Brexit Impact On Indian Economy Will Be Modest: Naushad Forbes

Confederation of Indian Industry President Naushad Forbes talks to BW Businessworld about the Indian economy, Brexit, Raghuram Rajan's exit, the new aviation policy and other key economic issues.

There has been a resurgence in the manufacturing sector. How long do you think it can be sustained?
What we are seeing is a modest growth in manufacturing, there has been some divergence in what the index of industrial production numbers say and what the GDP manufacturing numbers say. The GDP numbers say that manufacturing has revived and is now growing at 5-6 per cent a year, the index of industrial production numbers say that manufacturing is actually flat. I think we're all looking for that sustained resurgence in manufacturing which will come later in the year.

With the exit of Britain from the European Union, how do you think this will affect the Indian economy?
The impact on the Indian economy is going to be modest. The reason being 70 per cent of India's economic growth comes from the domestic consumption and so domestic consumption is not going be affected by Brexit. The UK is India's largest FDI destination in Europe and we invest more in the UK than the rest of the Europe combined and those investments with the UK are for both the UK market and for the European market to the extent that those investments are built around with trade between the EU and that will be affected but the overall effect on the Indian Economy will be very small.

Recently there has been a change in the aviation policy in India, the 5-20 rule is no more there, do you think Indian players will benefit from this?
I would make the argument that India's national carrier is Emirates in terms of passengers and the way they transport them around the world. I don't think that's a good thing for India. India should not have a policy which comes in the way of Indian carriers wanting to expand and fly overseas.

With Raghuram Rajan saying he won't seek another term, do you think now the government will have more say in making the RBI policies or shuffling the interest rates?
I think the government will appoint a very able successor in place of Raghuram Rajan soon and I'm confident that successor will continue his good work of establishing the RBI as a world class independent central bank. It should be independent because that is how you get a stable economy in the long run, so I wouldn't want a successor who would be a listener to government.

There has been a political compromise for GST and it is most likely to be passed in the coming monsoon session. Do you think it will have a huge impact on the Indian taxation policies?
It will be a big game-changer, GST is a big bang reform and thinking about the effects it can have. Too many decisions are based upon what the taxation policies are - whether or not the kind of taxation policies you have allows you to manufacture in one state and move goods across the state. I think GST will add 1.5-2% annual GDP growth and that's a big number which every year an Indian household will have.

Despite many promises made by the current government and the previous government on 'energy conservation', we do not have any solid plans. How do you think India is moving forward in this sector?

Look at the average carbon emission to GDP ratio or energy conservation to GDP ratio, it's been improving 2 per cent for the last 20 years. It is better than the world average which is 1.5 per cent so we have been improving our energy conservation to GDP rate by 2 per cent. To meet our commitment in Paris on climate change, we need to improve our carbon emission to GDP ratio by 3 per cent a year and there are various steps that have been taken. We say that we are lacking behind in the area.

Despite many promises being made by the NDA government and the promise of 'achhe din', there are not many tangible results. What are your expectations in the coming days?
GDP growth has been 7.5 per cent in past two years, it's significantly better than it was in previous 5 years. I think we've seen our potential as a country being delivered on the ground. We have important programs that the government has launched in doing ease of doing business etc. The Make in India initiative was launched, the bankruptcy reform is being undertaken and there is hope that GST will happen very soon. As a country we need to grow at rapid rates for the next 30 years, we need to grow at the rate of 9-10 per cent a year for 30 years.