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VOL.9 I ISSUE 02 I DECEMBER 2021 PRICE ₹100/- Perspective Ride the NEW in Kerala Sreenath Vishnu, Chairman, CII-Kerala Analysis Whither GST? Umasankar G. GST: Centre’s gain, States’ loss Mohammed Raseef Go for GST compounding in real estate Stanly James On theMuthootGroup growth path Exclusive interview with George Jacob Muthoot Chairman, Muthoot Group ISO 9001-2008 CERTIFIED



AD Kerala Chamber Business News | 3 | December 2021

Kerala Chamber Business News | 4 | December 2021

Kerala Chamber Business News | 5 | December 2021

VOL.09 I ISSUE 02 I DECEMBER 2021 KERALA CHAMBER Editorial Managing Editor Dr. Biju Ramesh For a better GST regime Editorial Board Chairman KCCI Shibu Prabhakaran The Union Government has begun steps to overhaul the Printer & Publisher Jose J. Valavi Goods and Services Tax (GST) rates and the system of GST Editorial Consultant Nimmi J. Chackola administration across the country. The need for changes Design K.Babumon in the original GST scheme was felt almost as soon as the Raja Sethunath most significant indirect tax reform in the country’s history Mohammed Raseef was introduced in July 2017. Wiser for the experience of the last four-and-a-half years, the Centre and the States are now Rajesh Nair looking at ways to rationalise the tax rates and to rectify sys- tem glitches that have come in the way of the new tax system E. Devadasan IAS(Rtd) becoming popular with the stakeholders, particularly the Secratary KCCI businesses. C. Gouridasan Nair Two Groups of Ministers (GoMs) have been constituted to submit recommendations to achieve the two objectives. The Language Mill Indications are that the new rates and systemic changes would get formalised by the new year. The main GoM is chaired by ISO 9001-2008 CERTIFIED Karnataka Chief Minister Basavaraj Bommai, who also hold Kerala Chamber of Commerce and Industry (KCCI) the Finance portfolio, and has as one of its members Kerala Chamber Corner, Shanmugham Road, Kochi, PIN 682 031, Kerala, India Finance Minister K.N. Balagopal. The key task of this GoM is Tel. 91-484-2380950, 2354885 FAX: 91-484-2374253 to review the current tax structure and recommend rationali- sation measures, including merger of slabs. E-Mail: [email protected] The GoM also has been asked to review the list of goods and services exempt under GST with the objective of expanding AFFILIATED TO the tax base, review instances of inverted rate structure and recommend suitable rates to eliminate it. Originally, the Associated Chambers of Commerce and GST Council had formulated a four-slab rate structure—5%, Industry of India (ASSOCHAM) 12%, 18% and 28%--with a nil-tax category, a category fea- turing gold with 3% tax, and another category attracting an Federation of Indian Chambers of Commerce and Industry (FICCI) Indian Council of Arbitration (ICA) Kerala Chamber Business News, Kerala Chamber of Commerce and Industry Board of Directors RNI No. KERENG/2008/25119. Shibu Prabhakaran Jose J. Valavi Nimmi J. Chackola Dr. Ramesh Kumar Raja Sethunath Printed and published by Vice-Chairman Finance Director The Secretary, Kerala Chamber of Commerce and Industry (KCCI), Chamber Corner, Shanmugham Road, Kochi – 682 031, Kerala, India. Ph: 0484-2380950, 2354885 Fax: 91-484-2374253 Email: [email protected] Website: www.keralachamber.in Editor responsible under PRB Act: Dr. Biju Ramesh, Managing Editor. Printed at Orange Printers Pvt Ltd TC 81/1227, Gandhari Ammancovil Jn, Thiruvananthapuram- 1, Kerala, India. Kerala Chamber Business News | 6 | December 2021

additional cess. In effect, what we have today is a 7 tax-slab some minor tinkering here and there, but the kind of broad- structure. spectrum changes that the trade and business community in When the GST was rolled out, there were over 200 items in this country have been looking forward have not happened the 28% tax slab, but subsequently the rates on many of these so far. Thus, the current exercise is of crucial importance for items were cut to 18% or less, resulting in revenue shortfall for businesses as well. the Centre. In 2018-19, the Central Government had budg- The business community has been finding GST compliance a eted for a GST revenue of ₹7.44 lakh crore, but could collect heavy burden. Businesses must upload invoices every month only ₹5.8 lakh crore. In FY20, it set a more moderate target and make sure input credit claims are reconciled, or else pay of ₹6.63 lakh crore, but could collect only ₹6 lakh crore. The penalty. Delay in realisation of claims has meant shortage of 15th Finance Commission in one of its reports noted, “The working capital for which they must rely on business loans. available numbers indicate that GST buoyancy during 2017- Most businesses have been finding that invoice matching 2020 was less than that of subsumed taxes during 2011-2017.” between inputs and outputs is their top issue with GST. Apart Understandably, the Central Government is keen to reverse from all this is the inverted duty structure in the case of some the trend. There are two reasons for this. First, the five-year commodities, which means the tax on the finished goods is grace period during which the Centre is bound to compensate less than that on the inputs. the States for revenue loss on account of introduction of GST The Finance Ministry had asked businesses and trade bodies would come to an end next year. Second, the Compensation to submit their recommendations for amendment of the Cess would have to go once the grace period ends. On their GST scheme by November 15. Several trade bodies have part, the States are worried that they would be left in the lurch submitted their proposals in response. The Kerala Chamber of once the revenue loss compensation dries up. They have little Commerce and Industry (KCCI) joins the trade and business space for fiscal manoeuvring now. As such, their only option, community across the country in expressing our anxieties regardless of whether they like it or not, is to partner with the about the GST rates and issues of GST administration. We Centre to craft a better GST regime. hope that the exercise that has been set in motion by the As is evident from the above, it has essentially been a back and Finance Ministry in partnership with the State governments forth between the Centre and the States all these years. Caught would help resolve all the vexatious aspects of GST. in the middle were the business community. Repeated pleas Welcome back to Kerala Chamber Business News. with the Centre specific tax-related issues had resulted in Dr. Biju Ramesh Managing Editor K. Babumon Mohammed Raseef K. Mohammed Basheer Riyaz U.C. K.M. Ahmed Iqbal E. Devadasan IAS (Rtd) Secretary Kerala Chamber Business News | 7 | December 2021

VOL.09 I ISSUE 02 I DECEMBER 2021 KERALA CHAMBER Cover Package INTERVIEW George Jacob Muthoot (Chairman, Muthoot Group) The Muthoot Group, the country’s largest gold loan NBFC, is looking 14 at 15% growth during FY 2021-22 and hoping to hit the ₹1,00,000 crore turnover in the near future. Excerpts from an interview with George Jacob Muthoot,Chairman, Muthoot Group. Golden Legacy The 4th generation of the Muthoot Family is already at the helm of different business verticals of the Group. It’s a golden legacy that they preside over. A who’s who at the top of the Muthoot Group. Humility pe rsonified George Jacob Muthoot, Chairman, Muthoot Group, presides over a gold loan empire. But talking to the man is like talking to your best friend. Unassuming and gentle, he is a straight-talker who wouldendear himself to anyone who meets him. A profile. Giving hand The Muthoot motto of trust and credibility drives thefamily’s business. But beyond it is the idea of ‘giving’.A look at the CSR activities of the Group. Kerala Chamber Business News | 8 | December 2021

Column RReeppoorrtt Time to revisit Kerala’s development strategy Go leisure shopping! Jose Sebastian Life in Thiruvananthapuram is all set to move 22 Kerala should revisit its development strategy and try out 26 to the next level with Lulu Group opening new ideas to create a more equitable, happiness generat- one of India’s biggest malls in the Kerala capital on December 16. ing and environmentally sustainable development model. Analysis GST: Revamp time 36 What is in store as the GST Council takes some crucial steps for a wholesale revamp of the Goods and Services Tax (GST)? An analysis by Umasankar G. GST: Centre’s gain, EC forces APEDA States’ loss to wield the cane The Goods and Service Tax (GST) has benefited the The Agricultural and Processed Food Products Centre more than the States, writes Mohammed Raseef. 32 Export Development Authority (APEDA) has Case for GST compounding in real estate been forced by the European Commission (EC) to initiate action against five organic Stanly James product certification agencies.(GPS). Perspective Four EU bodies seek bar on APEDA Four European Union (EU) organisations 32 that deal with organic products have asked the EU Committee on Organic Production to bar the Agricultural and Processed Food Products Export Development Authority (APEDA) from giving accreditation to agencies certifying organic products exports from India to the Union. Synergies to the fore Indo-U.S. business relations are set 44 to hit a new high with the Trade Ride the NEW in Kerala Policy Forum (TPF) deciding to go in for targeted tariff revision, mutual access and India’s early return to the Kerala is a State of unmatched potential for Generalised Preference System (GPS). 26 trade and investments with a conducive business environment and strong political governance Article systems. Kerala has several strengths that makes it an ideal destination for business in- vestment, writes Sreenath Vishnu, Chairman, CSR was in full view CII-Kerala State Council, and Executive 57 during 2018 floods Director, Brahmins Foods India Pvt Ltd. Abhilash N.M. Kerala Chamber Business News | 9 | December 2021

Exports will touch $550 billion in 2021-22 : Piyush Goyal The economy has bounced back strongly He called upon the States to take greater interest in promoting after the Covid-19 pandemic-induced exports and not be complacent thinking that it was the Union shutdowns and will record the highest-ev- Government’s responsibility to promote exports. Uttar er exports of $550 billion in 2021-22, Pradesh, he said, has set an example for other States by creat- Commerce, Industry and Textiles ing a full department for export promotion. The States must Minister Piyush Goyal has said. realise that when exports are promoted, it will create more Merchandise exports, he said, was worth jobs and strengthen the economy, he said. $235 billion for the first seven months of the year and are well on track to hit $400 billion. Simultaneously, Services exports should go up to about $150 billion, Mr. Goyal said at the launch of the India International Trade Fair (IITF) in New Delhi. Several reports suggest that Diwali sales were probably the highest seen in a long time. Every other statistic, be it on job cre- ation or EPF enrolments, indicates a broad recovery. The PMI [Purchasing Managers’ Index] for Services has hit a decadal high and Manufacturing PMI is above 55. GST collections, which normal- ly spikes in March-April, has surged in October, recording ₹1.3 lakh crore, he pointed out. Mr. Goyal said higher export volumes and value realisation also reflected the growing relevance of India in the world. “Collectively, we are on track for a historical high for exports of goods and services in the current year, showing how quickly the world has engaged with India, wants to deepen their engagement with India, so that they can be sure of India as a trusted partner in their supply chains and services chains,” he said. Cement price will rise as cost of coal is sharply up: India Cements India Cements has come out with a sombre guidance on the India Cements has not gone in for price increase as it had four cement price front, saying that the price of cement would in- lakh tonnes of coal, which can be used to produce 27 lakh tonne crease as every cement factory faces pressure on cost owing to of cement clinkers, at a lower price. The stock would suffice for the huge rise in coal price. four months, but after that the price will certainly have to be He said the cement companies were getting coal at $70-80 per hiked by ₹30-40 a bag. Rise in the cost of coal would also affect tonne, which has now gone up to $105, and still higher to the cost of power generation and the cost fuels used at the kilns, $135 and then flared to $250 per tonne, India Cements Vice- which would push cement prices further up, he said. Chairman and Managing Director N. Srinivasan. Kerala Chamber Business News | 10 | December 2021

Diwali sales put at ₹1.25 trillion Shoppers across the country bought products worth Rs 1.25 trillion this Diwali, helping retailers logdecade-highsales—asignofresilientdemand. The Confederation of All India Traders (CAIT), which represents about 70 million traders, has said that the tremendous sales response came as a much-needed breather for retailers who had been reeling under a sharp slowdown for the past two years. It has also made businesses opti- mistic about the near future. Traders are now gearing up for the wedding season, said CAIT. “During Diwali this year, there was an estimated business of about ₹1.25 lakh crore (trillion) in the entire country, which is a record figure in the last decade,” said CAIT National President B.C. Bhartia and Secretary General Praveen Khandelwal. “In Delhi alone, the business was about ₹25,000 crore.” Bhartia and Khandelwal said consumers pre- ferred Indian goods this time, leading to a direct loss of over Rs substantial profits. Sweets, dry fruits, footwear, watches, toys, home 50,000 crore of business to Chinese exporters. In demand were items décor, and fashion clothing also saw huge demand. such as earthen lamps, candles and paper mache lamps, which Consumersspentover₹9,000croreongoldjewelleryandsilverware,they helped small potters, craftsmen, and handicraftsmen rake in said,whiletraderssellingpackagingitemssawsalesof₹15,000crore. Real estate will cross $1 trillion by 2030: NITI Aayog CEO Amitabh Kant The real estate sector, which has a multiplier effect in the econ- Addressing a virtual event organised by the Confederation of omy, is expected to reach a market size of $1 trillion by 2030, Indian Industries (CII), Kant said the last 18 months have accounting for 18-20% of India's GDP, NITI Aayog CEO been challenging for India and the economy in general, and Amitabh Kant has said. the real estate sector was no exception. \"However, we see a sil- ver lining as the vaccination rate has picked up and infections are slowly coming down,\" he said. Mr. Kant pointed out that with the Securities and Exchange Board of India (SEBI) giving its approval for Real Estate Investment Trusts (REITs), the country would see opportunities worth ₹1.25 lakh crore in the coming years. The Smart City project, with a plan to build 100 cities, is also a prime op- portunity for real estate companies, he added. Mr. Kant stressed upon the importance of sustainabil- ity and technology going forward and pointed out that the housing sector also had the responsibility to realign its priorities to achieve net zero goals and work towards greater technology adoption as it would be a key game changer in the days to come. Kerala Chamber Business News | 11 | December 2021

Online building permit system in all cities by March 2022 The online building permit system will be implemented begun and around 52 lakh homes have already been complet- across all cities and towns by March next year, Housing and ed. The government has committed ₹1.85 lakh crore for the Urban Affairs Secretary Durga Shanker Mishra has said. scheme, out of which ₹1.13 lakh crore has already been pro- Addressing a real estate conference organised by CII and JLL vided. India, Mr. Mishra pointed out that India’s rank in World He said the Real Estate (Regulation and Development) Act Bank’s ‘Ease of Doing Business Report’ has jumped from 181 (RERA) has been implemented across all States except to 27 in the construction permits category. The system, in op- Nagaland, bringing confidence and trust in this important eration in about 2,500 cities and towns currently, has resulted sector of the economy. Around 70,000 real estate projects and in reduction in compliance cost and time. The online permit 55,000 property agents have been registered under RERA and system has been fully implemented in 19 states and Union about 75,000 cases have been resolved by State level RERAs. Territories (UTs) and will soon be operationalised across all He said the Model Tenancy Act has already been adopted by a 36 states and UTs, he said. few States and hoped that the remaining States would follow The Housing Secretary said that the government has already suit in the near future. The Central Affordable Rental Housing sanctioned construction of 1.14 crore homes under the Complexes (ARHC) scheme, which aims to provide afforda- Pradhan Mantri Awas Yojana - Urban (PMAY-U) to achieve ble homes to migrants, has elicited a lot of interest from pri- ‘Housing for All’ in the country. Work on 89 lakh homes have vate players, Mr. Mishra said. Kerala Chamber Business News | 12 | December 2021

Engineering goods exports cross $9 billion: EEPC Exports of engineering goods have crossed $9 billion in “On an annualised basis, this would translate to $105 billion September 2021 with 22 out of 25 top export destinations in 2021-22. In the first six months, 49% of the target has been such as China, the U.K. and the UAE recording growth, the achieved,” Mr. Desai said. Other destinations that recorded Engineering Export Promotion Council (EEPC) of India has growth included Germany, Turkey, Italy, U.K., Mexico, said. Vietnam and Singapore, he added. The share of engineering goods in overall merchandise ex- He counselled caution on the moves to fast-track Free Trade ports stood at 26.7% in September. With this, India’s cumula- Agreements (FTAs) with as many as six countries and trading tive engineering exports have risen from $32.4 billion in blocs as the FTAs signed earlier had led to increased import of April-September 2020 to $52.3 billion during the same period some items in ferrous and non-ferrous sectors from countries this year, EEPC Chairman Mahesh Desai has said. like Korea and Japan. LIC IPO likely in the fourth quarter Department of Investment and Public Asset Management the current fiscal. Secretary Tuhin Kanta Pandey has said that the much-awaited The government is seeking to raise as much as ₹10 trillion LIC IPO is expected to hit the market by the fourth quarter of ($133 billion) by selling up to a 10% stake. The sale of a 5% stake would make it India’s largest IPO, while a 10% dilution would make it the second-biggest of an in- surer globally, Finance Minister Nirmala Sitharaman had an- nounced plans to sell shares in the insurer in February 2020, but the outbreak of COVID-19 pan- demic slowed the process. Government sources said that disinvestment in BPCL is in the due diligence stage and financial bid- ding of BEML, Shipping Corp, Pawan Hans, Central Electronic and Neelanchal Ispat will take place in December-January, leading to their share sale during the current fiscal. Kerala Chamber Business News | 13 | December 2021

COVER PACKAGE INTERVIEW Muthoot On theGroup growthpath Demand for gold loans remains strong as under-banked borrowers find gold loans a good source of credit. Over the years, we have been speaking about 15% growth and we will continue to give the same guidance for this year too, says George Jacob Muthoot, Chairman, Muthoot Group. Muthoot Finance is the market leader in the NBFC space. What is secret of the group’s success? If there is one secret to the group’s success, it is our sustainable business model. Our collection effi- ciency, diversified product mix, sustained profitability, new digital offers, increased brand visibility and our customers’ trust in us have helped us retain our competitive edge and become leaders in the gold finance NBFC space. This is a business in which you have to keep ahead of the market trends and ride fiscal up- sides and downsides. Muthoot Finance has been successful in showing consistent growth Kerala Chamber Business News | 14 | December 2021

Kerala Chamber Business News | 15 | December 2021

over the past several decades. What would you attrib- certainly helped the NBFC sector to tide over the recent stress. ute this to? The Muthoot leadership? Or the way the Indian economy has opened up over the past three What is your outlook for the Indian economy? Do you decades? think the 20.1% growth in Q1 FY 2021-22 can be con- strued as a trend? Muthoot leadership is something that has helped us achieve increased brand visibility. More importantly, our reputation The sharp growth in Q1 was on the back of low base of last as a trustworthy business group has helped us retain our com- year as Q1 of last year was impacted by the Covid first wave. petitive edge in the gold loan segment. Of course, the positive Economic activity has been reviving since July and growth changes in the Indian economy have been a great support, momentum has picked up. Most of the high frequency indi- especially in these post-Covid-19 days. cators suggest recovery in the economy. The RBI has pegged There has been a strong demand for gold loans and the market India’s GDP growth rate at 9.5% for 2021-22. Pick up in the size has increased. So, I would attribute our consistent growth pace of vaccinations is also a big positive as it will aid quicker to both these factors. According to the World Gold Council, recovery. Indian households hold nearly 22,000 tonnes of gold and post-Covid demand for gold loan finance has only increased Do you think non-farm credit growth is picking up? If as customers are using gold loans as a source of working capi- so, when can we expect the economy to reach the tal for their businesses. pre-Covid levels? NBFCs have been experiencing serious liquidity stress Banking system credit growth has improved to 6.7% as of end for the past several months but, by and large, that August, but growth still remains in single digits. The RBI, in seems to be behind us. Are you comfortable with the its September bulletin, had pointed out that aggregate de- present situation? mand is still weak and below pre-pandemic levels. The measures taken by the Government and the RBI have Covid second wave is said to have hit NBFCs asset George Jacob Muthoot, Chairman, Muthoot Group, hands over a cheque to K.N. Ananda Kumar, Executive Director, Sai Gramam, Thiruvananthapuram Kerala Chamber Business News | 16 | December 2021

quality and collection efficiency at least in some geog- good. So, I have no complaint there. raphies. Do you think this will push some NBFCs into the stress zone? NBFCs are clamouring for long-term liquidity at fair in- terest rates to grow their long-term loan books across Yes, Covid second wave did impact the asset quality of NBFCs business. Do you think the government and RBI should as collections were hit due to localised lockdowns. As the sec- open a special window to meet this demand? ond wave has peaked and restrictions have been lifted in most parts of the economy, we are seeing a pick-up in collection NBFCs are a significant contributor to credit growth and efficiency now. As collections and the growth momentum of for last mile connectivity. Given their reach in the un- the economy pick up, the asset quality of most NBFCs is likely der-served and under-banked sectors, they play a pivotal to improve. role in achieving the objective of financial inclusion. While RBI and the government have already announced measures the system interest rates have come down, demand for long to help with liquidity and offset the effects of the pandemic. term credit at low interest rates is always there and any fur- These steps would certainly go a long way to improve asset ther support from the regulator would always be welcome. quality and the ease liquidity situation in the NBFC sector. We believe that NBFCs with strong balance sheets and strong You have been maintaining your balance sheet quality capital adequacy will do well in the days to come. despite very many crises that the NBFC sector had to live through since the 2018 IL&FS implosion. Can you If NBFCs are to restructure their loan exposures due explain your strategy? to the hit from Covid-19 second wave, do you think banks should support them on the liabilities side by Muthoot Finance has followed a balanced growth strategy bridging the asset-liability gap to avoid a mismatch with focus on maintaining a strong balance sheet. We have and prevent another round of crisis? the highest rating among gold finance companies. The company has evolved a robust, proper and adequate internal Lending from the banking system towards NBFCs have been audit system in keeping with the size of the company and its The immeasurable Princess Aswathi Thirunal Gowri lakshmi Bayi inaugurating the value of giving distribution of wheelchairs as part of Muthoot Group’s CSR activities. ‘Har Zaroorat Ka Saathi’ – That’s the Muthoot social responsibility outreach slogan, speaking out loud and clear the Muthoot Group’s readiness to be by the side of the needy. The Corporate Social Responsibility (CSR) initiatives of the Muthoot Group are many and varied and range from con- struction of houses for the homeless, upskilling of youth, and provision of artificial limbs to the differently-abled, dialysis assistance to the poor, marriage assistance to daughters of widowed mothers and food kits to the starving. Years 2020 and 2021—the years of the Covid-19 pandem- ic—saw Muthoot Group’s CSR activities scale new highs with the distribution of groceries to the pandemic-hit masses, especially the guest workers; provision of PPE kits for front- line health workers; and distribution of masks, sanitizers and gloves for the frontline workers and police personnel in different parts of the State. The Group also pressed into service a mobile free and rapid Covid-19 screening facility in Pathanamthitta distric. Kerala Chamber Business News | 17 | December 2021

LGeogldaecny B usiness families flourish not on the spirit of enterprise alone. If families in business stay in business and are successful, that is in large measure because their businesses are built on strong foundations of integrity, ethics and trust. The 134-year-old Muthoot Group is what it is today—India’s most trusted non-banking financial services brand—it is thanks mainly to these core values. It’s in many ways a golden legacy, handed down by Ninan Mathai Muthoot (1873-1955), who founded the Muthoot business enterprise way back in 1887. His son M. George Muthoot added to that legacy by ven- turing out into full-fledged banking in 1939. And, if today, Muthoot Finance is India’s No. 1 gold loan NBFC, the credit should go to the visionary leadership of his son M.G. George Muthoot who, along with his three siblings, rode on the lofty foundational principles to make the Muthoot brand a house- hold name across India. The fourth generation of the Muthoot family has already stepped into the top rungs of the group’s business, enterprise, leisure and hospitality, educational and healthcare verticals. “We are a value-driven institution. We place premium on trust and credibility,” says George Jacob Muthoot, who took over as Chairman of the group following the demise of his elder sibling M.G. George Muthoot. business model. 3rd Generation Sitting (from left to right) We provide gold loans for a short tenure of about 12 months. We have a highly liquid portfolio and a high proportion of George Alexander Muthoot (Managing Director, The Muthoot Group), gold loans is repaid within the first 6 months. Customers have George Jacob Muthoot (Chairman, The Muthoot Group), a sentimental attachment to their gold assets and we have the late M.G. George Muthoot often seen that they always clear their loans in the set repay- (Group Chairman, The Muthoot Group of Companies - 1949 -2021), ment tenure. We do not believe in gold auctions and it is used George Thomas Muthoot as an extreme last resort. (Joint Managing Director, The Muthoot Group). Do you think that the time has come for NBFC to shift 4th Generation Standing (from left to right) gears by focusing on balance sheet expansion and profitability rather that sticking to the pandemic George Muthoot Alexander (Executive Director, The Muthoot Group), strategy of conserving capital? George Muthoot George (Managing Director, Muthoot Leisure & Hospitality Services), Kerala Chamber Business News | 18 | December 2021 Alexander George Muthoot (Deputy Managing Director, The Muthoot Group), George Muthoot Jacob (Executive Director, The Muthoot Group), Dr. Georgie Kurian Muthoot (Managing Director, Muthoot Healthcare) and Eapen Alexander Muthoot (Executive Director, The Muthoot Group).

The industry is still recovering from the pandemic stress and, How is your gold loan portfolio doing? Do you think for now, I feel we should stick to the strategy of growth even as the steep fall in the prices of gold is a case for concern? we conserve our capital. Demand for gold loans remains strong as under-banked Our gold loan portfolio has been safe even when the economy borrowers find gold loans a good source of credit. Over the was hit by COVID-19 pandemic as a lot of people had started years, we have been speaking about 15% growth and we will using gold loans to meet working capital requirement. As continue to give the same guidance for this year too. for fluctuations in gold prices, our gold loan portfolio is not From a profit of about Rs 1,000 crore during the year ending directly impacted by any price fluctuation as the loan tenure March 2013, our profits have steadily grown and by March at Muthoot Finance is short. 2021, our profits stood at Rs. 3,722 crore. Our dividend pay- out ratio has been strong and have ranged between 19% and Do you think financing new economy products like 29% from FY16 to FY21. electronic vehicles is the next big thing that can hap- pen to NBFCs? Kerala Chamber Business News | 19 | December 2021

Humility personified L ooking up the man on the Net before meet- ing him helped. Otherwise, one would have it is small, but I have been working out of this office for quite found to place him in context in that no-frills, very some time now. It’s just that I have now become Chairman of unexceptional, branch office of Muthoot Finance, the Group.” bang oppose the Government’s Women’s College, You have to request him to ask someone to switch on all the Thiruvananthapuram. lights to get a decent picture of the man but, as you take aim, Dressed nearly-casually, George Jacob Muthoot, he either beams into the camera or goes all taut as he stands Chairman of Muthoot Finance, the country’s largest before a framed picture of M. George Muthoot, father of the gold loan NBFC, radiates warmth and friendliness as present generation Muthoot leader-siblings and founder of he gets up to greet you. “Can’t believe this is the office of Muthoot Finance’s gold loan business. the Chairman of an NBFC that controls 70% of the gold And his voice betrays a suppressed choke as he mentions the loan business in India,” you tell him. sad circumstances that led to the mantle of Chairmanship of He breaks into that warm smile of his and tell you, “Yes, the Rs. 56,000 crore plus-turnover holding company on him— the demise of M.G. George Muthoot, who was instrumental Kerala Chamber Business News | 20 | December 2021

in making Muthoot Finance a pan-India company Muthoot Group 3rd Generation with an astounding client-base running into several crores. Standing (from left to right): George Alexander Muthoot, Managing “He was our inspiration for four decades. When he Director, The Muthoot Group and George Thomas Muthoot, Joint took over, we were present only in four States with Managing Director, The Muthoot Group. just 31 branches. Now we are present in 29 States Sitting (from left to right): George Jacob Muthoot, Chairman, The and Union Territories, have 4632 branches with a Muthoot Group and the Late M.G. George Muthoot, Group Chairman, 100,000 retail investor base and we are a diversified The Muthoot Group of Companies (1949 -2021) group today—all this only because of his vision and strong sense of mission.” Demand for vehicle loans has been strong and there is huge What he and his three siblings and the younger gen- thrust on Electric Vehicles these days. Lenders expect electric eration has built is an amazing business empire that two-wheelers, which after government subsidy, are increasingly now enjoys a CRISIL rating of AA1+ (Very strong becoming competitive on price compared to petrol-run vehicles, degree of safety with regard to timely payment of to trigger new activity in the market and boost demand for loans. financial obligation and carry lowest credit risk). Financing is key to making EVs affordable. In urban, semi-urban, What is the group’s single important asset, you and rural areas, an increasing number of banks and NBFCs will ask, and pat comes the reply, somewhat expected, certainly begin to finance electric vehicle but with a firmness in his voice that is remarkable: “Trust and credibility.” He goes on, “We are in the Kerala Chamber Business News | 21 | December 2021 gold loan business where trust is everything. We keep Rs. 140-crore worth of gold apart for every Rs. 100 crore investments,” says Mr. George Jacob Muthoot. He goes on to tell you how closely-knit the entire family is and how good the vibes are with those in the extended family who also share the ‘Muthoot’ brand in some form or the other, despite being com- petitors in key verticals. “Our elder brother was the one who held us together. We would meet frequently outside of business to cherish our memories and dreams. We are also closely linked to people who have the Muthoot tag for their businesses,” he adds. He says it is a new generation that is leading the business under the stewardship of his brother George Alexander Muthoot, who is the Managing Director of the group, and George Thomas Muthoot, joint Managing Director, and himself. The company, he says, is looking at crossing the Rs. 1 lakh crore turnover mark ‘in the nearest future’. What went wrong with the group’s bid foray into banking proper? “We didn’t want to go into the small finance bank space. What we tried for was a univer- sal bank, but the policies then did not favour us.” He says the group considers itself an important cog in the nation’s economic wheel, providing much-need- ed liquidity to lakhs of people who are largely un- banked. “I am sure the government also sees the key role we play in the economy,” he adds.

Time to revisit Kerala’s development strategy F or many years now, Kerala has been pursuing an outward banks. opportunities in Japan. Going by the looking development policy based on Tourism, information technology and reports, Malayalee youth are being the export of human and non-human bio-technology were once touted as recruited to work even for onion resources. While recognising its solutions to Kerala’s problems. The cultivation in South Korea. contribution to the creation of what is steep fall in the prices of petroleum known as ‘Kerala model of products in the Middle East and the Let’s get our youth back development’, time is ripe to think pandemic induced lockdown should home about an inward-looking development have served as an eye-opener to policy that is rooted in our own soil. An Malayalees. Should we continue to But Kerala badly needs its youth back ageing population, climate impart knowledge and skills to match home. Kerala is among the States with change-induced natural calamities and the blue- collar job market in the high proportion of population above persisting pandemics like Covid-19 Middle East or caregiving jobs in the 60. The State is fast transforming into a have added an urgency to this line of European countries, Canada and vast old age home. Demographers have thinking. United States? Newspaper reports predicted that by 2025, the proportion suggest that Kerala is prompting our of aged population in Kerala will be ‘Dutch disease’ youth to respond to the emerging job 25% of the total population. If the Scholars have pointed out that Kerala economy is afflicted by a kind of ‘Dutch disease’, a situation where the flow of external remittances adversely impacts the productive sectors of an economy. The flow of remittances since the mid-1970s led to high wages and huge rise in land prices, which rendered agricultural and industrial production increasingly unremunerative. Much of the remittances flowed to the construction sector and this had serious environmental impact. Kerala now has to find ‘room for rivers’ as high-rise buildings have occupied the river Kerala Chamber Business News | 22 | December 2021

Jose Sebastian present trend of youth migration among Indian States in per capita founded. But on a closer examination, it continues, Kerala will have to depend household consumer expenditure. can be seen that both lack substance. on migrant caregivers to take care of the Almost 80% of manufactured consumer Kerala can consider a wide range of old. It is against this backdrop that goods are imported from other States environmentally sustainable industries. Kerala needs to consider revisiting its and countries. We have nearly 35 lakh Agro-processing industries for example development policy. Kerala badly needs educated youth with a wide spectrum of are least polluting. The backward and a more equitable, happiness generating skills and training. forward linkages underlying and environmentally sustainable As for materials, we are the major agro-industries ensure development of development model. producers of raw materials like rubber, both sector. cashew, coconut, spices and marine Population per se is also not a The Four ‘Ms’ of Wealth products. A major portion of all this is constraint for industrialisation. If so, Creation exported outside the State for processing. how come Mumbai, the most populated The paradox is that the finished products city of India, is also the most A dispassionate look at Kerala society are imported into the State in sizable industrialised of places in the country? and economy will show that we have in quantities. The crux of the matter is locating abundance the four ‘Ms” of wealth It is not that every commodity that Kerala industries at locations that suit the creation: money, market, manpower imports should be manufactured here. If environmental and spatial specificities and materials. The banks in Kerala are one-third of the imported consumer of the State. flooded with funds. Our credit-deposit goods are manufactured here, it is ratio is around 60%. The problem that sufficient to change the face of Kerala. Real constraint: Psychic the banks face is lack of profitable Infrastructure investment opportunities. Vast majority Lame excuses of loans are for wholesale and retail At the political and official level, there is trade, vehicles and construction. Kerala One of the oft-repeated excuses for a lot of talk about Kerala’s lack of is a huge market for consumer goods. Kerala’s industrial backwardness is that infrastructure. But infrastructure is According to the National Sample Kerala is environmentally fragile and both physical and psychic. While a lot Survey Organisation’s consumer highly populated. Prima facie, these of emphasis is placed on physical expenditure survey, Kerala stands top arguments would appear to be well infrastructure, scant attention is paid for psychic infrastructure. Ease of doing business is the barometer of psychic infrastructure. In the latest ranking prepared by Government of India’s Department of Industrial Promotion and Trade, Kerala is ranked 28. It is not that Kerala is not making any effort to improve the ranking. The State government has taken several steps like single window clearance, deemed licensing, etc., in this direction. But these have not helped in improving the State’s image as a business-friendly investment destination. The root cause of this seems to be Kerala’s history of perceiving Kerala Chamber Business News | 23 | December 2021

entrepreneurs as exploiters of ‘surplus value’. While there is no explicit opposition to any entrepreneurial pursuit by society at large, the fact remains that they are not widely welcomed and celebrated. The social utility of entrepreneurs as creators of job and wealth for the society and tax revenue for the government need to be underlined. Successful entrepreneurs should be projected as role models for the youth to emulate. Kerala must try new ideas scholastic pursuits and government would be possible to replace the migrant jobs. This ‘diploma syndrome’ should labour to a large extent. Entrepreneurs everywhere are risk not be mistaken for any thirst for For years, we have been talking about the takers. But the hall mark of Kerala knowledge. If the society can provide disadvantages we suffer in terms of society is risk aversion. The high gainful employment after basic location, multiple taxes, transport premium for paid employment, education, majority of those pursuing bottlenecks created by border check especially government job, is a the so-called higher education will opt posts, etc. With the introduction of consequence of this. It seems the society out of it. Instead of inculcating the right Goods and Services Tax (GST), all these has to provide some kind of ‘social values and attitudes towards work and have been cleared and the country has insurance’ to entrepreneurs, the risk life, our higher education tends to become a common market. The takers. Why not reserve a certain promote disdain for manual work. circumstances are quite favourable to tap percentage of government jobs to After spending years pursuing various the tremendous potential for wealth entrepreneurs who have provided degrees, the youth fail to land jobs creation here. It is high time Kerala starts employment to at least 5 people for a matching their aspirations and, in the looking inward to break this vicious continuous period of 10 years? process, lose the physical fitness to do circle. Marketing is the major stumbling block any kind of manual work. The salaries for most first-generation entrepreneurs. they receive in the jobs they ultimately Jose Sebastian was senior faculty at the Here also government can give a end up are far less than what the Kerala Government-run Gulati Institute of helping hand. The government has now migrant workers receive here. If the Finance and Taxation (GIFT), made it mandatory for State employees government can remove the stigma Thiruvananthapuram. He is currently to be in handloom attire once a week. In associated with manual work by commentator on Kerala economy and society. a similar way government can stipulate bringing them under universal pension that a certain percentage of salary of system and social security benefits, it government employees and pensioners must be spent on products of specific quality manufactured by first generation entrepreneurs in the State. Break the vicious circle Kerala is caught in a vicious circle of fiscal crisis and development crisis reinforcing each other. After meeting the committed items of expenditure such as salary, pension and interest payments, the State is left with little resources to support those engaged in productive activities in the agricultural and industrial sectors. The sons and daughters of this class are after Kerala Chamber Business News | 24 | December 2021

Planning a meeting? Come over to KCCI Hall! Kerala Chamber of Commerce and Industry (KCCI), Chamber Corner, Shanmugham Road, Kochi, PIN 682 031, Kerala, India, Tel. 91-484-2380950, 2354885, FAX: 91-484-2374253, E-Mail: [email protected] with parking facility

Ride thePERSPECTIVE NEW in Kerala Kerala is a State of unmatched potential for trade and investments with a conducive business environment and strong political governance sys- tems. It is a destination beyond tourism, writes Sreenath Vishnu, Chairman, CII-Kerala State Council. Kerala Chamber Business News | 26 | December 2021

Sreenath Vishnu Kerala Chamber Business News | 27 | December 2021

PERSPECTIVE Kerala is one of the richest Indian States Life in Kerala reflects its overall best big state crown: it is the and also one that is safest, healthiest and most environment-friendly State in best placed to achieve India. Kerala also has many other feathers in its cap. It is the developed- only State in the country with very high Human Development country living Indices (HDIs), the most striking among them being lowest standards in the near infant mortality and cent per cent literacy. It is the first State in future. India to launch a Transgender Policy… The list does not end there. Kerala stands out among the States of India not only as one that leads the pack on the economic front, but also as one that is at the very forefront in human development, thanks to its robust educational system and strong commitment to pub- lic-welfare. This is a State of unmatched potential for trade and investments with a conducive business environment and strong political governance system. Easily, this is a destination where one can discover much more than the wonders that tourism pamphlets speak about. Kerala is known for the alternative model of development and has risen from being a low economic power to a position where it leads growth in various sectors. At one point of time, it was one of the poorest regions in India. Today, however, it is one of the richest Indian States and also one that is best placed Kerala Chamber Business News | 28 | December 2021

to achieve developed-country living standards in the near fu- and their inward remittances have stimulated the State’s over- ture. all development. Growth of the Kerala economy accelerated in the late 1980s Coir, handlooms, and handicrafts are the major traditional in- and the process is still very much on. To navigate this complex dustries of Kerala and, together, they employ a substantial part economic growth landscape, it is important to understand of the State’s total workforce. Kerala also has a strong presence that Kerala is unique because its social development preceded in the agro-based industries and is all set to take advantage of economic growth, which in turn provided the stimulus for a its huge potential in the food and beverages sectors. With re- faster and qualitatively better economic growth. This has spect to the agro-based industries, a good part of the domestic made Kerala an enigma to analysts of economic and interna- demand is met by imports from other Indian States and vari- tional development. One aspect we cannot miss out in this ous other countries. Major export items from Kerala are jewel- journey is the State’s strong civil activity, strong citizen move- lery, marine products, spices, packed food and cashew. ments and the State government’s deep involvement in the de- Kerala has a vibrant service sector spanning hospitality, tour- velopmental process. ism, Ayurveda, medical care, transport and financial and edu- Kerala contributes 4.11% of the country’s GDP and the Sate’s cational services, all of which contribute substantially to its per capita income is 50% above the national average. Per capi- economic growth. ta consumption expenditure in rural Kerala is twice that of The State is geographically well placed to be a destination for rural India and that in urban Kerala is 1.3 times that of urban investment. It has four international airports, 18 major and India. Kerala, therefore, offers an ideal space for several in- minor ports and excellent rail and road systems. The State’s dustrial activities and a welcoming market for a wide variety geo-strategic location on the international maritime route en- of products. sures that it is an ideal candidate for export-oriented indus- A major foreign exchange earner for Kerala is its export of hu- tries. In spite of the several natural disasters that have imper- man resource services. More than 24 lakh Keralites are NRIs illed the State’s economic growth in recent times, Kerala has Kerala Chamber Business News | 29 | December 2021

PERSPECTIVE thrived and the key sectors of the State’s economy have flour- According to ished. statistics available There are enormous possibilities in the State and it is for the with the State industries to tap into the domestic and international market government, Kerala in a more strategic manner. now has 1.41 lakh registered live MSME Sector MSME units, out of which 68,000 were The Micro, Small and Medium Enterprises (MSME) sector registered in the last has emerged as a highly vibrant and dynamic sector of the five years. Indian economy over the past five decades. It contributes sig- nificantly in the economic and social development of the country by fostering entrepreneurship and generating large employment opportunities at comparatively lower capital cost. MSMEs are complementary to large industries as ancillary units and this sector contributes significantly in the inclusive industrial development of the country. The MSMEs are wid- ening their domain across different sectors of the economy, producing a diverse products and services to meet the de- Kerala Chamber Business News | 30 | December 2021

mands of the domestic as well as global markets. which 68,000 were registered in the last five years. Just before Kerala has a relatively high share of the total number of the pandemic, that is during 2019-20, 13,695 new MSME MSMEs in the country. With its excellent connectivity, com- units were started in Kerala with an investment of ₹1,338.65 munication network, availability of highly skilled human re- crore and they generated employment for 46,081 persons. sources, and relatively good industrial infrastructure, it is highly suited for the growth of the MSME sector, which can Support from Government help in industrialising rural and backward areas and provide employment to youth, especially those belonging to socially Government policies have been favourable to industrial and disadvantaged groups such as SCs, STs, women and persons economic growth thus far. There have been business friendly with disabilities. amendments to the relevant laws and regulations. In order to The Government of Kerala has been pro-active in taking up strengthen the sector, the Government of Kerala has also many initiatives to energise and stimulate the business envi- come up with the Kerala Investment Promotion and ronment in the State. It has rolled out many policy reforms to Facilitation Act, 2018. clear hurdles for investment and accelerate industrial growth. Kerala offers a broad prism of fiscal and policy incentives for With a conducive environment for entrepreneurs to grow and businesses under its Industrial and Commercial Policy. The flourish, Kerala is witnessing growth in registration of MSME State also has well-drafted sector-specific policies to ensure units. promotion and evolution of each sector. E-governance initia- According to statistics available with the State government, tives have also strengthened transparency and bridged the the State now has 1.41 lakh registered live MSME units, out of digital divide. Initiatives such as dedicated toll-free number for investors to Kerala Chamber Business News | 31 | December 2021

PERSPECTIVE provide information on investment related queries, The Single Window System will Investment Facilitation Centre in KSIDC, Kerala Single become effective only if the Window Interface for Fast and Transparent Clearance government and industry (KSWIFT) are some of the commendable initiatives from the associations join hands. The government. The Single Window System will become effective need for physical submission only if the government and industry associations join hands. of documents, limited The need for physical submission of documents, limited cov- coverage of departments and erage of departments and lack of awareness among Industry lack of awareness among as well as government officials about laws and rules have to be Industry as well as government resolved. officials about laws and rules The government can set up a Central Monitoring Mechanism have to be resolved. for reviewing Single Window System at regular intervals, en- sure timely technological updates of the online portal, im- prove effectiveness of the Right to Services Act, make the deemed approvals facility effective on the ground, and en- courage self and third-party certifications, among others. The enactment of “The Kerala Investment Promotion and Facilitation Act, 2018” by amending 7 Acts related to Kerala Chamber Business News | 32 | December 2021

The State Government should: • Establish a Central Monitoring Mechanism to review Single Window System at regular intervals • Ensure timely technological updates of the online portal • Improve effectiveness of the Right to Services Act • Make the ‘deemed approvals’ facility effective on the ground • Encourage self and third-party certifications. clearances of various departments and agencies has helped in A strong economic growth rebound is expected in the State bringing in transparency and accountability in the function- on the back of rapid vaccinations, a recovering monsoon ing of the administration. boosting agricultural output, thrust on infrastructure invest- The new industrial policy—the Kerala Micro, Small, Medium ments by the government, and growth in export. Enterprises Facilitation Act, 2019—seeking to strengthen the Despite the downward revision in the GDP growth projec- existing single window clearance boards at State and district tions, India is expected to be among the fastest-growing ma- levels and in the industrial parks by bringing amendments to jor economies in the world and Kerala cannot but be part of the Kerala State Single Window Clearance Boards and that story. Industrial Township Area Development Act, 1999, the newly The Reserve Bank has lowered the country’s growth projec- announced policy for the plantation sector, completion of the tion for the current financial year to 9.5 per cent from 10.5 per GAIL pipeline and the Edamon-Kochi transmission line pro- cent estimated earlier, while the World Bank has projected ject, formation of the Kerala Bank and the Kerala infrastruc- India’s economy to grow at 8.3 per cent in 2021. After phased ture Investment Fund Board (KIIFB), are some of the com- unlocking post the second Covid wave, economic activity has mendable industry-friendly measures taken by the State gained momentum. government. As growth momentum gathers pace, supported by the meas- Industries Minister P. Rajeeve’s recent announcement about ures undertaken by the Central and State governments, the the formation of Statutory Complaints Redressal Committees Indian economy will emerge stronger on a sustainable devel- is also a welcome move from the State government. opment path. Kerala Chamber Business News | 33 | December 2021

PERSPECTIVE WHAT SHOULD Create a detailed relaunch map ensure employee safety at the workplace, and extend pro- tection measures to employees outside the office. The best approach is to develop a detailed relaunch map— country by country, site by site, segment by segment, custom- Identify avenues of growth er by customer, and product by product—in order to prior- itize recovery opportunities. This map will guide production, Identify and capture pockets of profitable growth. supply chain, and marketing and sales efforts, and help deter- Investor logic will be needed to funddemand; companies mine a recovery timeline for each site. will have to be ready to reallocate exploration and mar- It will also enable business leaders to get a head start on reas- keting expenses quickly. Adopt tactical pricing. The aim sessing investments and prospects for changing the geography of their value is to ensure the material and psychological conditions chains, for example, through relocation of that enable customers to make their purchases and create assets. It may be appropriate to freeze some favourable business conditions for a rebound in con- planned or ongoing projects until the com- sumption, while avoiding a dangerous situation in which pany has the capacity to reassess them. simultaneous pressure on prices from suppliers and cus- tomers put companies in difficulty across the value chain. Provide customers with safety Help core clients with solvability. To secure sales, prag- guarantees matic assistance should be provided to customers and suppliers in financial difficulty by providing them with Emerging from the lockdown, clients will payment facilities or extensions of deadlines in a highly be more vigilant about health and increase targeted manner. their demands on safety. Companies will Optimize the marketing mix. Marketing departments need to provide products and services that must ensure that the offering is in line with the crisis-re- adhere to the most rigorous health and lated shift in demand. In the short term, this will mean safety conditions, and be able to show or actively encouraging customers to interact through digi- explain them to the clients. tal channels. Communicate proactively to the customers about measures implemented in back offices, production, or Reboot operations and supply chain storage sites. Remember, these may not be visible to the cus- tomers. These could be end-to-end processes, minimizing hu- Secure the supply chain on strategic procurement (for man handling, testing procedures example, booking truck capacity until freight returns to across the entire supply chain, normal), as well as for operational processes that are traceability of components, or strict application of the highest sanitary standards in infrastruc- ture and on every link in the sup- ply chain (especially in the food sector). Safeguard health of employees Many employees are eager to re- turn to work, but many are also worried about being able to do so safely. Companies will need to both reassure employees about safety and find ways to motivate them in a post-lockdown world, Kerala Chamber Business News | 34 | December 2021

INDUSTRY DO? critical to ensure recovery. Strengthen the company’s decision making. A successful re- ability to anticipate and meet demand. This includes start will require addressing a adjusting the ramp-up speed to avoid generating new large number of interdependent stocks of finished products for which customers may issues simultaneously. Many go be few and far between. Set out a phased recovery, site beyond the usual corporate gov- by site. ernance framework because of This sequencing is based on four major criteria: the their scale, complexity, and the regional regulatory environment of the site and its speed of response they require. distribution centres; the state of local demand; the Crisis-management hubs set up site’s capacity in terms of production volumes and the from the time of lockdown pro- availability of labour and protective equipment; and vide a solid foundation to navi- finally, the solidity of the subcontractors’ finances and gate these issues. Their areas of operations. specialization—protection of em- ployees, Shift IT and technology to restart mode stabilization of operations, cus- tomer engagement, and the con- Accelerate digital transformation to serve new cus- duct of financial stress tests—re- tomer and employee needs. The IT infrastructure main relevant even after business must be relevant, secure, and able to meet the emerg- resumes. ing expectations of both customers and employees. Provide impetus through the op- Improve data-driven decision making and data avail- timal use of working capital. ability. In the case of a partial restart of production Management of working capital lines, for example, the reconfiguration of the supply requires special attention to en- chain will require the calculation of a new optimum sure that cash flows will be sufficient to cope with the from commercial, logistics, and production data. shocks of the crisis and recovery, regardless of which sce- Additional data sources must also be considered to inform strate- nario the company is faced with. Companies must model gic and operational decisions. Rethink the portfolio of IT projects their financial data for each scenario and systematically and technology spending. The expected decline in revenues in identify factors that could affect liquidity. most sectors will re- Sustain value creation and reinvest in sult in pressure on recovery costs and investment In many situations, the crisis has been an opportunity to capacity in the short- strengthen relationships with large customers and solidi- term. At the same fy the supplier ecosystem. Having navigated through this time, internal work- collective ordeal, many companies can strengthen part- from-home collabo- nership relations with all the stakeholders in their envi- ration tools will see ronment. growing adoption wIn some business segments, dramatic productivity and executives will gains and agility have been achieved. For leaders, it is want to accelerate now important to determine which of the developments their digital transfor- imposed by circumstance may have generated value, fi- mation to meet nancially, operationally, and for their people. Some of e-commerce demand. these could then be incorporated into future thinking about the reorganization of work and reinventing the Steer the restart business model. - Sreenath Vishnu with care Increase the speed of Kerala Chamber Business News | 35 | December 2021

NEW VISTA Lulu Mall Thiruvananthapuram Go leisure shopping! Life in Thiruvananthapuram is all set to move to the next level with Lulu Group opening one of India’s biggest malls in the Kerala capital on December 16. The Lulu Mall comes to the southern end of the State, after its debut in Kochi years ago, at a major inflection point in social life—a time when e-tail has bested retail by a good measure and in-person shopping is yet to re- cover from the devastating blow dealt by the Covid-19 pandemic. The sprawling Lulu Mall, which is getting its finishing touches, promises to put the joie de vivre back into shopping. Located on NH 66 bypass at Akkulam, close to the Technopark, the mall is a 185,800 sq.m. develop- ment which is expected over 200 national and international brands and 12 Anchor Stores including the LuLu Hypermarket spread across 18500 sq.m. The mall will house a 12-screen multiplex and a 7400-sq.m. Family Entertainment Centre, which will include an 1800 sq. m. Trampoline Park. The Mall will also feature a 2500-seater food court, as well as several restau- rants and cafes, that serve various regional, international and specialty cuisines. With ample parking for over 3000 vehicles, spectacular flagship store designs and an ample offering of food and entertainment, LuLu Mall will be a true leisure shopping destination for the people of both south Kerala and southern Tamil Nadu. Chief Minister Pinarayi Vijayan inaugurated Lulu Group’s second shopping mall in Kerala on December 16 in the presence of UAE Minister for Foreign Trade Thani Ahmed Al Zeyoudi, UAE Ambassador to India Ahmed Abdul Rahman AlBanna, megastar Mammootty, Kerala Leader of the Opposition V.D. Satheesan, leading pol- iticians and M.A. Yusuff Ali, Chairman and Managing Director, Lulu Group. Kerala Chamber Business News | 36 | December 2021

P. Vinod Kumar Kerala Chamber Business News | 37 | December 2021

Kerala start-ups have huge potential in EV segment: Rajeev Chandrasekhar Maker Village, which functions at the Integrated Start-up “Entrepreneurs should not get stuck in ideas and models. They Complex (ISC) in the Kerala Technology Innovation Zone of must equally concentrate on how to sell their products,” the Kinfra Hi-Tech Park, Kochi, has the potential to make valuable Minister said. In each of the past eleven months, the country has contributions as an electronics hardware innovator, Union been seeing the emergence of a unicorn. Tuning into the Prime Minister of State, Electronics and Information Technology, Skill Minister’s vision on Digital India and one-trillion-dollar digital Development and Entrepreneurship, Shri Rajeev Chandrasekhar economy, Kerala too must join in generating companies with a has said. value of over one billion US dollars, for the State to boost its start- Mr. Chandrasekhar, who was on a visit to the ISC, while on a visit up ecosystem, he added. to the State, said start-ups in the country must make the best use Among those who interacted with Shri Chandrasekhar included of the flurry of global opportunities generated in the post-Covid heads of KSUM, Maker Village, IIITM-K and Digital University era by tapping the particularly vast potential in the electronics Kerala. sector. The Minister also visited the Internet of Things Excellence Centre Given that Indian startups have risen largely in the domain of jointly hosted by KSUM, Maker Village, Digital University Kerala software, the Maker Village under the Kerala Start-up Mission and the Centre for Materials for Electronics Technology (KSUM), has the opportunity to make headway as a hardware in- (C-MET). He also interacted with start-up entrepreneurs and novator. The government, he said, is ready to provide to financial took a round of KSUM’s Super Fab Lab besides the stalls that ex- support to innovators to design high-quality electronic systems hibited the products of firms incubated under KSUM. using indigenously developed chips. KSUM Chief Executive Officer John M. Thomas, Maker Village Mr. Chandrasekhar interacted with stakeholders in the start-up CEO Nizamuddin Mohammed, Kerala Digital University Vice- ecosystem and noted that the EV segment of the automobile in- Chancellor Dr Saji Gopinath, IIITK-M Chairman Madhavan dustry provided entrepreneurs with immense scope for develop- Nambiar, KSITIL Managing Director Santhosh Babu and former ment. Electric vehicles relied heavily on electronics. So, the effort Telecom Secretary Aruna Sundarrajan were present among the must to target the international market as the domain was just in delegates. its infancy in most other countries of the world. Kerala Chamber Business News | 38 | December 2021

Kerala Paper Products Limited to go on stream in January Kerala government’s efforts at ensuring continued function- ing of Central PSUs under the State is all set to bear fruit with meeting held in Thiruvananthapuram that future recruit- the Kerala Paper Products Limited, the reinvented avatar of ments carried out on a needs basis. However, he assured them the Hindustan Newsprints Limited (HNL), Velloor, going on that employees who were part of HNL would have priority. He stream in January. also responded to the trade union leaders’ demand that all The State government had taken over the unit which was on other amounts still pending payment to the workers of HNL the disinvestment block following industrial sickness. It had should be cleared. cleared dues totalling ₹145.60 crore, which included payment The Minister said the government proposed to complete ren- of salary arrears to employees as committed in a resolution ovation of the newsprint manufacturing unit in four stages plan submitted to the Company Law Board. spread over 46 months. During the first two stages, the focus Industries Minister P. Rajeeve told leaders of trade unions at a will be on newsprint and write and print paper manufacture. In the third stage, the focus will be on paper board manufac- ture and that in the fourth stage on manufacture of craft grade paper. He said the government had formed Kerala Rubber Limited to make use of the excess land owned by the company. The trade unions were represented at the meeting by former Chief Minister Oommen Chandy, CITU national secretary K. Chandran Pillai, INTUC State president K. Chandrasekharan and former Union Minister for Law P.C. Thomas. Stern measures to end ‘Nokkukooli’: Labour Minister V. Sivankutty Labour Minister V. Sivankutty has directed officials of the There are allegations that many of them are now not engaged Labour Department to take stern action to check the practice in active work. The government would conduct a mustering of workers collecting gawking fees (Nokkukooli). of all active workers to weed out those who are not active on The Minister issued the instructions at a meeting of depart- the job. ment officials held in Thiruvananthapuram. Mr. Sivankutty Labour Secretary Mini Antony, Law Secretary Hari V. Nair, said meetings involving trade union leaders and district level Additional Labour Commissioner Dr. S. Chithra, and senior officials would be convened in all districts to send a strong officers of the department were present at the meeting. message to all concerned. At the State-level, the Labour Secretary and Labour Commissioner would jointly convene a meeting of trade unions. The government is convinced that it has the support of trade unions to end the practice of collect- ing gawking fees, he said.He congratulated the Thrissur District Labour Officer for having cancelled the labour cards of 11 workers following complaints about collection of gawk- ing fees. He also instructed officials across the State to initiate similar action if they receive complaints about such practices. The government, the Minister said, is also contemplating amendment of the Kerala Headload Workers Act 1978. The State at present has 3 lakh headload workers with job cards. Kerala Chamber Business News | 39 | December 2021

KFC to offer loans up to ₹1 crore at 5% interest, launches bill discounting facility Kerala Financial Corporation (KFC) has introduced a new KFC has also launched a special loan product for the Micro, scheme for small and medium sector enterprises offering loans Small and Medium Enterprise (MSME) sector to assist them to up to ₹1 crore at 5% interest. execute work orders and also to discount their pending bills. The scheme is being implemented by revamping the existing Under the scheme, 75% of the cost of work received from gov- Chief Minister’s Entrepreneurship Development Programme. ernment departments/ agencies/PSUs will be provided as loan. At present, up to ₹50 lakh is available under the scheme at 7% Repayment will be dependent on the duration of work and ex- interest. The scheme will be changed to provide up to ₹1 crore at pected receipt of funds from the work awarding authority. The 5% interest. rate of interest will be linked to the credit rating score of the The State government will provide 3% subsidy under the MSME starting at 8%. scheme and a further 2% subsidy will be provided by KFC. The Considering the COVID-19 situation, the credit rating of the target is 2500 enterprises in five years at the rate of 500 enterpris- MSME will be based on the analysis of pre-COVID period bal- es per annum. For this KFC will set aside ₹300 crore every year. ance sheets. Once the work awarding authority has accepted the Industrial units seeking support under the scheme must have bill, MSMEs can immediately get up to 90% of the bill amount MSME registration. The age of the chief entrepreneur should be by discounting. For final bills, discounting can be done without below 50 years. The age limit for SC/ ST entrepreneurs, women security as well. entrepreneurs and Non-Resident Keralites is up to 55 years. Micro, Small and Medium Enterprises (MSMEs) play an impor- Loans are available to start new ventures and modernise existing tant role in the economic growth of the country. However, they ones. continue to face constraints in obtaining adequate finance par- The loan will be up to 90% of the project cost. Larger projects ticularly in terms of finding funds to execute the work orders will get higher amounts too. In such cases, loans up to ₹1 crore and also to convert their bill receivables into liquid funds. KFC’s will be sanctioned at the rate of 5% interest and the balance at scheme will be appropriate to address such issues faced in the the normal interest rate of KFC. MSME sector during this pandemic period. The repayment period is up to 10 years. However, the interest To become eligible for the scheme, the applicant should be subsidy will be available only for the first five years. KFC will MSME Udyam registered. GST registration and the latest audit- provide specialised training and follow-up services for the select ed balance sheet are also mandatory. However, GST registration entrepreneurs. Start-ups will also benefit under the scheme. will not apply to MSMEs exempt from registration. If an MSMEs Loans up to ₹1 crore will be available to start-ups at 5.6%. has an annual turnover not exceeding ₹200 lakh and pays in- come tax on a presumptive basis, then an audited balance sheet will not be insisted upon. The loan will be sanctioned as a Line of Credit (LoC) for a five- year period where MSMEs can avail facilities like guarantees, work execution loans, bill discounting, government promissory note discounting, equipment finance, etc. Maximum assistance will be ₹20 crore for companies/registered co-operative societies and ₹8 crore for others. However, the limit for guarantees and discounting of government promissory notes will be up to ₹50 crore for all entities. The validity of the LoC is for five years. Once the customers exe- cute the loan agreement, they can avail all facilities throughout the five-year period without many formalities. The scheme will be reviewed with based on feedback from the MSMEs. KFC tar- gets to disburse at least ₹500 crore under this scheme during the current financial year, a KFC release said. Kerala Chamber Business News | 40 | December 2021

Wipro awarded technology transformation contract Kerala Bank has awarded a mul- ensuring security for clients of Kerala ti-year multi-billion-dollar contract Bank.” to Wipro Limited to provide a con- “We see IT modernization as the key solidated, common core banking driver for achieving business trans- system for the bank with over 20 al- formation and growth. An integrated lied solutions aimed at streamlining IT landscape comprising best-in technology adoption and enabling class Core Banking and allied solu- superior customer experience. tions will not only enable seamless The leading global information tech- information flow but will also help nology, consulting and business pro- achieve high performance and scala- cess services company, would amal- bility in our operations. We are de- gamate the 15 different core banking lighted to be partnering with Wipro environments that the Kerala Bank for this long-term engagement, given runs with five different core banking Wipro’s consistent track record, lead- solutions. ership position in India and strong IT and people processes,” Wipro will also set up a Data Centre, Disaster Recovery said Rajesh A.R., GM-IT & Banking, Kerala Bank. Centre, Near DR (Disaster Recovery) and Command Centre, Wipro is currently engaged with over 100 DCCBs across 12 implement the latest Reserve Bank of India cybersecurity States in India. With over 25 years of experience in providing frameworks, and provide facility management services for a technology services amd solutions to the banking industry, period of five years. Wipro has consolidated its position across all banking seg- Sanjay Jaireth, Head - BFSI India (SRE), Wipro Limited, said, ments in India, including Scheduled Commercial Banks “Wipro has been engaged with Kerala Bank and is providing (SCBs), Regional Rural Banks (RRBs), Co-operative Banks core banking services to multiple District Co-operative and the new Small Finance and Payment Banks. Central Banks (DCCB) for many years. This extensive experi- India is one of the six focus regions that comprise Wipro’s ence uniquely positions us to deliver this complex pro- APMEA (Asia Pacific, Middle East & Africa) Strategic gramme, which redefines customer experience while Market Unit. Honour for Rajadhani Business School Rajadhani Business School, Thiruvananthapuram, has won the Kerala Kaumudy Award for the Best Business School 2021. Rajadhani Group of Educational Institutions Chairman Dr. Biju Ramesh received the award from Cooperation and Registration Minister V.N. Vasavan at a function held in the State capital. Established in 2013, the school offers full-time Post-Graduate Management Programme approved by the All India Council for Technical Education (AICTE), New Delhi, and is affiliated to the APJ Abdul Kalam Technological University, Kerala. Kerala Chamber Business News | 41 | December 2021

REPORT Flawed organic product certification: EC forces AthPEeDActaonweield With the European Union (EU) taking a hard position, the Agricultural and Processed Food Products Export Development Authority (APEDA) has clamped down on four organic product certification agencies in India for ETO norms violation. However, the export industry has said that the EU intervention amounted to breach of India’s sovereign rights. O rganic products export to the European Union (EU) processor or exporter for organic products certification. The has been experiencing some turmoil for some time authority has also imposed fines on all the five firms. now owing to European Commission’s threat to initiate meas- The European Commission (EC) had issued a draft notifica- ures if action is not taken against 5 organic product certifica- tion to blacklist these 5 agencies as some shipments cleared by tion agencies in India. them had failed to meet the norms for presence of ethylene ox- Now the inevitable has happened with the Agricultural and ide (ETO). Processed Food Products Export Development Authority The agencies sought to be blacklisted by EC are CU Inspections (APEDA) being forced to initiate action against them. It has India Pvt Ltd, ECOCERT India Pvt Ltd, Indian Organic suspended Certification Agency (Indocert) and OneCert International the accreditation of one of the certifying agencies for a year Private Limited and Aditi Organic Certifications Pvt Ltd. and barred the remaining four from registering any new APEDA is the competent authority to supervise organic certifi- Kerala Chamber Business News | 42 | December 2021

cation in India. OneCert was fined ₹5 lakh, while the others were asked to pay Acting in response to the EC’s insistence, APEDA found that a penalty of ₹2 lakh each. The four have also been rated under organic sesame, hulled sesame, white sesame, amaranth and the ‘high-risk’ category. flax seeds shipped by four exporters based on certification by In the case of Aditi Organic Certifications Pvt Ltd, APEDA OnceCert flouted the ETO minimum presence norm. found seven complaints from the EU relating to its certifica- APEDA conducted a hearing in September and, its order on tion of sesame, psyllium husk and brown flax seed shipped by October 20, said 36 of the complaints from the EC were an exporter. It was also charged with not having identified the against shipments certified by OneCert, which had failed to point of contamination with the ETO levels being as high as identify the source of contamination. It also charged OneCert 24 mg/kg against the norm of 0.1 mg/kg. with non-compliance in the certification programme and in- Organic consignments cleared by CU Inspections India Ltd consistencies in inspection findings. were found to have received nine EU notifications, Kerala Chamber Business News | 43 | December 2021

REPORT particularly for shipments by two exporters. APEDA said F our European Union (EU) organisations that deal though the agency found the measures for sourcing by the ex- with organic products have asked the EU Committee porters insufficient, it failed to report this in the annual in- on Organic Production to bar the Agricultural and spections. Processed Food Products Export Development Authority ECOCERT was found responsible for four notifications of ir- (APEDA) from giving accreditation to agencies certifying regularities from the EU in the case of one exporter. Though it organic products exports from India to the Union. found high risk of cross contamination with conventional They have also asked the EU to delist India from the list of coun- products which, though a ‘minor’ shortcoming, amounted to tries recognised for organic product exports to the EU and di- failure to conform to the norms. It had also failed to report the rectly supervise the shipments from the subcontinent. problem initially or in its annual inspection. The organisations, in a letter to the Committee Chair Elena IndoCert, APEDA said, had cleared 13 shipments of sesame, am- Panichi, pointed towards the steps taken by the United States aranth and quinoa seed from two exporters that had received EU Department of Agriculture (USDA), which had directly taken irregularity notifications. In one of the shipments, the ETO level over the supervision of organic products exports from India was 11 mg/kg. The authority said the agency had failed to take to the US. sufficient measures to maintain the integrity of organic products In July this year, the USDA ended a 15-year agreement with and also report it in the annual inspection. APEDA allowing the latter to accredit agencies certifying or- APEDA reportedly came down heavily on OneCert since over ganic products export to the US. The USDA had said it was 25 complaints of irregularities had been received from the EU. changing its approach to organic ‘oversight’ in India under A higher penalty was imposed on OneCert to ensure that the its National Organic Programme. agency would be more careful when clearing organic consign- The four organisations asked the EU to improve the quality ments in future. of organic products imported into the EU permanently and The European Commission’s insistence on action being control APEDA’s functioning in this perspective. One of the taken against the Indian certifying agencies has not gone down well with the Indian trade who were of the view that the EC action amounted to dictating intervention in India’s sovereign rights. Kerala Chamber Business News | 44 | December 2021

Four EU bodies seek bar on APEDA ways could be coming up with ‘some additional audits’ and post-harvest related issue and the farmers were not the making sure that APEDA ‘is reacting and working as appro- cause but victims of contamination. priately as the control system needs them to be’. The five derecognised agencies certified close to 80% of or- The organisations even suggested that an alternative body to ganic products imported to Europe from India, which is APEDA, which controls and supervises organic exports, should the sixth most important country for imports into the EU. be allowed to come up. Until then, Indian farmers should be giv- “This means that many operators in the EU that depend on en time for transition and EU countries be allowed to import ingredients from India will be affected quite severely,” the Indian organic products without disruption. organisations said. The communication was sent to the EU Committee asking it to They told Panichi that to meet the interest of organic com- review its decision on blacklisting five agencies certifying organic panies and consumers in Europe, besides the affected or- products exports from India to the European Commission. The ganic farmers, the committee should re-evaluate the best five certifying agencies have been derecognised for their failure way to improve the quality of the controls on ETO in India. to meet the norms for ethylene oxide (ETO) presence in their The EU should at least establish a proper transition time consignments, particularly sesame (til/gingelly). and regime if the Commission is convinced it has taken the The EU organisations said in view of the committee’s black- right measure, while allowing organic farmers in India to listing, “hundred thousands of Indian organic farmers will continue marketing their products, the organisations said. find difficulty to export their organic products to EU and also The problems were not only caused by the five blacklisted the interests of companies selling and customers buying their firms but APEDA as well, they charged. “Information was products in Europe are harmed”. withheld or forwarded very late to the control bodies and The organisations – Organic Processing and Trade also the information given by the control bodies to APEDA Association (OPTA), Europe, SYNABIO, BioNederland and was forwarded very late to the Commission by APEDA,” Association for Organic Food producers – said ETO was a the four organisations alleged. Kerala Chamber Business News | 45 | December 2021

ANALYSIS WhitherGoods and Services Tax T he Goods and Services Tax (GST) was the product of exemptions and thresholds, taxation of services and taxation ceaseless work at different levels, involving both the of inter-State supplies. Central and State governments, spread over a decade. There The idea was that by amalgamating a large number of Central were many who doubted its worth and possible impact from and State taxes into a single tax, GST will mitigate ill effects of the day it was first mooted by the then Finance Minister P. cascading or double taxation in a major way and pave the way Chidambaram. Those doubts have only got compounded five for a common national market. From the consumers point of years after its rollout with effect from July 1, 2017. view, the biggest advantage would be in terms of reduction in Introduction of GST was easily the single most important in- the overall tax burden on goods, which was estimated at the direct tax reform in the nation’s history. It was the product of time to be around 25%-30%. It would also imply that the actu- repeated back and forth between the Centre and the States al burden of indirect taxes on goods and services would be and hard work of the Empowered Committee (EC) of State much more transparent to the consumer. Finance Ministers (EC) and Joint Working Groups (JWGs) of Introduction of GST, it was argued, would also make Indian officials having representatives of the States as well as the products competitive in the domestic and international mar- Centre. kets owing to the full neutralization of input taxes across the The task assigned to them was humongous. While the value chain of production and distribution. It was further Empowered Committee of Ministers had to draw up the gen- contended that the tax, because of its transparent and self-po- eral roadmap for GST, the JWGs were required to examine licing character, would be easier to administer and mark shift various aspects of GST and draw up reports specifically on from the informal to formal economy. Kerala Chamber Business News | 46 | December 2021

GST? NowthattheGoodsandServices Tax (GST) has completed 5 years, all eyes on the GST Council which is set to rationalise the tax rates and compress the rate slabs, writes Umashankar G. A proper evaluation of the true impact of GST has become looking at a bleak fiscal future. The 15th Finance Commission, impossible because of the massive disruption caused by the headed by N.K. Singh, had also made a case for GST structure Covid-19 pandemic. But, from the perspective of the States, rationalisation in its report. With GST revenue collections ris- the new tax has proved to be a let-down because it has robbed ing in recent months, the Centre also appears more confident them of whatever little fiscal autonomy they enjoyed till July 1, about tax rationalisation and system revamp. 2017. Whether GST has in it the potential to achieve all the The Government of India has, therefore, constituted a Group goals touted at the time of its launch also has come under of State Finance Ministers headed by the Chief Minister of question. Karnataka to look at tax rationalisation. The seven-member The time appears to have come to raise all those questions group includes West Bengal Chief Minister Mamta Banerjee, about GST, particularly the way it has affected the financial in- who also holds charge of Finance, Kerala Finance Minister terests of the State. True, it may not at all be possible to go K.N. Balagopal, himself a staunch critic of GST, and GST back on the decision, but this is the right time to make an Council members from Bihar, Rajasthan, Goa, and Uttar honest attempt at achieving fiscal federalism by bringing into Pradesh. the GST scheme new elements and systems that would make A second Group of Ministers (GoM) is simultaneously look- the GST story a happy one for both the Centre and the States. ing at systemic reforms that would address potential sources This is the time to do that because the 5-year grace period of tax evasion and suggest changes in business processes and during which the States were eligible for compensation for IT systems to plug revenue leakage. This GoM would also loss of revenue would end by July 2022 and the States are identify possible use of data analysis for better compliance Kerala Chamber Business News | 47 | December 2021

ANALYSIS and revenue augmentation and identify mechanisms the items against four now - 5%, 12%, 18% and 28%. The recast will for better coordination between Central and State tax seek to simplify the regime as well as lift revenue. Options on the table administrations in different states. include pruning the list of items, both goods and services, currently Discussions currently on indicate that the new regime exempt from the tax and merger of the 5%, 12%, 18% and 28% slabs to would have just three major tax rates covering most of create a three-slab regime. GST on decision has been carried out with the Central Board of Indirect Taxes and Customs (CBIC) notifying the man-made fibre, new rate on November 18. Levying of higher tax on inputs and lower levy on the fabrics and finished products had led to build-up of credits and apparels cascading costs. It had also led to accumulation of taxes at various stages of the MMF value chain and 12%pegged at blockage of crucial working capital for the industry. Although there is a provision in the GST Act for the The complex tax structure that applied to manmade fibre industry players to claim the unutilised Input Tax (MMF), yarn, fabrics and apparels has been rationalised Credit (ITC) as a refund, there were other complica- with a single levy of 12%. tions which resulted in more compliance burden. The Till now the tax rates on MMF, MMF yarn and MMF fab- inverted tax structure had caused an effective increase rics were 18%, 12% and 5% respectively. The new rate is in the rate of tax applicable to the sector. effective January 1, 2022. The world textiles trade has been moving towards The GST Council, chaired by Union Finance Minister MMF but India was not able to take advantage of the Nirmala Sitharaman, had at its meeting on September 17, trend as its MMF segment was throttled by the invert- decided that the inverted duty anomalies in the textile ed tax regime. The correction in the duty anomaly, the sector should be corrected from January 1, 2022. This industry argues, will help the segment grow and emerge as a big job provider. However, the textile retail has raised a red flag over the decision contending that it would adversely affect Kerala Chamber Business News | 48 | December 2021

It should be remembered that these are not new proposals. This is the right time to make an The late Arun Jaitley, who introduced the new tax regime, had honest attempt at ensuring true himself spoken as far back as November 2017 about the fiscal federalism by bringing into Government’s intention to go in for a three-slab rate system, taxing only luxury and demerit goods at 28%. 85% of the trade. the GST scheme new elements The Retailers Association of India (RAI) has urged and systems that would make the Finance Minister Nirmala Sitharaman, State Finance GST story a happy one for both Ministers and the GST Council to reconsider the pro- the Centre and the States. posed hike in GST rate. The RAI CEO Kumar Rajagopalan said, “The increase in Apart from the existing four key slabs, 0.25% and 3% applies GST rates on textiles and apparel is not in anybody’s in- to jewellery and precious metals, respectively, besides a top- terest due to its impact. On the business side, it will add up compensation cess levied on select items such as automo- to the financial burden of an already-stressed sector, biles. Many common use items have been exempted from slow down its pace of recovery and affect working capital GST, making it a complicated regime prone to classification requirements, especially in the case of MSME businesses disputes and leakages. GST is not levied on nearly 150 goods which account for 90% of the industry.” and over 80 services. The argument is that by pruning the ex- On the consumer side, he said, “It will lead to a rise in emption list, the GST base can be widened, which will not the prices of garments, thereby hurting consumption. only increase revenue but also keep the overall rates at a rea- On the government side, in the long run, it may lead sonable level. to many unorganised businesses going out of the GST Union Finance Minister Nirmala Sitharaman had recently in- net.” dicated that the effective tax rate under GST had slipped from The RAI said, “A far more beneficial and reasonable the original revenue neutral rate of 15.5% to 11.6% “knowing- solution is to make the entire value chain subject to a ly or unknowingly” due to multiple rate cuts since GST rollout flat 5% GST rate. This will not only resolve the invert- in July 2017. ed duty structure anomaly but also give a fillip to the industry.” Kerala Chamber Business News | 49 | December 2021

ANALYSIS Centre’s gain, States’ loss Mohammed Raseef At the time of implementation of GST, some well-known from the people. economists had pointed to the several shortcomings of the Kerala has refused to toe the Centre’s line there because, as new tax regime. One key issue that they had flagged was that stated by State Finance Minister K.N. Balagopal said during though GST is being touted as a ‘single taxation system’, in re- the South India GST Conclave, an online interaction with the ality, it is a dual tax because both the State and Centre collect Ministers of Southern States, organised by FICCI, Kerala col- separate taxes on a single transaction of sale or service. lects less tax on diesel as compared to the Centre. The Central Tax rates have been increased for many products, thus raising government, the Minister said, was collecting ₹31 on a litre of their costs. Some sectors such as textile, media, pharma, dairy diesel as cess, which is not being shared with the States products, IT and telecom have been losers in the bargain, as through devolution of funds. they have been forced to bear the brunt of a higher tax bur- The Minister also said that prior to GST rollout, Kerala had an den. Prices of commodities such as jewellery, mobile phones, income growth of 14% to 16% every year. After the etc., too have gone up in the process. Real estate is one segment of the economy that got a real hit from rollout of GST. Economists are of the view that GST has had a negative impact on the real estate sector. According to them, it has added up to 8% to the cost of new homes and re- duced demand by about 12%. The claim that the inclusion of petroleum products under Goods and Services Tax (GST) will bring down fuel prices is baseless. Fuel prices can be reduced only if the Centre fore- goes the huge amount it collects as cess on petrol and diesel and this has been proved by the recent decision of the Central government to forego some part of the cess that it collects Kerala Chamber Business News | 50 | December 2021


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