was critical as India progresses towards higher growth and development. Two-thirds accorded high priority to reforms in labour regulations.

Other sectors considered to be of high priority were Agriculture and Healthcare. Both received positive responses from 68 per cent of respondents. Transportation, including Ports and Airports, was also given high importance going forward.

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