The priorities of the National Democratic Alliance (NDA) government in its third term no doubt include facilitating a private investment-led revival to boost the India growth story. Ahead of the forthcoming Union Budget for FY25, it is naturally keen to listen to suggestions from stakeholders like the apex industry associations on how to ensure that a virtuous spiral of private capex kicks in. This is an unfinished agenda of the last five years. The fact remains that despite a strong public capex push, corporate investments have not crowded in to drive the process of overall economic expansion, which hit 8.2% in FY24. To be sure, leading conglomerates have been making big-ticket investments but a broader private capex upswing has not kicked in. In this milieu, it is indeed surprising that India Inc offered extremely timid, if not pusillanimous, suggestions like public capex spending must be stepped up by 25%, besides simplifying the tax regime, and more production-linked incentive schemes which the government in any case is mulling.
The pre-Budget consultations would have been more fruitful had industry frankly told the ruling dispensation why their animal spirits remain dampened and what it takes to ensure that corporations drive the growth process. Perhaps that is asking for too much as India Inc lacks fearless leaders like the late Rahul Bajaj to talk truth to power. After the NDA dispensation came to power for the second term in 2019, Bajaj frankly stated at Bajaj Auto’s annual general body meeting: “There is no demand and no private investments. So where will growth come from? It doesn’t fall from the heavens.” Later at an awards function, he raised concerns about the fear of speaking out among businessmen in the presence of the Union home minister. The reality is that domestic firms are hesitant to tell the government that unless there is demand — although an industry spokesperson said that the Centre must continue supporting the growth momentum by “energising” demand — capacity utilisation will not improve to a point where industry makes fresh investments.
This hesitancy of India Inc was observed by the late economist IG Patel who presciently wrote about this tendency of many in private business “who think even now that rather than incur the displeasure and unpleasantness of opposing government policies and all that, it is much simpler, much cheaper, much more comfortable to be on its right side”. The bland demands for a simplification and rationalisation of the tax regime also conceals the anxieties of industry — which came to the fore with the suicide of the founder of Café Coffee Day, VG Siddhartha, in 2019, whose last letter mentioned harassment by the income tax department and a private equity investor — over so-called “tax terrorism”.
It is also striking that India Inc does not forcefully advocate a bold and ambitious reforms agenda to trigger a private capex upswing by implementing deep-going structural reforms to free up the land and labour markets. Problems of land acquisition have bedevilled many investment projects. Domestic small and medium businesses, for their part, are struggling to cope with labour law requirements and predations of the inspector raj. It is these structural economic reforms, besides improving the conditions for doing business, which can kick-start more private sector investments. India Inc’s animal spirits then are bound to be rekindled to broaden and drive the pace of overall economic expansion.