R. Dinesh says on the infrastructure side, industry has suggested faster Gatishakti implementation.
In an exclusive chat with The Sunday Guardian, CII President R. Dinesh discussed a host of issues. Excerpts:
Q: You take on presidency of CII at a time marking nine years of the Modi government. What have these years meant for industry?
A: Rather than look at it from the nine years point of view, I would say the focus of this government has been on transformative reforms. The platform for, what you would call as the new India has definitely been built. What we mean by that is that the reforms which were needed to ensure that India becomes a key part of the world, the growth engine starts firing and the necessary steps to make that happen, have all been the focus of this government. So that’s the foundation. Then the next focus which came was the pillars–the ease of doing business. It has moved very correctly and I think it was led by the Prime Minister himself in terms of the cost of doing business. Those two have been helped, or supplemented or made possible by the infrastructure spend. To tell the truth even when Covid came, all of us were hoping that there would be spending done on the consumer side etc. But the Government actually took a contrarian view and spent it on infrastructure, which I think were proved right. The Finance Minister took the call and I think it was a fantastic step because it has prepared India for the current situation. it is benefiting India and in the way industry is seeing its growth. I think it is a question of continuing those steps which we see as the need. Obviously you can keep fine-tuning it, improving it, which is what I think the government is doing and which is what the industry wants the government to do.
Q: You mentioned several reforms that have changed the business environment. Do you agree there is room for more?
A: I wouldn’t call them reforms because they have all happened. Now is the stage of refining them, improving them. Going ahead, industry has suggested focus on further globalisatiion of the economy, setting up of a National Trade and Investment Promotion Agency, fast-track on FTAs—UK, EU, Israel, GCC, EFTA and setting up FTA facilitation centres. Already the Government is working on them, but to make it faster. The second thing we have said is cost of doing business, where obviously logistics is a big focus. On the infrastructure side, industry has suggested faster Gatishakti implementation. These are all not new but are to be implemented or continued as the case may be.
Q: PM Narendra Modi is due to visit the US. What does industry expect?
A: From the PM’s visit to the US, obviously our expectations are access to technology and awareness creation for how we work as a business. Every time the PM goes, he is our best “ambassador”, to use the words. We hope we will get even more interest on FDI to come in and investments to make happen. The approach is always to see what’s best for the country from an industry perspective. So any effort he makes, is something which we will more than openly seize. The US has both technology and capital, so both are focus for us.
Q: You have projected 6.5-6.7% GDP growth for India in FY24. Given the efforts being mounted to scale up the economy, can we target more?
A: Well even at this estimate, people are asking me how you can be so positive! You also have to consider what is happening globally. Countries which were growing, maybe not a high rate but a lower rate of 2-3% are getting into a recession itself. In that context, I think we are actually being positive and optimistic when we say that we can grow at 6.5-6.7%. The second issue is the lag effect of all this – the Ukraine crisis war and inflation was at a phenomenal double digit in the developed countries that we have never seen. Even some of our neighbouring countries are speaking of 20-30% inflation. In that context for us to be able to grow is a big winner. It will be too bombastic of me to say that India could do 8-9%. In fact, at CII we are sticking our neck out and saying that next year onwards we think we can get 7.8% if global economy bounces back, because that one per cent will come through global growth.
Q: India is now actively pursuing FTAs and is keen to be a winner in these deals. How do you think we should move ahead?
A: What I think is that the focus of the Government has shifted to bilaterals rather than multilaterals. India is today a confident nation, it is a new India. That reflects in India’s capacity to export, capacity to be part of global supply chains, offer quality protection and be competitive. So all that means that what’s in the past cannot be a benchmark for the future. The benchmark for the future is a more competitive, more resilient, more cost and quality competitive India. Which is what I think we are. As CII, we welcome all of them. If you look at every FTA that gives the opportunity to export, obviously you will negotiate your position and so will the other partner country. That’s part of life, you live with it and you go on with it.
Q: There has been some tapering off in India’s exports amid global slowdown. What should be India’s strategy to boost trade flows?
A: Obviously India has seen significant export growth and that is a continued focus but we should also bear in mind what’s happening globally. Countries growing at 4-5% or 3-4% are now talking about zero per cent and lack of growth. In this scenario, if we continue what we are doing today, I feel that itself will be a big achievement. That means we will grow but maybe not at that speed which we grew earlier. That’s a challenge and to maintain the growth is important. Second, the free trade deals and facilitating an opportunity for India to grow that export is a big focus. Third is competitiveness and that involves the cost of doing business. That makes logistics cost, as well as making sure that we are becoming part of the global supply chain, a core focus area.
Q: How can India tap global supply chains to boost exports?
A: How do we become part of the global supply chain? Two things. One, you have international companies typically coming and investing in India for the domestic market. Once they come in, they see an opportunity to export. Then you become globally competitive. So a virtuous cycle is created. It is for the individual companies to benefit from it and use what they have as capacity. Incentives are not the way to go because ultimately we have to be competitive on our own. We are doing FTAs which will give market access, and second is the cost of business, which is what the Government has to focus on because incentives are always short term.
Q: How is the PLI scheme working? Only some areas seem to be gaining.
A: Industry has obviously recommended, asked for PLI. The idea behind that was to provide a short-term incentive to enable people to get to some form of growth parameter. But PLI is not a solution for all sectors and for all investments to take place. People will come here for the domestic demand, people will come here because India is competitive. The PLI is a sweetener.
Q: You have expressed concern about the tepid flow of FDI into India.
A: You have to bear in mind what happened last year post the Ukraine crisis, with the inflation rates and interest costs going up globally. In fact, Indian interest cost, at one point of time, showed just 1-2 per cent difference from the rest of the world. The differential was huge earlier to where we are now. In that context and considering the uncertainty in the global economy, typically what would happen is that people will just shut shop and refuse to do investment anywhere in the world and keep the money in their own country–whether that be the UK, USA or Japan. However, what has happened is that despite all this, we have only a 14% fall in FDI. In my mind that is a very good performance. We could have had 25% drop.
Q: What can India do to tap global investments?
A: What we need to do to get more flows–again I will go back to the same basics–make India the best place to invest in, make India the most cost competitive in terms of doing business and continue then focus on ease of doing business. Obviously corporates from their own partnerships will do what is required for each company to find the right partner to get access to technology and access to capital. That will happen. From CII side, we have specific focus areas like the survey on cost of doing business on the manufacturing sector, making sure that we build capability, skill development. Of course, it is equally important to work with the MSMEs, develop their future because if you look at India’s competitiveness, MSMEs and livelihood businesses provide that ability for us to attract capital.