Confederation of Indian Industry (CII) president R. Dinesh believes there is scope for some ‘quick-win’ reforms amid this election year to spur the economy, like expanding global trade ties and facilitating investments from pension funds and insurers, while bigger changes like GST rationalisation and fixing archaic factor market laws may have to wait till beyond 2024.
Stressing that several industry segments, including steel, cement, chemicals, as well as services like hotels and aviation, are seeing high-capacity utilisation rates, Mr. Dinesh asserted that private sector will “move from promise to delivery” this year, in an interview with The Hindu. He also highlighted the need for Indian businesses to be able to tap the necessary growth capital more easily from domestic banks as well as overseas investors.
“While steel and cement capacities are being robustly utilised due to infrastructure investments, for me a very positive sign is the machinery sector, which is already seeing around 80% utilisation. Machinery orders means that it is going into further productive investments by other companies,” Mr. Dinesh said.
Pointing out that banks are unable to provide pure ‘equity’ funding for fresh investments or acquisitions, Mr. Dinesh said “Indian corporates have to invariably go overseas for funding”, on which the central bank places some restrictions.
“We understand why the Reserve Bank of India [RBI] regulations were put in place, but I think there’s a new India… Also, pension and insurance funds still have restrictions on how much they can invest in private bonds and government securities, there’s room to reform this as globally, retirement funds are the largest investors in equity and capital markets,” he emphasised.
“There are such reforms which are quick wins, where we can see delivery happening this year… We have also mentioned factor market reforms and a three-rate GST structure, inclusive of petroleum, et al [in our wishlist] as we want this to be part of the thought process.”
Underlining the need to expand India’s global trade engagement through free trade agreements (FTAs) and export promotion efforts, the CII chief indicated the need for India to review its stance on import tariffs to attract more investments and integrate with global value chains.
“Our view has been always that industry will survive in the long run only if you are competitive globally. In the short term, you may have issues that you have to manage with certain concessions. Therefore, if you want to be part of global value and supply chains, and want more overseas investment, then [to] say we will be not open to dealing with the rest of the world, there is no way. It’s a conflicting thought process,” Mr. Dinesh explained.
“We have to ready to be globally integrated, nobody’s advocating that everything [import duties] should become zero. You have to have negotiations, but subject to that, we want more FTAs, we want more involvement, because we see that opportunity for us to grow,” he added.
Ahead of the RBI’s monetary policy review this week, the CII president said industry is hopeful that interest rates will remain unchanged and the stance shifts from ‘hawkish’ to ‘neutral’. This would help perceptions so that people who are investing, believe that “Okay, if I invest now, in future, I may see lower interest rates, but I don’t know for sure till the inflation data comes”.
“We hope that if things continue like this [inflation remains around 4.5%] till October, then after that or December, we could look at asking for a rate reduction. We are not trying to push for it [now] because we think the time is not right for it,” he explained.
