A voluntary code of conduct for industry towards greater transparency and better corporate governance is on high priority for the new CII President Rakesh Bharti Mittal in the wake of scams afflicating the banking sector regarding corporate loans.
"We will be bring out voluntary codes of corporate governance for industry compliance -- one for large companies, another for smaller ones and one for the financial sector," Mittal told IANS in an interview here.
The new president of Confederation of Indian Industry (CII) -- an apex body -- said that doing business ethically and transparently, with social responsibility, featured high on the list of imperatives for Indian industry at the juncture.
Noting that the low investment rate remains a deterrent to growth, Mittal said that bank NPAs, which had crossed a staggering level of Rs 9 lakh crore, and the "over leveraging" of corporate India, could constrain investments further.
The CII's focus on governance comes in the backdrop of the recent Rs 13,600 crore fraud on state-run Punjab National Bank by the accused diamantaire Nirav Modi and his uncle Mehul Choksi, who along with industrialist Vijay Mallya are currently absconding, even as the government has set in motion the process for bringing them back from overseas to stand trial.
"We will also work with companies to develop governance in their supply chain. My theme for the CII this year is 'India Rise', where the 'R'is for 'Responsible India' and focuses on governance, transparency and social responsibility. The other letters in 'rise' stand for inclusive, sustainable and entrepreneurial India," he said.
On corporate debt, he said that certain sectors were "overleveraged" but that the whole industry should not be painted with the same brush. "Corporate debt can be a result of bad business outcomes resulting from factors beyond the control of the company," he said.
"The other category is that of fraud, where there is wilful default and both government and regulator should differentiate between the two. Any wilful defaulter should be given the maximum punishment as a deterrent," Mittal said, pointing out that the Insolvency and Banruptcy Code (IBC) "is addressing some of these NPAs".
The government has embarked on a two-pronged strategy on bad loans. On the one hand, it has brought in the IBC which provides for a six-month time-bound insolvency resolution process, extendable by another 90 days. On the other hand, it has approved a Rs 2.11 lakh crore recapitalisation plan for state-run banks.
Noting that "100 per cent losses are not being written off" in NPA resolution and "other businesses are being encouraged to revive stalled projects", Mittal pointed out that some of the stressed assets were drawing good bidder interest for revival, particularly in the steel sector, where the favourable short-term outlook has helped to raise steel prices.
"Lending institutions will now be more cautious on loans which is a good thing," he said.
He also said that the country's current falling investment rate of less than 30 per cent could be the result of the "change in dynamics of demography" whereby India is moving from "a saving to a spending economy", which is a positive in terms of demand.
"The strength of our economy is in domestic demand," the CII President said.
In this connection, he welcomed the government's resolve to double farmer incomes and the measures to help the stressed agriculture sector as outlined in the Budget for 2018-19.
"Agriculture has been languishing too long on archaic policies. Time has come to rank the states on agri-reforms in the way they are competing on ease of doing business rankings," he said, adding that parametres for this should be land lease, high-value crops, water management, no free power and micro irrigation, among others."
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