Exclusive: ‘Policy push needed to unlock $500 bn FDI in 3 years’ Q&A with CII president Rajiv Memani

Will the West Asia conflict lead to more severe economic impacts this financial year than the government’s February estimates, given lasting supply disruptions and high energy costs?

It is difficult to assess the full impact at this stage. India entered the year with strong tailwinds—robust GDP growth, ongoing reforms, macroeconomic stability, and healthy government, bank, and corporate balance sheets. Consumption was strong, with automobile sales and IPO markets booming. After the West Asia conflict began, the government also acted swiftly, engaging industry, ensuring gas availability, protecting vulnerable groups, and coordinating closely with states.

However, India’s high dependence on energy imports makes it vulnerable, and rising costs will filter unevenly across sectors. Even if the conflict ends now, disruptions may take 3–4 months to ease. While some impact is inevitable, its severity remains uncertain and will depend on how long the situation persists.

The government also has some levers to manage the fiscal situation, including revenue-boosting measures such as accelerating privatisation and disinvestment, and introducing innovative dispute resolution schemes, which can help strengthen the fiscal position.

Raising more non-tax revenues through disinvestment may not be easy in current market conditions..

I think there are still good assets that can be done (privatised). Capital is most valuable when deployed at the right time, especially in a crisis. Ideally, it should support strategic initiatives that strengthen India’s long-term resilience—enhancing energy security, building manufacturing capacity, and reducing external dependence.

At the same time, a portion should be directed toward providing immediate relief to vulnerable sections of society and affected businesses. This balanced approach can address short-term pressures while laying the groundwork for greater economic stability and strategic autonomy in the future.

Given the current situation, what recommendations does the CII have for the government to address economic challenges?

We’ve put together a set of recommendations. Some have already been implemented or accepted by the government—such as RoDTEP (Remission of Duties and Taxes on Export Products) and  customs duty on fuel and certain measures to ease banking credit.

Much of our focus, however, is on providing relief to MSMEs, exporters, and importers facing high logistics costs, including freight, demurrage, and insurance. We have also suggested measures around NPA recognition and support mechanisms similar to the Covid-era credit guarantee schemes.

With the rupee steadily depreciating and capital flowing out amid global uncertainty, how can India attract foreign investment at this juncture, and what measures should the government consider to address FPI outflows and boost FDI inflows?

India needs a structural and proactive response to the weakening rupee and potential rise in the current account deficit, especially with energy prices high and non-oil imports having grown sharply. First, exports must be pushed aggressively by leveraging FTAs and a more competitive currency, along with opportunities arising from tariff changes in key markets like the US.

Second, import dependence should be reduced by identifying high-value import segments and creating a clear domestic production roadmap, particularly in areas such as energy and data infrastructure, while strengthening long-term resilience.

Third, India should integrate deeper into global value chains (GVCs) by targeting 30–40 major global players and actively encouraging them to manufacture and scale up locally.

Finally, foreign direct investment must be ramped up, with a target of about $500 billion over three years. This requires proactive engagement, single-window clearances, strong inter-ministerial coordination, and a revamped FIPB-like mechanism to ensure faster, transparent approvals and a more investor-friendly environment.

How to overcome obstacles created by China in global value chain relocation to India?

While some global manufacturers have shifted from China to countries like Vietnam, many of these investors could also come to India. The success of electronics manufacturing, including the expansion of the Apple ecosystem, shows this potential. A list of 40–50 major global value chains, including brands like Nike, highlights the opportunity, especially in labour-intensive sectors.

India’s large market and the global push to diversify away from single-country dependence—particularly on China—work in its favour. At the same time, emerging sectors like data centres present a major opportunity. With capacity expected to expand to 6 GW by 2030, investments could reach Rs 12 lakh crore. If I look at the bill of materials today, the total equipment imports will be Rs 8.5 lakh crore. Why can’t we manufacture that equipment here? Building domestic manufacturing capabilities here and tapping global demand, such as Middle East reconstruction, can significantly boost growth.

On taxation, do you expect the government to take any additional measures at this stage?

CII’s key tax suggestions focus on nudging investment without significant fiscal cost. Government can look at a limited-window incentive—such as exempting long-term capital gains tax for FDI (not FPI) on fresh, primary investments made by a set deadline, i.e., by March 31 2027—to encourage quicker capital inflows.

Accelerated depreciation, say up to 33% in select sectors, especially for domestically manufactured capital goods, to spur investment, can be considered.

Most importantly, the emphasis is on improving dispute resolution, reducing litigation, and creating a more predictable tax environment.