Interview/ Sanjiv Puri, president, Confederation of Indian Industry
SANJIV PURI, THE ITC chairman who was recently elected president of the Confederation of Indian Industry, has a clear blueprint: Ensure that the new ‘coalition’ government’s composition does not derail the economic reforms set in motion by Modi 1.0 and 2.0. And that there is something in it for everyone, the takeaways from the recent election results making it all too clear. Puri and India Inc’s first test in this regard will be the Union budget, slated for mid-July. And he has some expectations. Excerpts from an exclusive interview:
Q/ India is having an economic boom, but one that is not creating jobs. Is the private sector not investing enough at fault?
A/ India has achieved an 8 per cent plus growth at a time when the rest of the world has been under stress. So that in itself is an exceptional performance. Now, India has a demographic advantage. Therefore, there is a need to create a lot of quality jobs; no doubt about it. What should be the way forward? The broad approach to growth and creating jobs is around the model that has been adopted by the government—an investment-led growth. Investment creating jobs and consumption creating a virtuous cycle.
First of all, we need to look at next generation reforms, which are between the state and the Centre. Land, labour, agriculture, power, and so on, to unlock the productivity of the economy.
Number two, we believe that the private capital expenditure (capex), which also serves a purpose besides generating employment, strengthens the competitiveness of the economy, reduces logistics costs and increases accessibility for people to various services that may not be available in their location. Private capex should go up by 25 per cent. And there can be greater thrust on rural areas besides these two.
Q/ But that would again be from the government side. What can the private sector do to generate more jobs?
A/ I don’t think these two are completely divorced from each other. Clearly industry has an important role to play. Whatever items I am saying, it is not just for policy makers, but also for the industry to leverage to orchestrate the next horizon growth.
If you look at manufacturing, we are seeing that this sector is reviving in a significant way with fresh investments. There is also an opportunity in sectors that have a high employment index, where the employment-to-capital ratio is high. These are sectors like toys, apparel, textiles, wood-based, retail, tourism, media and entertainment. These are industries that need to be provided further impetus. For this, we are recommending an employment-linked incentive (ELI) with some outcome metrics.
A lot of investment needs to go into human capital development—skilling, education and health care. And industry also needs to do its bit as far as that is concerned.
For rural areas, we are suggesting integrated development hubs, where even CII can open model career centres and so on. Again, joint responsibilities.
As far as investment is concerned, let me say that the private sector is investing. The investment as a percentage of the GDP in the financial year 2023 was 23.8 per cent. The trajectory is upward. It is higher than the highest peak over the past several years.
This is also a result of the fact that a lot of good enablers are in place—the rationalisation of the corporate income tax, the PLI schemes, ease of doing business, the interventions on logistics, FTAs, the technology tie-ups that have been enabled through bilateral agreements. All of these are providing the opportunity and we are seeing investment go up.
Q/ You said that the industry’s viewpoint is that the RBI’s annual dividend to the government, which this year had more than doubled to 02.1 lakh crore, should be used for additional capex.
A/ One portion of it.
Q/ Looking at the upcoming budget, do you think the government’s viewpoints might just have changed after the election results? There had been so much focus on infra and capex spending.
A/ The larger approach is on reforms to unlock the potential of the economy to make it more productive. Within that, capex is just one part of it. I see no reason that should change because we have benefitted from it. The economy is doing well. Capex, in particular, increases the productive capacity of the economy, besides creating jobs. So we believe that given the impact it has had, there is a reason to continue, or even, accelerate the pace of reforms.
Q/ The focus on infra and capex, a lot of highways and airports and all, did not really work if you go by the election results, and rural distress is pretty real. If the industry has a wish list, what would it suggest to the government?
A/ Highways and all increase the productive capacity of the economy. These are all essential requirements.
Specifically on rural, we should acknowledge the fact that some of the stress is on account of factors like climate. And the overall cost has gone up because of external factors. At one point of time, for instance, fertiliser cost really went up. Then there are geopolitical issues. I would say India has managed that comparatively well.
So where do we go from there? The issue is to look at how to build productivity in agriculture, how to build resilience in agriculture. There are certain policy instruments that are already in play, like farmer collectives and digital. We have to now take it to the next level to create clusters, create ecosystems for leveraging technology in agriculture.
And the second piece is on social infrastructure. It is about skilling, education, health care. To promote the spirit of entrepreneurship so that the people in rural areas are also available as resources to partner in the broader economy.
We are also suggesting creation of integrated rural development hubs where all of these facilities can be converged around a cluster of villages.
Q/ What are the areas that the government should probably look at now?
A/ These are the areas where we are seeing the next phase of transformation—labour, agriculture, power.
Q/ What would be the Indian industry’s best-case scenario for the upcoming budget?
A/ Continue on the fiscal glide path. Continue to invest in the important areas of public capex, social infrastructure, agriculture and creating centres of excellence in tourism.