Raise capital expenditure by 25%; focus on education: CII

“What we are strongly advocating is another 25 per cent increase in capex over last year. It is sitting at about 16.8 per cent in the interim budget, but we believe 25 per cent will provide a good boost to the economy and this kind of investment is also required to strengthen competitiveness. There have been some additional revenue flows through RBI. So, that has provided some opportunity to increase spending in certain areas,” Puri said.

India’s capital expenditure as per revised estimates stood at Rs 9.49 lakh crore for 2023-24. India had raised capex by 42 per cent in FY22 and 24 per cent in FY23.

Puri also highlighted that the issues of trade, investment and industrial policies need to be thought through synergistically as India is trying to integrate more with global value chains. Global value chains make up for over 70 per cent of the global trade, he highlighted.

“There are many interrelated issues. There are requirements for trade and standards domestically. We need to look at how to harmonise all of these things seamlessly so that it enables the country to enhance investment and have greater participation in global value chains,” Puri said.

He further stressed on the need for investment to bridge the skill gap in the country by increasing investment in education.

“CII recommends that over a period of time the public expenditure on education should be brought to 6 per cent. A lot more focus on early learning should be given …skilling is an extremely important area for human capital development. Today, unlike various developed countries suggests that our number of formally skilled people is about 5 per cent. And it varies from about 52 per cent in the US, to 80 per cent in Japan. So the intensity of formal skilling as per the reported numbers is much lower. So, this needs to be taken up to 25 per cent to provide the resources for growth manufacturing,” Puri said.

He further suggested that Employment Linked Incentive (ELI) schemes with appropriate outcome indicators can be launched for labour intensive sectors with high growth potential such as toys, textiles & apparels, woods based industries, tourism, logistics among others.

“The ELI scheme can also address the low female participation rate by giving a higher incentive for hiring of female labour. Besides, an International Mobility Authority should be set up to track employment opportunities in other countries and facilitate Indian youth to benefit from these opportunities,” CII said in a note.

On the financial sector, CII said that India’s financial sector stands robust but the sector needs to expand rapidly to be able to support the funding needs of a rapidly growing economy.

“Measures such as implementing the decision to privatize two public sector banks; diversifying sources of funding for NBFCs to help them to expand their reach; reviewing the priority sector lending framework every 3-4 years; making available long term patient capital from insurance and pension funds for infrastructure projects are important to finance India’s growth journey,” CII said.

On indirect taxes, the next set of GST reforms such as bringing GST under the three-rate structure with moderation of rates and bringing petroleum products, electricity, and real estate under GST should be expedited in consultation with the GST Council. Further, to facilitate India’s engagement with the GVCs, a three-tier import duty structure should be considered, with raw materials at the lowest rate followed by intermediates and then the finished goods, CII further added.