We Expect Engine Of Private Investment To Gather Pace

Can you elaborate on the next-gen reforms that the CII believes are crucial for achieving the projected 8 per cent GDP growth in FY25?

Let me start with acknowledging the number of reforms that have been carried out in the last decade or so, which have been driving India’s growth. In our view, some of the next-generation reforms, which can unlock significant growth opportunities and propel India’s growth rate to 8-plus per cent, lie in the domains of land, labour, power, agriculture, and fiscal sustainability. However, these lie either in the State domain or in the Concurrent List. Hence, we are suggesting creation of institutional GST-like platforms for consensus-building on these reforms between the Centre and the State governments.

It is imperative to build India’s human capital for inclusive growth and for industry competitiveness. Focus on education, skill development and health have to be a key priority. Public expenditure on education should be ramped up to 6 per cent of the GDP and on healthcare to 3 per cent of the GDP over a period. Currently, less than 5 per cent of India’s workforce has formal skill training. India’s mission should be to have at least 25 per cent of the workforce skilled by 2030.

Investment in R&D needs to be ramped up from the current 0.67 per cent of the GDP to at least the global average of 2.6 per cent of the GDP over the medium term. This is important for India to be able to continue to grow at a rapid pace in the knowledge and technology-based global economy of the future.

Trade can be an important driver of India’s growth, and policy needs to focus on deepening India’s integration with the global supply chains. What India needs is to evolve a common overarching strategy promoting investments, facilitating trade and global value chain (GVC) integration, and fostering manufacturing to achieve the best results for economic growth.

You mentioned six key growth drivers for the Indian economy. Could you explain how these drivers will specifically contribute to sustaining the growth momentum?

Let me go one by one. First is the pickup in private sector investment. The Gross Fixed Capital Formation (GFCF) of the private sector has risen from 20.7 per cent of the GDP in 2020-21 to 23.8 per cent in 2022-23, surpassing the pre-pandemic level of 22.4 per cent recorded in 2018-19. We expect the engine of private investment to gather further pace. Higher capacity utilisations, increase in private sector savings in the last decade resulting from improvement in the profitability of firms, and the government's proactive measures including EoDB (ease of doing business) and CoDB (cost of doing business) reforms, reduction in corporate tax rates, the PLI schemes are the key drivers. The private capex is only expected to become more robust and wide-ranging going forward.

Second is the public investment -- the high multiplier of government capex directly adds to the GDP, and the infrastructure that gets created reduces the cost of doing business and as well pumps up demand by increasing the number of jobs. India’s digital public infrastructure is a game changer as it boosts efficiencies, creates transparency and trust improves governance, makes public services more accessible, and provides further impetus to economic activity.

Third, the banking system is robust. The improvement in asset quality has adequately capitalised banks to provide financing for investment projects. Fourth is the capital markets which are touching new highs boosting business sentiment and fuelling the growth of Indian industry. Fifth is the reduced dependence on oil, making India less vulnerable to volatile global oil prices. In 2013, 2.8 thousand barrels of oil was needed to produce $1 billion of GDP, which has come down to 1.5 thousand barrels in 2022.

The sixth aspect is the geopolitical conditions that are favouring India’s ascent. India is one of the major beneficiaries of the ongoing supply chain realignment driven by geo-political factors. India has significantly stepped up its global engagement as reflected in its multiple partnerships such as I2U2, Indo-Pacific Economic Framework for Prosperity, iCET, and the number of FTAs that India has already signed and is currently negotiating.

Given the ambitious targets for public health and education spending, what strategies does CII propose to ensure the necessary funding and reforms in these sectors by 2030?

We are suggesting that the public expenditure on education should increase to around 6 per cent of GDP and on healthcare to around 3 per cent of the GDP by 2030. Adoption of technology can be a game changer in ensuring universal access and affordability to these services. We are suggesting setting up of a task force with industry participation to examine how best technology could be used for efficient implementation of the NEP. The task force can also track the implementation of the National Education Policy across various states and UTs.

In healthcare, we have recommended a hub-and-spoke model, wherein digital command centres could be set up for monitoring and extending support to smaller linked-up centres in more remote areas. The support could be both in the form of providing professionals, for example, surgeons or other specialists as required, and services, for example tele radiology and tele pathology.

Private sector investment and engagement in these critical social sectors should be facilitated. For example, hospitals could be considered as infrastructure investments. Interest rate subvention could also be considered for hospital equipment.

As for improving the ease of doing business, what are the main regulatory and compliance challenges currently faced by Indian industries, and how does the CII propose to address these?

We have seen tremendous improvement in ease of doing business. Going forward the thrust on simplification, rationalisation, decriminalisation of regulatory approvals and compliances must continue. The National Single Window System is a great initiative, and the next logical step would be to bring in all state and national compliances onto the NSWS with specified approval timelines and provisions for deemed approvals.

Commercial dispute resolution should be expedited by encouraging redressal through the Alternate Dispute Resolution (ADR) mechanism, and coverage of designated commercial courts should be expanded at the all-India level. Rollout of the four labour codes should be expedited.

The CII has outlined a 14-point agenda for economic transformation. Could you highlight the most immediate and impactful measures from this agenda that the government should prioritise?

The most impactful, to my mind, would be to start the process of consensus building on the next-generation reforms as I mentioned earlier. Strong focus on capex should continue with greater emphasis on infrastructure related to healthcare and education and agriculture-related infrastructure that helps improve agri productivity and farmer incomes, for example, cold chains, warehousing, dedicated transport corridors and irrigation. Emphasis on fiscal consolidation should continue.

Most critical for the nation is to draw out a road map for increasing government spend on social sectors like health and education and prioritise skilling. The country has a youthful population advantage, and we need to leverage it by improving the quality of the workforce through these measures.

Climate action should remain a high priority. We need to work on all facets of climate action -- mitigation, adaption, transition, at scale. A fund to support green transition, especially for MSMEs, is critical.