India can't afford yet more disruptions to supply chains: Ficci President

Subhrakant Panda, managing director of Indian Metals & Ferro Alloys, on Sunday took over as president of the Federation of Indian Chambers of Commerce & Industry (Ficci). In conversation with Asit Ranjan Mishra, Panda says the government needs to continue its capital expenditure (capex) push to crowd in private investment. Edited excerpts:

What are the pain points for the Indian economy as we enter Calendar 2023?

The concern is that global growth is going to slow down. One-third of the global economy is staring at a recession with two consecutive quarters of likely negative growth. Although we are well-positioned, neither are we decoupled nor are we an island. Therefore, there will be second-degree effects.

We just have to be conscious and aware of what is going on around us. The Russia-Ukraine conflict has put pressure on the globe and needs to be resolved.

On the other hand, you have supply-chain disruptions in China on account of its zero-Covid policy. While the country has taken a step back, some of the news coming out of China is a cause for concern.

While I would not like to speculate, I can only hope it will remain under control, both for the sake of the Chinese, as well as the world because we cannot afford any more disruptions to supply chains or any new strains due to unrestrained spread.

With the levels of alert we are maintaining, I don’t think there is any need to panic.

What do you expect the finance minister (FM) to focus on in Budget 2023-24?

We expect it to be a growth-oriented Budget which focuses on continuing revival from the pandemic and taking that forward. We expect it to focus on certain measures that will go towards attracting further investments into India, especially global supply chains which are looking at a China Plus One strategy once again.

In that context, we have suggested the concessional tax regime be extended for five years beyond the 2024 sunset clause, so that there is a clear window available to global supply chains to make that transition to India.

At Ficci’s annual convention, the FM cautioned against the impending climate tariff walls, perhaps referring to the carbon border adjustment mechanism. What can the government do to safeguard sectors most likely to be impacted?

What is most unfortunate is that countries are looking to finance their transition to a green economy by taxing others. This is at a time when the developed economies have done more than their fair share of contributing to the global warming crisis.

Financial support committed to developing economies to transition is yet to come into play. The reverse is happening. This is something both the government and the industry have to advocate against. It is important to have a level playing field. We have heard of non-tariff barriers, but these are very direct tariff barriers.

The government can look at several measures. One, by making available funds for the green transition in a targeted manner so that transition is as efficient as possible. Two, there needs to be a clear taxonomy for green financing and related issues.

Of course, looking at the medium to long term, there needs to be a transition to cleaner fuel for sectors that are fossil fuel-dependent. Research and development efforts in that direction are also important.

Why do you think private investment has not picked up yet? What more can the government do to encourage revival in private capex?

As far as private capex is concerned, that is already starting to happen. It’s more than a trickle and I expect it to gather momentum.

If you look at the second-quarter (Q2) manufacturing survey of Ficci, what is encouraging is the 40 per cent reported capacity addition in the next six months.

If you look at the value of private capex projects announced for Q2, that stood at about Rs 3.3 trillion —noticeably higher than Q2 of 2021-22. There is also a lot of hidden investment which is going on by way of reviving projects which were in the National Company Law Tribunal where ownership has changed hands, whether they have been brought back to production or capacity enhancement is taking place. That is estimated to be somewhere close to Rs 8 trillion.

From a government perspective, it did the heavy lifting during the pandemic and has continued to do so thereafter in terms of investment in public infrastructure. The government should maintain that focus and look to crowd in private investment.