Growth in domestic demand will attract foreign investment: CII President

NEW DELHI: R Dinesh, the newly-elected president of the industry body, Confederation of Indian Industry (CII), and Managing director of TVS Supply Chain Solutions spoke to TNIE on issues related to economy, manufacturing, private investment and consumption. Here’s an excerpt:

On macroeconomic scenario

There are some headwinds, but if you look at the data, three things emerge. One, the significant investment in infrastructure that has created a virtuous cycle. The virtuous cycle that is resulting in more money being available in the hands of the people, therefore, demand has been consistent (demand has actually gone up). More people are coming to India looking at the demand here, and then they start exporting. Because of the domestic demand growth, India has forecasted to give 15% of the global growth, making it clear that India is a bright spot for people to look at.

The second side of it is the corporate sector. I think most corporates have improved their balance sheets. The banks have got a very good balance sheet themselves.

The third is, as of now, we don’t see any negative from the monsoon perspective. That could be the one headwind. So, all the domestic drivers of demand, we believe, are in place.

On external factors impacting growth

Right now, we expect the grand crisis to not become any worse. We expect that inflation globally will not go up again — it will stay at the same level. And last but not least, there has been no global crisis immediately after the Central government budget – like we had seen in the past in the form of Covid and geopolitical tensions.

Chances of 8% plus growth

I can say we should do 8% or 10% growth, but we should actually see ground level as well. In the past, we have grown at 6.6% for eight years (2012 to 2020). We don’t know if we can grow at 8-9% right now, but we believe 7.5% and above is something we can get to. You have the platform built, you have the transformation reforms done by the government, most of them have been fully done.

Scepticism around manufacturing growth

These are fair concerns, but I see manufacturing as an opportunity. If you look at the market per se, the domestic demand will mean that more and more people will come to invest in India. And as they invest here, these companies would also look at neighbouring countries (if not all over the world) as their possible export market. I am not calling this China plus one strategy because I don’t think we should look at it that way. India is standalone on its own.

Many technology companies are coming onboard, and someone like Apple coming here will mean that the opportunity for growth becomes significantly higher. I am not saying it will happen at great speed, but you will definitely see significant growth in manufacturing.

On PLI schemes

I think anything which supports immediate investments to take place in India is welcome. And therefore, PLI is one of the methods. It has been very clearly articulated that PLI is only a short-term measure. People invest in India for the market, because India is competitive. They are not coming in just because there’s a PLI scheme, but PLI helps them make up their mind faster.

On bilateral trade agreements

We want more FTAs to be signed. India’s industry has to be competitive. We are becoming more competitive with more investments in manufacturing and capacity building, it gives us an opportunity to be a good export destination.

Nothing is given without some giveaways (to countries we sign FTAs with). But that doesn’t mean that we are going to suffer from giving market access to those countries. Our experience with the UAE, for example, has been good. There may be some giveaways, but we believe it will benefit the Indian industry, it will benefit India’s competitiveness to grow, and it will improve India’s access to new technology.

On consumption and private investment

Both anecdotally and from data, I think, if you look at the last four or five months, almost all sectors — FMCG, automobile, etc – have been reporting good numbers on the back of good rural demand.

There is always a lag between, I would call it, comfort and consumption. Comfort, meaning I now have the ability to spend and I see no risk for me before I spend. I think that barrier seems to have been broken post-February. Private sector is now committing to invest, and they will not commit without consumption going up. The rate of growth of consumption may be slower, but obviously, they have export opportunities also, which they are tapping into.

On sustainability and Carbon tax

India has taken the lead. The Prime Minister has himself committed a date, and the whole world appreciates that we have gone ahead much faster than what we have committed to renewable energy. And again, that’s also another factor for growth. All of the capacity is coming into the country because we are now being able to crack the code of making it economically viable. I think we will have to continue doing what is right, get the necessary capital for it, but it should not affect our growth.

On carbon tax, I think they (European Union) announced that it will be introduced in 2026. The rules will be implemented from the 1st of October. What CII is saying is we will see how the rules are coming out, what impact they will have. 15% of our exports are to Europe, and it will not become zero (because of Carbon tax). Will it affect us? If nothing is done, it will affect us. I believe we will do something to make it better and easier and actually use it as an opportunity.