The new government to assume office after the polls should focus on land, labour and agriculture reforms, provide support to micro small and medium enterprises (MSMEs), and increase the spending on education and healthcare, R Dinesh, president, Confederation of Indian Industry (CII) told FE in an interview. He added that the current government has been able to handle geopolitical tensions “very well”.
Q. What, according to you, are the key achievements of the Narendra Modi government over the last decade?
A. Today India is well acknowledged globally. The reasons for that are: focus on physical infrastructure, usage of digital infrastructure on a mass scale, and building of social infrastructure.
Digital infrastructure, which I call the “differentiator of India”, of this massive scale has not only resulted in better access to benefits for people, but has also built a database of information which is very useful.
For instance, India is the only country, where we have the visibility of goods movement, through the e-way bill mechanism. If we get to know that a good moved between two places in 72 hours, we know what is required to be done in order to make the movement under 60 hours or even lower. We know what bottlenecks to remove, which road to build, and that directly impacts the PM Gati Shakti programme.
Another aspect is our management of geopolitical challenges. I feel we have managed those challenges “very well”. During the Covid-19 time, the government spent heavily on infrastructure, rather than giving money in the hands of people. This has given us “rich dividends”.
Q. What should be the focus areas for the government to assume office after the general election?
A. For the industry, I would say the focus areas should be big-ticket reforms: land and labour, agriculture, support to MSMEs, and increasing the spending on education and healthcare. We expect the government to gradually increase their expenditure on education and health to 9% of the total Budget expenditure.
In the case of the first two, we know that it is a challenge to implement the reforms as we need consensus of the states. One of the solutions is to look at a GST-like structure, something similar to the GST Council. Stakeholders will have issues, they will discuss, but ultimately will find a way and move on.
For MSMEs, the government should introduce a rating mechanism for MSMEs, which can help in sector specific support for the MSMEs. This would also help in MSMEs securing lending from fintechs. Also, the government should create a Rs 500-1,000 crore fund to support green transition of MSMEs, and speed up digital transition of MSMEs.
Also, the government should support job creation and have an employment-linked incentive plan.
Q. It is perceived the economic growth isn’t creating enough jobs.What is the industry’s sense on the employment situation in the country?
A. CII runs a survey every quarter. The general feedback that we have got from our members is that employment is going to grow going forward. In manufacturing, jobs are created whenever fresh investment comes in. In the services sector, the employment is continuous as they keep on recruiting. H1 of FY25 is going to witness about 75% growth in employment as compared to H2 FY24.
Q. Investments from the private sector, especially MSMes, have been below par. When can we expect private sector investments to pick up meaningfully?
A. In the past three-four years, private capital expenditure has accounted for 36-37% of the total capex, so it has not gone down in that sense. The rate of growth of public capex has been so high that it seems private capex is not catching up.
Moreover, capital utilisation in certain sectors, such as cement, steel and automobiles have reached 90% and above. Most of the other sectors have crossed 75%. So there is a need for new investments. It’s only due to geopolitical uncertainties, new investments have not taken place. But companies are ready to invest.
There is a demand question too. Last year, we didn’t have a good monsoon, this year, we may have a good monsoon. These factors may result in private capex coming in.
Q. How do you assess the government’s support to the EV industry, especially in the light of the new EV-policy?
A. Any transition needs to be supported which the government is trying to do. But it has to be commercially viable. As we scale up, we will see private sector’s investment coming in towards the EV industry.
In EV, the production side of it is now being covered through the new policy. The next step would be to support infrastructure creation, and I am sure that would happen.
Q. How has the red-sea crisis hit freight costs and the logistics industry?
A. Now people have accepted it, and learnt to live with it. Most shipping companies have now started taking a different route. They have built it into their costs. When a situation suddenly develops, it becomes a shock. After two-three months, people get used to it.
Around 40-50% of shipping is taking a different route today.
Q. Goods exports in FY24 was less than that in the previous year. What is your take on export prospects?
A. A recent survey revealed around 75% of 1000-1500 overseas based companies have said that they would grow in India profitably, and grow with exports. It shows that India’s exports are going to grow significantly in the coming years, as we grow, because we are getting integrated to the global supply chains.
Q. The production-linked incentives (PLI) haven’t been successful in many areas, and the disbursement of funds have been far cry from the targets set..
A. PLI is not the reason why people are going to invest. Investment will take place only on demand, but the PLI scheme makes that decision easier and quicker.
Q.What is India Inc’s outlook on India’s growth for next 10 years?
A. We believe, we’re on a good trajectory. We can hit $5trillion in FY27, and $7 trillion by FY30. That would mean, growing at a rate of 8-9%.
Q. When do expect the RBI to start cutting rates?
A. RBI has managed growth and inflation perfectly so far. The industry expects RBI to start reducing rates starting Q2 FY25.