India is unlikely to sign a bilateral trade agreement with the US at any cost, and will only do so if the deal is fair and provides a competitive advantage to Indian industry, according to Confederation of Indian Industry (CII) President and EY India Chairman Rajiv Memani. In an interview with Moneycontrol, Memani shared his views on the India-US trade negotiations, the need for expanded Production-Linked Incentive (PLI) schemes, critical reforms such as GST 2.0, and India’s path towards achieving its growth and competitiveness goals amid global uncertainties.
Q: How do you view the India-US bilateral trade agreement negotiations?
A. The government has moved commendably fast on this, engaging across industry sizes and sectors. The key is ensuring that India gains a relative competitive advantage through the deal, especially in sectors like EVs and autos. On the trade agreements, and particularly talking about the US trade agreement, I would say the first thing is the speed at which the government has moved on this is really commendable. The amount of engagement that they have done with industry, different sectors of industry, different sizes of industries — whether it's SMEs, MSMEs, larger companies — understanding what their concerns are, what the issues are on the ground.
One concern is obviously the tariff rate of 26 percent kicking in. The US imposed reciprocal tariffs of 26 percent on Indian goods, scheduled to kick in after a 90-day grace period ends on July 9.
And secondly, we also want to look at relative competitiveness. So India wants to ensure that given the size of the market that India offers, given the strategic relationship that it has with the US, and the complementarity of the relationship, that India gets probably a deal which has to be fair to both the countries. But relative to the other countries, at least Indian industry has a competitive advantage through that trade deal. The government is not looking at entering the trade deal at any cost. The relative competitive advantage has to be there.
Q: What specific measures do you think are needed to ensure PLIs deliver stronger outcomes? While PLIs have worked well for electronics and semiconductors, what is holding back sectors like textiles and pharma from achieving similar success? What should be the immediate priorities to build resilience in critical areas like APIs and penicillin? Where do you see gaps and what should be the next steps?
A. Total incentive allocation over the last three to four years for PLIs and other manufacturing schemes is Rs 3,30,000 crore, but disbursal so far has been only Rs 30,000 crore. Electronics has been very successful, and semiconductors have received the largest allocation. In sectors like pharmaceuticals, we can do much more. In some sectors, the needle has not moved much — textiles being one of them. Electric vehicles (EVs) and hydrogen present significant scope to do more. The supply chain for renewables also needs to be built.
We have the template with PLIs for getting into global value chains and attracting companies to India. We should be using PLIs and complementary tools to move faster. In pharma, we need a well-drawn strategy and more support from the government. Large pharma companies must play a role. Getting into the penicillin supply chain is difficult, but we will have to bite the bullet to become self-reliant in such critical areas.
Electronics manufacturing has been a standout success. Like mobile phones, we must integrate more deeply into global value chains across sectors. This requires attracting leading global players to manufacture in India and ensuring a smooth entry and competitive ecosystem for them.
India currently accounts for about 2.8 percent of global GVA, compared to China’s 28.9 percent. Every 0.5 percent rise in India’s GVA contribution can add about 2 percent to our manufacturing-to-GDP ratio.
Q: What reforms do you believe are critical for improving the ease of doing business?
A. We should roll out Jan Vishwas 2.0 to address procedural or technical violations. For micro, small, and medium enterprises (MSMEs), compliance with multiple rules is difficult — we need a more liberal approach. A single-window clearance that links compliance requirements of the Centre and states at one place is essential to ease doing business.
We also need to look at the duration of approvals. In India, approvals are typically valid for 12, 18 or 24 months, whereas in many countries they are for 3-5 years. We have presented a list of such issues to the government. In GST, the audit process has become cumbersome, with multiple audits across states.
Q: How do you view the GST journey and what are your recommendations for GST 2.0?
A. GST has been one of the most successful reforms in independent India. The way states and sectors came together, and the government’s investment in technology, has been commendable. But it is time for a 2.0 version, focusing on more simplification — especially in audits and compliance.
The core objective of GST was uninterrupted input tax credit transfer. Wherever that chain is broken — be it due to some items not being subsumed under GST or input tax credit issues — we need to address that. Rationalisation of GST rates, particularly for mass consumption products benefiting the bottom 0-30 percent income group, is crucial. For India to succeed, the bottom pyramid must have more income flows and better skilling.
Q: CII has projected 6.4 to 6.7 percent growth. What more is needed to reach 8 percent?
A. India’s growth is very strong relative to the global environment. We are likely to be the fastest-growing major economy for the third consecutive year. Our macroeconomic indicators — fiscal deficit, foreign exchange reserves, bank balance sheets — are all in good shape.
To achieve the Viksit Bharat vision, we need to sustain around 7 percent growth with nominal growth at 10 percent. The key lies in continuing reforms, not necessarily big-bang reforms, but small and steady measures that boost competitiveness and unlock new opportunities. Given the global trade turbulence and geopolitical challenges, India’s current growth rate is commendable.
Q: What next-generation reforms are critical to boost competitiveness?
A. The next wave of reforms will have to focus on enhancing competitiveness and speeding up business processes. Many of these will be at the state level and involve coordination across ministries. Key areas include reforms in land availability, energy, and logistics to reduce costs.
Factor market reforms are essential — standardising land use categories, digitising land records, and ensuring clear titles will help. The government has set up a high-level committee on the next level of reforms which cuts across various ministries and also states. Reforms that make manufacturing more competitive and approvals quicker will be vital.
Q: Employment-linked incentive schemes have been introduced. What is your view in the context of automation?
A. These are nudges to encourage industry to focus on job creation. The government’s priority is generating employment, given our young population and the large number entering the workforce each year. While AI and automation are inevitable, boosting manufacturing, especially labour-intensive sectors, and sectors like tourism can help create employment opportunities and formalise jobs.
Q: What role will renewables and net zero targets play in India’s growth path?
A. Indian industry sees the need for mass application of renewables at competitive prices. The focus must be on improving transmission and distribution efficiency and building supply chains for hydrogen and battery storage. The government is working with industry to standardise net zero definitions and support hydrolyser production through PLIs. India must chart a low-carbon growth path that is economically viable and globally competitive.
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