“Govt have liberalised a few things. But, there are still too many things dependent on permissions,” Godrej said.

The Indian economy is back on track after the temporary disruptions caused by demonetisation and GST implementation, with consumer demand picking up overall and especially in rural India, said Adi Godrej, the chairman of the Godrej Group, in an interview to Sagar Malviya and R Sriram. Godrej believes the government has done a good job so far with the Goods and Services Tax and in a country like India, you can’t have a single rate for all goods. Edited excerpts from the interview:

Has business stabilised now after GST? How much have you been impacted?

Goods and services tax has gone off to a very good start. And growth prospects are very good. GST will always be work in progress. Even if you look at our old tax system, at least once a year we have the budget, which changes the rates…So new rates will always keep coming…The government has done a very good job. GST by itself is complex. They did a very good job of implementing it.

Consumer demand is very good. GST itself is creating demand. There are other factors also — the economy is doing well and overall, we are back to normal. In our case, rural growth has been very good and Godrej Agrovet is one company where the demand is only rural and it has also done well.

Government revenues in July have been very good, more than one twelfth of their budget…. Government revenues will rise and consumers will benefit. Penetration will increase. One of the problems in India is that there are only three packaged branded items that are fully penetrated — soap, some form of detergents, and match sticks.

How burdensome is the system now?

The only complaints to my mind are coming from people who are not used to paying taxes properly. They are the only ones affected and they are the ones complaining. Ethical companies will do well and unethical ones will have to get ethical.

Has business for your group companies recovered from demonetisation?

Demonetisation did lead to a little disruption, mainly the wholesale channel which supplies from most distributors to retailers in rural and small town India. They deal only in cash and that is not to evade taxes but because cash is the only affordable means of payment. Their gross margin is 1.5% and they can’t afford any other payment system. At the time of demonetisation, this got disrupted. Once adequate cash became available, it picked up. There was a systemic effect in June.

In GST, some rates were coming down and obviously people would not clear goods at higher rates June-end to sell at lower rates in July. So, it was held up… Digitisation is definitely increasing, but we must remember that all over the world including the US, cash is still a convenient form of payment and is the cheapest form of payment.

The second quarter has seen good rural demand. How has it been for your group?

We are expecting very good growth in the quarters to come. Few years ago, the growth was 15-16%. That may not happen for a while because in those days, inflation was 9-10%. So, volume growth is back to its normal level.

Should there be one single rate for everybody?

In a country like India, you can’t have the same rate on common food items and on luxury items like the Mercedes. That is neither desirable, nor workable. Lower rates lead to higher collection. It is a false thinking in India that higher rates of taxes will lead to higher collection. When we had very high rates of taxes in the 60s, 70s and 80s, our economy was doing badly and collections were poor. Much before liberalisation, the excise duty on toiletries that included simple things like talcum powder was at its peak at around 150%….Every time the government brought down rates, collections and demand increased.

Should the top rate be capped at 18%

Some items will be higher — the socalled sin goods and luxury items. I don’t think it should be capped at 18%.

Are you also looking at entering the Ayurvedic business?

That’s not a particular space that fits our brand. We are associated with quality products based on science and technology. That is our major selling point….Natural products are liked by people but no soap can be made without caustic soda. So, it is false to say that there are no chemicals.

When do you think private sector investment will revive?

With good technology, people can increase output with small modifications. You don’t necessarily need a new factory. So, people will invest when there is demand.

How much has ease of doing business improved on the ground?

Although our ranking has improved from 130 to 100, it is not a good ranking. It is better than 130. Now, I am glad the government is saying our aim is to get to top 50. This government is free-enterprise oriented. They have liberalised a few things. But in India, there are too many things still dependent on government permissions… If we really come in the top 50, it will be a sea change. We should look at the GDP (gross domestic product) growth in potential terms. If we get our act right and do everything needed, in the medium to long term, we should grow at double digits.

What major initiatives do you think the government should take up?

Further liberalisation and fewer permissions. For example, in many cases, you should just say go ahead and do it….In one of our businesses, real estate, particularly housing, there are too many permissions required. You put everything down so that you know what one has to observe and then leave it to the people.

What has been impact of RERA?

First of all, fly-by-night operators will be less. RERA has one very good clause which is that if projects are delayed because of government action, they can be held responsible. That’s a good provision. After RERA has been introduced, the last two quarters have been our biggest quarters ever for what is defined as sales in real estate….

Sales mean new bookings and in the last two quarters, when people have been complaining that real estate sector is suffering, we have had our best two quarters.