Private sector organizations in India must boost capital expenditure to support sustainable, long-term growth and job creation, according to industry leaders and policymakers.
Speaking at the Economic Times Awards for Corporate Excellence in Mumbai, Amitabh Kant, Uday Kotak Sanjiv Mehta, Sajjan Jindal and Preetha Reddy said that, while services provide a strategic advantage but manufacturing needed to rejuvenate further. The investment could encourage greater support for and India becoming a reserve currency of the world, said the panel.
India’s private sector should step up to the plate and boost capital expenditure to enable the country to grow faster, top industrialists and policymakers said at the star-studded Economic Times Awards for Corporate Excellence 2022 on Friday.
The country should leverage the unique demographic dividend it enjoys as it becomes the world’s most populous nation, overtaking China.
The high-profile panel agreed there is a strategic advantage in services, but emphasised that the country needs to boost manufacturing as well for long-term sustainable growth of 8% and above for adequate job creation, uplifting millions of Indians.
Business leaders also called for bringing more women into the workforce as they deliberated on the topic, Private Sector Capex Revival: Key to 8% Growth, at the event in Mumbai.
They expect investments in R&D to pick up pace as the world’s fastest- growing major economy strives to meet its immediate goal of becoming a $5 trillion economy.
The five-member panel comprised India’s G20 sherpa Amitabh Kant, Preetha Reddy, vice chairperson of Apollo Hospitals, Kotak Mahindra Bank chief executive Uday Kotak, Hindustan Unilever managing director Sanjiv Mehta, and JSW Group chairman Sajjan Jindal.
“India needs to grow at minimum 8% per annum over a long period of time. If you have to become a $5 trillion and subsequently a $10 trillion economy and raise the per capita income of Indians, I think the animal spirits of the private sector must rise up to the occasion now,” Amitabh Kant said. “We’ve been saying that we’ve been at the cusp of this big private sector capex boom for the last two and a half years. It’s time we actually did it.” In the past few years, only three-four large private sector groups have taken the risk to make substantial investments, he said, exhorting the broader corporate sector to take advantage of India’s unique opportunities.
Banker Kotak assured Kant that the private sector will boost capex. “Give them time and do not suggest an increase of taxation please,” Kotak said.
Mehta said that the private sector’s risk appetite hasn’t abated but India can’t slip back into an era of reckless lending and investment. He added that the required GDP growth can’t be achieved without both services and manufacturing firing.
Regarding Alternative Reserve Currency
“Private sector investment should come back… If it is driven by demand, then I see no reason why manufacturing capacity investment won’t go up,” Mehta said.
Kant agreed that India can’t bolster growth based solely on services. “A large country like India, which is bigger than 24 countries of Europe, can’t grow only on services. India needs to grow in manufacturing. Indian manufacturing must account for 25% of India’s GDP to create jobs,” he said.
Jindal echoed Kant, saying countries around the world including the US are trying to promote local industry and manufacturing after realizing that years of outsourcing resulted in ceding the economic advantage to China.
“India is doing the same with the PLI (production-linked incentive) scheme,” Jindal said. “It is a very supportive scheme, promoting manufacturing within India. And I think the benefits of this will show up very clearly in the coming years.”
Kotak pointed out the risks of being over-dependent on the dollar.
“All our monies are in nostro accounts and somebody in the US can say you cannot withdraw it from tomorrow morning, and you are stuck,” he said. “That is the power of the reserve currency. And I think we are at a very crucial time in world history, where the world is desperately looking for an alternative reserve currency.”
India could offer an alternative, since Europe is disunited and some countries have trust issues with China.
“It is our chance. If we can build our institutions in the next 10 years, we can take a shot at becoming the reserve currency of the world,” Kotak said.
India is projected to slow to 6% in FY24 from 7% in FY23 but will remain the fastest-growing major economy. Against that, the global economy is projected to grow 2.8% in 2023, down from 3.4% in 2022, hit by war, high inflation, and monetary tightening. Growth in advanced economies is projected to slow to 1.3% in 2023 from 2.7% in 2022.
India’s investment picked up pace in FY23 amid signs that private investment is reviving.
Preetha Reddy said that India should soon see big investments in R&D, and not just in the pharmaceutical sector.
“I think everyone is waking up and realising that investment in R&D actually pays great returns in the future. So if it didn’t happen in the past, I’m very confident that it’s going to happen in the future,” she said.
Prime Minister Narendra Modi has previously spoken about the need for Indian industry to unleash its animal spirits, building on the investment thrust led by the Centre that’s seeing a vast infrastructure buildout across the country.
Between the fiscal years of 2018 and 2022, investment in infrastructure in India has increased at a compounded annual growth rate (CAGR) of 7% to Rs 11 lakh crore. On top of that, the government announced a 33% increase in capital expenditure to Rs 10 lakh crore for FY24.
Courtesy: ET Bureau | May 1, 2023 at 08:30 AM IST