Capex should be ramped up by 25% over BE: CII President Sanjiv Puri

CII President Sanjiv Puri said that exports are facing headwinds while suggesting measures such as minimum import and anti-dumping duty

SANJIV PURI, president of the Confederation of Indian Industry (CII), in conversation with Ruchika Chitravanshi in New Delhi, said that employment and consumption should be the primary thrust areas in the upcoming Budget. Puri mentioned that exports are facing headwinds while suggesting measures such as minimum import prices and anti-dumping duties. Edited excerpts:

 

The advance growth estimates have shown lower-than-expected growth numbers. How do you think the Budget can spur growth in the economy?

 

In the context of what is happening globally and certain transitory factors, 6.4 per cent gross domestic product (GDP) growth is a good base to start with because we are on a solid foundation. Let’s build on it. It also means that the second half will be 6.7 or 6.8 per cent. We are starting from a good position. The headwinds we face are primarily due to external factors, such as the export sector not performing well. There is a lack of growth, which is exacerbated by climate change, disrupting economic activity and contributing to sticky food inflation. Interest rates are also high. However, there are clear opportunities, such as supply chain realignment, energy transition, digital transformation, and food and nutrition security.

 

How can the Budget make the most of these opportunities?

 

Some important areas are reviving and providing a resurgence to certain manufacturing sectors, such as electronics. We should consider targeted interventions for labour-intensive sectors such as garment, footwear, furniture, tourism, and real estate. Granting infrastructure status to hospitality, footwear, and apparel could benefit from a PLI (production-linked incentive) 2.0. An integrated approach to trade, investment, infrastructure, and skilling should be taken. We can look at Customs duties in a three-tier structure to ensure we do not become uncompetitive. Our suggestions focus on employment and improving consumption.

 

Would you like to see some changes by the government in the PLI scheme?

 

The quantum of capital expenditure (capex) may not be high for certain industries, but employment could be high. Therefore, linking the PLI scheme to employment outcomes could be an important driver. It has to be appropriately structured in consultation with the industry.

 

Lower capex is among the reasons for lower growth in the first two quarters. What kind of increase are you suggesting in this Budget?

 

We are suggesting that public capex be ramped up by 25 per cent this year over the Budget Estimates of Rs 11.1 trillion while sticking to the fiscal glide path and not compressing it any further. We should maintain a fiscal deficit of 4.9 per cent this year and bring it down to 4.5 per cent next year, without cutting it any further. We should ensure the money is spent efficiently.

 

Do you expect the Budget to address the consumption challenge?

 

We are suggesting certain relief, such as income-tax cuts, an excise reduction on petroleum products, and increasing Mahatma Gandhi National Rural Employment Guarantee Act wages to boost consumption. Much of the economy depends on natural resources. We need to look at setting up a national commission on adaptation and agricultural resilience, as well as a commission on water security because economic activity cannot progress without addressing these issues.

 

What are the factors holding back private capex, and what can the Budget do to address them?

 

The order books in capital sectors are showing positive trends, and our internal CII surveys also indicate continued investment growth. However, the headwinds to investments are largely external, due to the lack of growth in exports. China is dumping stock in many markets, impacting several value chains. We need steps such as a minimum import price and anti-dumping duties. These are the main barriers holding back investments and affecting capex-heavy industries. Another factor is that investments are driven by demand. With increased public capex, better crops, and more favourable monsoons, the trajectory of demand should improve.

 

The Chief Economic Advisor recently said that while corporate profits have grown fourfold, wages have not increased as much.

 

Wages have been increasing. Typically, wages are reviewed continuously, based on inflation and the market dynamics of retaining skilled talent. Specialised agencies provide data showing that wages have been growing. There is a spirit of collective bargaining, where wages are renegotiated periodically. If we look at trends over a two- to five- to 10-year period, we may draw different conclusions. However, when wages are revised, they are not indexed to profits per se. Wage increases are largely determined by benchmarking and inflation.

 

Increasing India’s exports may also mean increasing imports from China. How do we calibrate our China strategy?

 

It’s important to be sensitive to broader national concerns. Therefore, we will need to apply a selective approach to strategic issues that cannot be compromised. As we work on supply chain resilience and diversification, we hope that, over time, dependence on China will reduce.

 

You’ve suggested a seven-point agenda for improving employment opportunities in India. The already announced schemes, like the internship programme, are still in pilot stage.

 

There are sometimes hiccups in implementation, which both industry and the government are working to resolve. Based on the learnings, there may be opportunities to make tweaks. The investment in human capital development needs to increase over time. We recommend creating rural development hubs to benefit from the demographic dividend in rural India. Micro, small and medium enterprises, which form a large base of employment, need to be strengthened. We should focus on easing the process of doing business for them.

 

Economists have called for a separate manufacturing policy in this Budget. What do you think?

 

We are recommending an integrated trade, industry, infrastructure, and skilling policy. These elements should be considered together. We can focus on new-age advanced manufacturing sectors for the next decade.

 

What kind of GDP growth are you expecting in 2025-26?

 

We expect around 7 per cent growth, but given geopolitical and geoeconomic uncertainties, as well as climate change, it will likely be in the range of 7 per cent plus or minus.

 

On meeting climate change goals, what assistance are you expecting from the government?

 

Adequate resources are critical for energy transition, both for mitigation and adaptation. Setting up a developmental financial institution to support financing in various forms would be helpful.