Push Towards Digital India Will Improve Ease Of Doing Business: Rakesh Bharti Mittal, President, CII
In an exclusive interview with BW Businessworld, Rakesh Bharti Mittal, President of CII, discusses the economy, trade, employment, investment, ease of doing business, data breaches, corporate governance issues, sustainability and so on.
How does the economy look like right now?
Well I would say things are better and getting much better. More importantly, if we look at the global economy, and the Indian economy, for the first time what I see is, there’s a synchronization in the growth patterns. The world GDP growth is moving up, at about 3.7%. Emerging markets are at about 4.6%, India is at about 6.7% in 2017. And the IMF projections for 2018-19 is anywhere between 7.2 and 7.7%. So it is predicting a good positive growth as I see it. And more importantly, we are talking of India becoming a $5 trillion economy by 2025. This is something which is doable, given that there are many sectors starting to do well. The auto sector is doing good, the rural area’s tractors are doing very well, cement, steel, are at the back of infrastructure spending by the government is doing extremely well. FMCG companies are clocking good healthy growth month on a month now. And this is also I think, if we see the demonetization, the GST impact, is all behind us. So going forward, all the indicators are looking positive. So I am very very, if I can say, I am very very bullish on the Indian economic growth.
What do you think are the main challenges that the economy faces today?
If I look at 2-3 things, one is the temptation to spend more in a pre-election year by the governments. It’s one area which I don’t have an answer to, but that is something which I believe should be done judiciously. On the fiscal deficit, we are happy that the government, the finance minister has maintained it at 3.5%. I think what we are talking about is equality of fiscal deficit. There should be more capital expenditure going forward. The second risk factor is the high oil prices. Rising oil prices is something which I am sure the governments are engaged. But the good thing is we have got the first shipment of oil and petroleum products from USA’s shale gas production, and if that can support us, that mitigates the risk, it doesn’t eliminate it but it will mitigate it to some extent, given the rising energy demands. So these are the basic risk factors that I see.
How do you think India is impacted by the US-China trade wars?
I think if we see globally, countries are getting into protectionism. Now so far we have always been talking about global trade, open trade, open opportunities, which India is even doing today, we are rolling out the red carpet for foreign investors to come in. If I see the FDI regime in various sectors, we have by far the best and the most flexible FDI regimes across the world, any sector we talk of. Yes there is, if I may say, a bit of a turmoil, looking at the US and China engagement on the trade war. Given India’s huge domestic consumption, I think this is something which is a saving factor for India. Especially if you see, for example, US has increased the tariff on steel from India, from the world actually, it’s part of that, but our export is very little. So, therefore, do we get impacted significantly? The answer is no. But certainly, the companies which are dealing with the US do get impacted. And China also. And therefore, our demand within the country because of infrastructure, there is a lot of demand of steel and cement. I think that should mitigate that loss, which we have seen. Will it happen, all the things which are being talked about? It is difficult for me to take a guess, but I wish that this doesn’t scale up to significant trade wars because that can upset the global economy.
Why are jobs not happening in India? What is the scenario with respect to employment?
Well jobs are happening. It is not that the jobs are not happening. If we see pre-demonetization, that year we generated about 5.7 million jobs. Post demonetization, GST, the data points being contested, I can’t say refuted, is the loss of about 1.5 million jobs. But what we are not looking at is the jobs being created in the unorganized sector. That never gets counted. So for example, the Mudra loan scheme of the government, about 12 crore loans has been given. 12 crore people have got loans. And if each one of them employed just 2 people, you’re employing 24 crore people. Now, will that happen immediately? The answer is no. They have got loans and they are going to start the journey. You still need hands to employ. It could be a family member who gets employed, or it could be an outsider who gets employed. What we need to do and look at here is, are we investing enough and focusing enough on skill development. While the government has put huge amounts of money, tens of thousands of crores in skilling, the problem is if you skill a person, that person needs a job right next to his home. He or she doesn’t want to move to where the job is. That is one of the problems we are facing on the skilling side. But having said that, under the RSMA, there is a policy of setting up vocational training centres in all the K-12 schools. That pace is very very slow. Every year, every state is saying a few thousand vocational training centres are coming up. We have millions of schools, across the country. This is something in which the government must put money in the next 12 to 18 months. And have those vocational training centres set up, which are being run by the private sector. I think that is a very positive thing that the government has done. Because today government teachers don’t come and teach in schools, you hire skilling people, they will not be available. The private sector has to deliver. There are measurable KPIs which have to perform. So my view is that if that can be done and we start providing skills in the classes of 9, 10, 11, 12, those children become employable. And that is the struggle that most of the FMCG companies, agri companies, or agri equipment companies face. The relevant sales force which they require, you need to be a graduate for selling agri-equipment. You just need to be trained on selling skills. So all these skills will be available at the vocational centres. After class 12, first of all, each child may not want to go for higher education, whoever wants to, they must pursue their higher education. But many children you see after they drop out of class in 8,9,10th, earlier it was class 6,7, parents would pull them out for menial jobs. The shift which I have seen in the last 10 years is, parents want to see their children study till class 12. They want their children to pursue higher education, they don’t want their kids to lead the lives which they have led. So that’s a positive sign. And not only that you get an employment, but you also have the opportunity of starting a micro-enterprise. And then you become the employer and you employ people. I think that is something where a lot of resources are being put, lot of focus is being put. And if we can get a push on that, then you can have the right skill-set people after the K-12 schooling.
Do you think the Modi government will meet its target on job creation?
Well I think so far the government has not met the target, which was given year on year. But some very good, positive initiatives have been taken, as we just discussed. And given that the industry, especially the corporate India will start investing into expanding their capacities. For example, steel, cement are already doing very well. Tractor, agri-equipments are doing very well. FMCG sector is doing very well. So I think if we start looking at other sectors moving on the back of huge consumer demand, so there will be the opportunity of employing people. The problem which I see is, today, out of the 2 and a half million graduates, only 28% are employable. So we need to start investing with the academic institutions and that is the role which the industry will need to play. The government can only facilitate. Industry-Academia partnerships are something which are extremely important. Globally, if you see, a lot of innovation, a lot of R&D, is done through the academic institutions, where the industry puts the money, the resources. And I believe that the way technologies are being developed, given that every 5 years we are seeing technology disruptions, we need to start working with the academic institutions, even if I may say, tweaking or changing the curriculum, for what is required 5 years henceforth. We need to start looking at internship programs which will prepare the students for handling the job in the future. We need to start looking at R&D and innovation, and we need to start preparing the students for the future of jobs, which I talked about earlier. We are only preparing them for jobs of the future, while the world is moving to future of jobs. And that is something where we need to start investing, heavily into future technologies. The science and technology was good, the engineering courses were and continue to be good at what we are doing, but the way that the technological developments are taking place, it’s a different world. And if India wants to be in the 3 large economies, then this investment will have to take place.
So what do you think is the reason for Indian corporates not investing enough?
I just talked about it. It’s the consumer demand, lack of good monsoons, lack of consumer demand, demonetization, GST, I think these were 3-4 events which sort of held the consumer, or the people of families, they were only spending on the necessities. But in the last year, we are clearly seeing, FMCGs come back to where it was or almost there. We see tractors, I met two or three of my friends who are in the manufacturing of tractors, and they say we are full with orders. So that clearly shows that rural demand is coming back. FMCG is something which goes right up to the every nook and corner of the country, that’s come back to where it is. Cement, steel on the back of infrastructure is doing well. I think the incentives on the low-cost housing and all, real estate sector, RERA is already in place. So to my mind, the government is doing their part very well. I think its, for now, the industry to come forward. I believe Indian corporate investing is set to increase and I believe it will start happening now.
We did a couple of surveys and we found that not enough has been done on the ease of doing business in India. What are your thoughts about this and what more can be done?
I don’t agree with that statement. If India has jumped 30 ranks in a year, or let’s say between the two World Bank surveys, that clearly speaks on we have done a lot in ease of doing business. If we go to the data points of setting up the industry, and doing something which is now in a number of days, which used to be number of months or a year or beyond. I think that is something which is very good. And more importantly, the digital India program, digitization of everything and bringing everything online, will bring in more transparency. And I think that is what is required, if you can do all your business, all your government business if I may say, without going to an office, is something which is very good. If you see today, the income tax returns are filed online, the funds come online, it’s a dream to my mind. And that is something that government and the taxation department has done very well. The finance minister has done very well. So a push towards digital India will improve ease of doing business.
Why are we getting to hear multiple governance issues in Indian boardrooms?
I can only say that these are the events that have come in the very recent past. They are independent entities, they are being governed by the board and investigations are on. So it’s not that anyone or any person has been indicted. Having said that, I can only say that while the government is coming forward in bringing new policies measures, the IBC is something which is extremely good. So all ministries are doing that. It is the responsibility of the industry to be transparent and ethical. This is one role which the CII plays very well, and we continue to engage with our members. The only thing which I can say on this is that we need to differentiate, wilful default or not. So if there is a wilful default, by all means, consequential management must take place. But you can’t paint everyone with the same brush. Consequential management refers to action, punishment, but only if the default is wilful. Thankfully there are some businesses which did do well, not that there was a fraud happening, the industry sector didn’t do well and there could be various other reasons, which are now being, those entities are now being handled through the IBC process. The issue is my mind is very good, we are not losing all the investment which has taken place, the creditors will get money depending on what industry or sector we are talking about. But more importantly, those assets would be taken by someone, we see those manufacturing companies back again production, no loss of jobs, I think it’s a good thing what the government has done. Of course there are some processes which are being looked at, and I am sure the government will come out and make sure that they are taking place.
What do you feel about the recent incidents of data breaches?
I think, to my mind, when we are looking at new technologies, we’re talking of digitization, we’re talking of online transactions, we must make sure that there are enough safety measures put around. That’s the first thing. Cyber crime and cyber security is something where all the governments across the world are engaged in. And industry must also look at investing significant amounts on this. This will be one thing, which will be a huge area of concern going forward.
Do you think tech majors across the world and influencing democracies? What are the implications for India? For example, Mark Zuckerberg said he will ensure fair elections in India.
I think to ensure fair elections is the job of the election commissioner. I am not on social media so I really can’t tell you what they do. But having said that, there are many other ways to influence. I think it is going to be depending on the policies in place, I think it will depend on how the economy is moving, there are many factors.
Where do you see the Indian economy heading in the next 5 years?
Well I can only tell you that all the projections from the IMF and other nodal agencies, they are talking of India moving up, from 6.7% to 7+, 7.5% in 2018-19, we are talking of going up to 8% in 2022. It’s only looking good for India. Having said that, the global trade, or exports, is where we want a lot of support and hand-holding from the government. And I was very happy when the finance minister talked about putting robust long-term export policy for agri-products. That has been one area where we have been asking the government to come out with a policy. So I think that is something which is good to hear, and I would say, given the other policies, the Prime Minister is himself leading in a mission mode. To my mind, this is a huge positive, I think when we talk of industry must respond and react in a positive way, every citizen of India must take their responsibilities. When we talk of Swachh Bharat Abhiyan, we can keep criticizing the government that there is a lot of garbage lying on the road, but who puts the garbage? We are the ones who put the garbage there. So, I think there are responsibilities of every person we need to look at. To my mind, Solid Waste Management needs to go in the private hands, because the government agencies have not done a good job. And neither do they have the money to invest. Every city, every big town is bringing more solid waste on to the roads everyday than the capacity to clear that, which the corporations have. And they don’t have money to invest, and to my mind, this is not only an opportunity where we need to see cleaner roads and cleaner environment, but also it ends up into a business opportunity. Globally, solid waste management are businesses which companies have built. So I think the government should not yield to the pressure of the employees of the corporations who go up in arms whenever they want to do this, the government must take the hard decisions.
Just one questions from my end, since I am a sustainability and environment journalist, what do you think of India’s position on sustainability? Do you think there will be a push towards sustainability, in the next few years?
Certainly yes. I think corporate India is showing its responsibility in sustainability, the government is as well, but of course, we all need to do much more. And if you see, Prime Minister Modi leading the International Solar Alliance, these are the things where we are very happy and proud. And what I am also happy about is that India is sitting on a high table globally, talk about policy, policy measures, resolutions, I think it’s a very good thing.
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