What is your assessment of the current economic situation?
With 8.2 per cent growth achieved during 2023-24, the Indian economy makes for a compelling growth story. This healthy growth came on the back of solid growth numbers in all four quarters, helped by a healthy expansion in manufacturing output from supply-side and investment from demand-side.
India is in a sweet spot and we see a footprint of 8 per cent growth for this fiscal on the back of pickup in private investments, productivity gains driven by public investments in physical and digital infrastructure, a well-capitalised banking system, which is geared up to finance India’s growth and a booming capital market.
Further, India’s dependence on oil is reducing, making it less vulnerable to the volatilities in global oil prices. In 2022, for India to produce $1 billion of GDP, 1,500 barrels of oil was needed whereas, in 2013, to produce the same amount of GDP, 2,800 barrels of oil was needed.
The geo-economic conditions are helping in India’s ascent. India’s working age population to total population will be highest for any large economy by 2030.
What is the broader economic strategy you expect from the new government?
We expect the broad strategy of high capital expenditure, coupled with fiscal consolidation, reform push and emphasis on inclusive growth to continue. CII has suggested increasing capital expenditure by 25 per cent over the revised estimate of R9.5 lakh crore for 2023-24. The government should stick to the fiscal glide path of a deficit of 4.5 per cent or lower by 2025-26. In the current fiscal, the stated target of 5.1 per cent in the Interim Union Budget 2024-25 should be adhered to, though we do think that this could be lower given the robust revenue collections and the windfall RBI dividend of R2.1 lakh crore.
We would like to see higher capital expenditure on healthcare, education and in rural infrastructure. This would include areas like irrigation, cold chain, dedicated transport corridors, Pradhan Mantri Gram Sadak Yojana, etc.
Job creation is emerging as a major concern. What would be your recommendation to the government?
There has been emphasis on livelihood generation through multiple programmes. Programmes like the PM SVA Nidhi scheme and the Mudra scheme provide credit support to street vendors and small entrepreneurs. The digitisation of transactions and GST, credit to micro enterprises and thereby boosting livelihood generation.
CII has suggested launching an Employment Linked Incentive Scheme for labour-intensive sectors with high growth potential such as toys, textiles & apparels, wood-based industries, tourism, logistics, retail, media & entertainment, with incentives linked to employment generation.
The Open Network for Digital Commerce (ONDC) can play a critical role in providing market access to small enterprises. Linking of micro-enterprises and farmer collectives to ONDC can help boost livelihoods and should be taken up on a mission mode.
In your reckoning, which sectors will become more prominent in the next five years?
In my view, in the next five years, domestic manufacturing should grow rapidly, given the global supply chain diversification and the emergence of India as a global trusted partner, coupled with the government’s continued push on manufacturing. We see some of the PLI sectors becoming big or bigger as the case may be. These would include auto and auto components, electronics manufacturing, pharmaceuticals, food processing etc.
Tourism is another area where India has huge potential. Given India’s commitment to achieve net zero by 2070, renewable energy will certainly continue to grow rapidly. We also see India emerging as a player of consequence in sectors such as electric vehicles, green hydrogen, drones, Artificial Intelligence based products and services.
The new government will be presenting its first budget next month. How would you explain your key expectations?
We expect it to set the tone in terms of priorities and reforms for the next five years. Sustaining the growth momentum with macro-economic stability and inclusion should be the biggest priority of the government.