There should be continued public investment for inclusive growth: Sanjiv Puri

We are also seeing that manufacturing is taking off now. And we have seen some good outcomes in certain sectors—electronics, renewables, semiconductors, food processing, among others. There should be a focus on scaling up labour-intensive sectors, where the employment-to-capital ratio is much higher … So, the CII is recommending an employment-linked scheme with certain outcome metrics.

The third important area is investment in human capital development and social infrastructure … Data suggests that only 5 per cent of the people have gone through formal organised training. Many other countries are anywhere between 50 and 80 per cent. That is the kind of number we need to aspire to and the first target could be 25 per cent in the next few years … It is of course the responsibility of industry also to keep on collaborating and working in these areas.

While you are recommending higher public capex, the government has been saying that it is also now time for the private sector to scale up investments. There appears to be a tug of war of sorts.

I don’t think tug of war is the right phrase … the industry certainly also has a responsibility. The industry must invest and we will continue to invest. And I think the data speaks for itself. If you look at private sector investment as a percentage of the GDP, it has been growing and is much higher than what it was a few years ago. Of course, a lot more should be done … We must credit the government for putting in place the right enablers like (lowering) corporate income tax, improving the health of the financial sector, pushing ease of doing business, and launching PLI (production-linked incentives) schemes, among others.

What is the current state of rural consumption and demand according to you? Is it still a big concern?

The industry has been reporting that they are seeing green shoots of recovery. Monsoon forecasts are good, so it augurs well for farm incomes … The continued thrust on capex shall also provide jobs in rural areas. So, all of these augur well. And when we talk about consumption, let us also not forget that India is doing much better than many parts of the world (where consumption is still not back at pre-pandemic levels) … We should be reassured by the fact that India has recovered well after Covid and is on a growth path.

Do you think it is time for the government to seriously look at some sort of tax rationalisation and incentives to put more money in the hands of the people, particularly the lower income groups and the middle class, to push consumption?

For the lower end, whatever can be done will always be welcome. But I would put greater emphasis on measures that create jobs and also help in creating productive capacity and a virtuous cycle of investment and employment growth. To address some immediate requirements, I think the government has always been proactive through MNREGA and other avenues. Some income relief to the bottom is always welcome.

(For the middle class) the simple principle about more money in the hands of people is always useful. But at this point, we have a trinity of priorities—investment for inclusive growth, climate emergency, and fiscal consolidation. When we are looking at all the priorities, I would think that it would be better to first focus on those that are worst off.

While India is trying to get into global value chains, time and again goods exported by us are found lacking in terms of the acceptable standards in the developed world. How should the government and industry deal with it?

It will have to be a journey, a transition and it cannot happen overnight. Maybe there has to be a system of an additional layer of certification for the moment and over a period of time, everything can get merged into one (certification system). The transition map will have to be thought through. A lot of it has to do with the standards and the quality of the testing facilities that we have.

Inflation in certain sectors and segments has been rather sticky. What can be done to bring it down in the larger interest of the economy?

Because of the various global dynamics, the cost table itself has got impacted. Like fuel costs are mainly determined by global benchmark prices. But if you look at overall inflation, as far as India is concerned, the overall management is much superior to anywhere in the world. So, things are absolutely in the right direction.

The steps that have been taken in the past regarding reducing the oil intensity in the economy will further build resilience. Building resilience in the agri value chain will also help us deal with food inflation. In our recommendations, we have also mentioned the next generation of reforms—labour, power, agriculture … productivity can be enhanced in these sectors, cross-subsidisation can be gradually done away with, and all that will reduce the cost table. These have to be addressed structurally by making each sector more productive.

Among other things, the CII has listed climate action and energy transition as a key focus area. How should the government proceed on that front?

There should be sectoral roadmaps with just transition mechanisms because there are social angles to transition and decarbonisation. Policymakers and industry should collaborate on preparing those roadmaps…The right incentives and disincentives should be brought into the system, like having carbon markets and removing points of friction in regulations, so that private capital can be unlocked. And it can be unlocked only when friction is removed and economic returns are there.

Also, to deal with extreme weather events, adaptation by various sectors of the economy needs to be scaled up quickly. We have recommended the formation of a National Commission on Adaptation, and also a National Mission on Water Security…there can be no economic activity without water.

Carbon tax from the European Union and even from other developed economies will start hitting our industry by making our exports to these countries expensive. What is your perspective on the issue?

At one level, we have to question this issue about Indian industry or industry from outside financing the transition of the West. Any of these taxes should not be designed to create trade barriers. It should be done in a fashion that is just. One country is getting to net zero in 2040 or 2045. Another country is doing it in 2060 or 2070. So, the transition paths are different because of the stage of development and the emission intensity…Nonetheless, I think energy transition has to be accelerated in various sectors to become competitive. What is important is for every sector to have a very clear roadmap and the right incentives to make the investments viable, and also the availability of green funds so that the cost of capital for the industry is more reasonable. We also need to make new technologies on energy transition pathways accessible at scale.

What can the government and the industry do together to rapidly increase the number of skilled workers in the economy?

Skilling is an issue that requires attention. Obviously, Covid has had an impact. The question is how do we address it? We are saying that we need to make it more demand-driven with greater participation of industry, better collaboration between industry and training institutes so that programmes are aligned to requirements. We also believe it is now time for a universal labour management system, where there is an inventory and there is also a forecast of requirements in the economy … While a lot of work is being done by the industry also, we need to certainly scale that up.