To keep up its world-beating economic growth momentum, India needs big-ticket reforms in land and labour as well as higher spending on health and education up to three percent and six percent of the GDP, CII President R Dinesh said.
India’s statistics ministry expects the full-year GDP growth to be at 7.6 percent for 2023-24. Many global agencies have now raised their growth forecast for the country from their earlier estimates, with the World Bank now expecting it to touch 7.5 percent in FY24 and 6.6 percent in the current financial year.
But, undertaking such reforms requires consensus, points out the chief of the country's top industry body. "A GST-type federal structure to undertake these measures in order to ensure higher rates of growth for India requires consensus among states," said the Confederation of Indian Industry (CII) president.
Dinesh said that India is now well-recognised on the global stage and several steps have contributed to that. He highlighted the Narendra Modi-led government's management of the Covid crisis and the measures taken on infrastructure upgrade.
“Elements that have facilitated this includes infrastructure, and within infrastructure it is physical infrastructure, digital public infrastructure and its use by businesses and direct benefit given to common man, and third, social infrastructure. This has made India an economy to work with because it has a huge domestic demand,” Dinesh told Moneycontrol in an interview on April 11.
He also highlighted the need to create a fund for MSMEs (medium, small, and micro enterprises) to ensure that they have access to quality credit. He added that the 100-day agenda of the next government should include steps to rationalise the GST (Goods and Services Tax) regime.
In a bid to improve the employment scenario, Dinesh recommended an employment-linked incentive plan in the lines of the existing Production-Linked Incentive (PLI) scheme covering sectors such as tourism, hospitality, healthcare and logistics, to create jobs in a big way.
On Capex
Setting a new record, the central government has allocated Rs 11.1 lakh crore as capital expenditure for the current fiscal year, This is an increase of 16.9 percent compared to the revised estimate for FY24.
However, with government doing the heavy lifting on infrastructure spending, questions have emerged on when private capex will step up.
According to Dinesh, going forward, good growth is expected in private sector investment on infrastructure given that capacity utilisation is picking up.
"Our member survey showed capacity utilisation in all sectors is in excess of 75 percent while in sectors such as auto, cement and steel it is already 90 percent. And feedback from members tells us there is going to be growth in private capex in H1 of FY25 versus H2 of FY24," he said.
The CII President added that it is not that private capex is not taking place, but the rate of growth of government spending on infrastructure is far higher and therefore industry has leg room to catch up.
According to him, private sector investment in 2023-24 should be at a similar level as seen in FY22 and FY23, which was between 36-37 percent.
On growth & inflation
Sudden geopolitical incidents such as the Red Sea crisis could be an impediment for India's world-beating growth, R Dinesh said, adding that on the domestic front, barring monsoon, there are no risk factors.
"Biggest challenge for Indian industry is from geopolitical dynamics – what is going to happen in commodity prices due to inflation. There was a huge spike earlier that spike has been corrected. But the fact remains that global inflation is going to have a negative impact on India. That we need to watch out for and we will work with the government to see how we can support with steps to tackle that," the CII President said.
India's headline retail inflation remained largely unchanged at 5.09 percent in February, compared to 5.10 percent in the previous month. The Consumer Price Index (CPI) measures retail inflation by examining the changes in prices of most common consumer goods and services.
Even as overall retail inflation eased, food prices remained firm in February 2024. And, the evolving situation in the Middle East has also led to volatility in global oil prices with Brent crude flirting with $90-per-barrel levels.
A spike in oil prices has a direct impact on India's local inflation given that the country is a net importer of the commodity.
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