An impetus to manufacturing and targeted interventions in labour-intensive sectors such as footwear, apparel, tourism, and furniture are required to take growth to the next level, Confederation of Indian Industry (CII) president Sanjiv Puri said. In an interview with Aggam Walia and Aanchal Magazine, Puri, who is chairman and managing director of ITC Ltd, also spoke about continuing government schemes for MSMEs which serve as a large employment base. Edited excerpts: India’s GDP growth is seen slowing to a four-year low of 6.4 per cent in FY25. It’s 6.4 (per cent) in a situation where the whole world is in stress. Of course, we would like to see it better but it’s still a decent number…the first half is 6 (per cent), second half is 6.7 (per cent). So it is showing that it will pick up. There were transient factors in the first half — the elections, weather etc. We must recognise that it is achieved in a situation where merchandise export is depressed, China has been dumping stock in the globe and in India also. We’ve also gone through a period where food inflation has been sticky, which impacts the capacity to spend. So, in this situation, the fact that we’re growing 6.4 per cent and 6.7 per cent in the second half, it kind of reinforces that we are on a strong foundation. Reinforces that policy interventions over several years have certainly helped to take us this far. We should really be discussing that having come so far, what needs to be done to go to the next level? 6.7 or 7 per cent to 7.5 per cent and 8 per cent. What measures can be taken for higher growth? There are several areas where there are opportunities to do things. After a long time, we have seen the resurgence in manufacturing. Certain sectors have really done well. Now, the question would be how can we take the learnings to some other sectors, particularly from an export perspective. How can we provide impetus to labour intensive sectors like footwear, apparel, tourism, furniture, and so on and so forth. Targeted interventions in each one of these sectors is what we’ve recommended. Second, MSMEs have a large employment base. What is it that can be done to take the MSMEs forward? We believe that the ECLGS (Emergency Credit Line Guarantee Scheme) has worked well, so that needs to be strengthened and continued. Second, the government has done a very good job in terms of digitisation of the economy and a lot of digital platforms are available for MSMEs, given that many of them have small establishments. So, can we look at a single platform? There are many right now, like Udyam, TReDS, GeM, and ONDC is also coming in. So, a seamless solution to all of them. Third, to provide impetus to manufacturing, how do we get more and more sectors to integrate with global value chains. A targeted approach with an integrated view as far as investments, trade, infrastructure, and skilling is concerned would be helpful. It would also mean that in these areas where impetus is being provided, the duty structure has to be aligned so that the cost of inputs do not make us uncompetitive. CII is suggesting that at some point in time, we should be looking at three tiers with very moderate rates in each one of them. Do you think the bigger corporates have somewhere failed in stepping up investment as much as it was required, especially on the back of corporate tax cuts? No, I don’t think so. As far as corporate investment is concerned, if you look at the period after the rate cut, it has been a very turbulent period. There was Covid, then there was a pickup, and then the global turmoil. Despite all these situations, private capex as a percentage of GDP in 2022-23 was higher than pre-Covid. It's materially higher than pre-Covid. Now, there might have been some transient factors in the recent past where certain activity slowed down. But if you look at it today, CMIE has said that the announcements of capex have seen a segment jump in Q2. There is also data to show that the order books of industries to do with plant and equipment of capital goods is also good. Third, 35 per cent of our members are saying they will be investing more this year, 45 per cent are saying they will be investing more next year. Now, what is coming in the way? One is this huge issue of China dumping. That does impact investment and two, the growth in consumption – ultimately capacity is invested to meet certain demands, so consumption impacts. And as the public capex on its own also crowds in private investment, that is also starting to pick up and will also provide some impetus going forward. Wage growth has been a concern lately. There was a recent FICCI-Quess study on stagnant growth in salaries between 2019 and 2023. I don't know what data was used there. I haven't read the report. There are specialised agencies that actually provide data on how wages are moving in industry. It's a fact that private sector companies do annual reviews to retain talent based on inflation and this is also based on data that the experts publish. So, wages do go up and it is not that when profits go down, wages go down. It doesn't happen that way. The velocity of increase may get a little moderated, but it still increases. To senior and mid-level people, where there is a component of variable pay, that will of course have its impact, but it's not that the wages go down per se. It's very important for companies because otherwise they will not be able to retain talent. I think the larger issue may be on disaggregating the data to figure out which sectors and so on and so forth. I don't have that kind of information. But from an economy perspective, the larger issue is how to create more good quality jobs and which are the sectors that can provide impetus to employment. You have stressed on the need to create good quality jobs. We have seen a rise in employment in agriculture, which is a reversal of the trend we were seeing earlier and not the ideal way of transition. What is urgently required for the creation of good quality jobs? As far as agriculture is concerned, it will always remain important. It's about 45 or 46 per cent of the workforce. Even if it goes down, it will still be substantial. We have to bring in agricultural reforms to improve farmer incomes. There's no doubt about it. There are good schemes that the government is pursuing with FPOs (farmers producer organisations) and bringing in technology into agriculture. The journey has to continue and we have to provide impetus to take it forward. Agriculture has to improve. As far as creating good jobs is concerned, providing impetus to labour intensive sectors, MSMEs, and integrating into global value chains – all these will create good quality jobs. The other opportunity we have in India is on the services side, which is really thriving, like GCCs (global capability centers) and IT. ‘Targeted interventions in labour-intensive sectors, MSMEs needed to take growth to the next level’ There's a lot of demographic dividend in rural areas given the better physical and digital connectivity. We can create integrated rural hubs, which have components of health care, skilling, education, career management, and so on and so forth. Some of it can be in public-private partnership. It can be around clusters of villages given that connectivity is better, you can travel to that place, do your training and go back. Because if a person has to come to the city, then there are a lot of expenses like lodging. Skilling and human capital development also becomes important to benefit from all of this. CII has emphasised the importance of increasing exports and becoming competitive. In some sectors, like textile, there is a concern that tariffs and quality control orders (QCOs) are restricting access to cheaper raw material and making exports uncompetitive. How do you see this issue? What we have suggested in CII is that, from a perspective of exports and integrating with global value chains, at a sectoral level we need to create an integrated trade, investment, infrastructure, and skilling policy. Once we look at it holistically, the optimal path will emerge. Some of these factors, whether it is tariffs or QCOs, of course they do have their short-term issues, but we need to take a broader view on how these sectors have to integrate with global value chains and stay consistent with that. There has been a realisation lately that some dependence on China is perhaps unavoidable to make domestic industry competitive. What do you think should be the approach towards China? We have to recognise that there is the need for efficiency in the industry. At the same time, there are certain larger strategic issues at a national level which also have to be cognized. We cannot disconnect the two. So within that, we have to have an approach that would definitely mean selective. Once we take that selective approach, and in that particular sector what is the best solution, whether it's collaboration or any other form, we have to pursue that. We will have to be very clear, we cannot completely ignore these larger strategic issues, but at the same time we cannot just decouple.
