Rajiv Memani at Idea Exchange: ‘In the new global order, economic strength and resilience matter. India should focus on building that’
A seasoned and leading voice from the Indian industry, Rajiv Memani, Chairman and CEO - EY India, is currently the face of India Inc as the President of the Confederation of Indian Industry.
Rajiv Memani, Chairman- India region Ernst & Young at the Idea Exchange on Thursday. (Express Photo by Tashi Tobgyal)
Rajiv Memani, Chairman and CEO – EY India, and President of the Confederation of Indian Industry (CII), on seeing opportunities in the US tariffs, why business with China is important and the areas we need to work on to become a global economic force. The session was moderated by Sukalp Sharma, Deputy Associate Editor, The Indian Express.
Sukalp Sharma: How concerned is the industry about US tariffs? How would you rate the Indian government’s response so far?
There is a concern in the industry, definitely, because India and the US have enjoyed a strong, bilateral economic relationship. There are companies that were exporting substantially to the US and some were labour-intensive. But, I believe that the noise around it is probably disproportionate to the economic impact. The industry, by and large, feels that it is something that shouldn’t have happened. But, at the same time, there is a large section which sees this as an opportunity for India to look at the next generation of changes. What can we do to enhance India’s competitiveness, for instance? A lot of these changes are not easy because they involve various ministries and states. At least this is something that will give the government, the industry and the stakeholders an impetus to create greater economic opportunities in India. As for the government’s response, India has been measured in its response. The behaviour of Indian political leadership is what one would expect from one of the largest democracies in the world. It’s very important that India maintains its stature of being free, fair and independent in its thought process.
Sukalp Sharma: Given how the Trump administration seems to have thrown the conventional diplomatic playbook out the window, what can the government and the industry do to mitigate this crisis?
Whatever has to be done is being done. From India’s side, it’s business as usual. What’s become clear is that economic size is important, but equally important is what your vulnerabilities are. How India addresses that, be it in terms of supply chain, creating diversified markets, building the strength and competitiveness of its own economy — India needs to address these with greater vigour.
On Tariff Mitigation | What’s clear is that economic size is important but so are your vulnerabilities. How India addresses that, be it creating diversified markets or building its competitiveness, is what matters
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Sukalp Sharma: What consultations has the CII had with the government on US tariff impact, particularly for sectors that are most affected?
You can break the engagement into two parts — sectors which are impacted and those outside of these sectors. The government, led by the Prime Minister himself, is keen to use this as an opportunity to bring in changes which should have happened earlier. On the first one (sectors impacted), I would say that the delta is so high that any normal relief measure honestly won’t work. Similar to what happened during Covid, we have sought specific relief. Payment of outstanding dues by various PSUs and other government agencies can be accelerated so that working capital blockages can be taken care of. Issues around inverted duty structures should be addressed. Obviously, there has been an ask to provide a direct, straight subsidy for some sectors. But you also have to engage with the government in areas where they are more receptive to change. Then I would think, solvency. The general belief is that this too shall pass, it’s unsustainable to have this kind of tariffs. It’s very important that organisations remain solvent. So, whatever can enable that, especially for MSMEs. The second is that the government is also working with the industry to see how we can diversify markets — building new relationships, accelerating the trade agreement with the EU and accelerating the implementation of trade pacts signed with the UK. Around these areas, we will probably see greater activity.
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Anil Sasi: Large industrial houses have lobbied and got certain things done, QCOs (Quality Control Orders) for instance. The problem with these tariffs is that it seems to be hurting smaller exporters than bigger companies.
I don’t think QCOs is a big versus small debate. QCOs basically came into being when MSMEs went to the government to say that they have been rendered uncompetitive because of cheap, substandard material coming from different parts of the world into India. The challenge later on was that QCO was imposed on products where maybe India either did not have adequate production capacity or, in many cases, zero production capacity. That created challenges for MSMEs and larger companies because neither could they import or if they imported, they had to import from destinations where it was very expensive. That is something that has been presented to the government to say that when they look at QCOs, they should do an economic impact assessment to say it should only be applied where it doesn’t impact the overall manufacturing of the finished products. Now the government has set up inter-ministerial committees, so the QCOs will go through a more detailed review.
On the US Tariffs | The industry, by and large, feels that it is something that shouldn’t have happened. But, at the same time, there is a large section which sees this as an opportunity for India to look at the next generation of changes
Anil Sasi: What kind of an opportunity do we have at this point to look at branding Indian products and services. A lot of our products are back-end, non-branded. Is that a constraint?
Absolutely. There are two-three elements to it. First, Indian corporates have massively underinvested in R&D. If you look at the percentages, it’s 0.6-0.7 per cent (of GDP). And if you were to compare that with averages around the world, that number is 3-4 per cent. You also have to facilitate industry-academia partnerships, which is also not happening as effectively as it is overseas. The third is tourism. It’s for both the industry and the government to ask, what does brand India stand for? If you are saying we are the fifth-largest economy in the world, the number of global brands that we have which are respected or accepted outside is far less.
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Harikishan Sharma: Can you help us understand the much-needed reforms in the agriculture sector? What should the government bring in, for short and medium term?
I think that the Bills (2020 farm laws that were repealed after farmers’ protests) had some very positive changes. Unfortunately, the government tried to push it but it could not get through. That has put us back. The government is looking at how to strengthen FPOs (Farmer Producer Organisations) in terms of procurement, technology and enablement. The second is fertilisers. India’s imports of fertiliser are continuing to grow. So how can we get greater manufacturing in India? What are the things that we can do to ensure direct subsidies to farmers, give them the choice whether they want urea or NPK (nitrogen, phosphorus, potassium) and also encourage usage of other fertilisers. The third area is the availability of a digital stack where farmers get data on monsoons, weather conditions and soil usage that they can access locally and freely.
Rajiv Memani, Chairman and CEO – EY India, and President, CII
Siddharth Upasani: Could the government and industry have predicted the global volatility given what had happened in the first Trump administration, when the focus was on China? Second, the GST reforms have led to fears of fiscal slippage, banks have started increasing lending rates. Does the RBI need to do more to ease financial conditions?
In the earlier Trump administration, the relationship between both sides was strong. It’s not only about leadership but a strategic partnership. If you look at various comments that former President (Joe) Biden made, it talked about being the most significant relationship of this century. So, I won’t blame the government for not having foreseen this.
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Everyone understands the US concern that you have a mounting trade deficit. Everyone understood that issue and everyone was trying to see how to figure that out. The US and other markets have been wanting to build more supply chains within. But still, one felt there was enough playing space within that for countries like India. Things will play out as they will but sometimes these events also create opportunities. Our focus has to be much more on trying to say what are the reforms? How do you galvanise industry? How do you attract FDI? That has to be the focus then the economic momentum will catch up. It is now clear in the new global order that global economic strength and economic resilience matter. India should be focused on building that.
I personally don’t feel that its (GST reforms) impact on tax collection overall will be that significant. GST rate rationalisation is expected to put $10 billion-$12 billion in the hands of the Indian consumers on an annualised basis. This is positive for the Indian economy and may lead to 0.5 per cent (higher) economic growth on an annualised basis.
The RBI is very aware of what’s happening. Right now, they will ensure that transmission impact is happening and credit availability is there. Again, there are various schemes that the government has launched, particularly to support MSMEs. That has started playing out and is getting more capital in the banking system. We’ll have to see how inflation behaves.
India’s Future | For India to become economically strong, the bottom 30 per cent has to grow. The industry has to address it, be it through skilling, minimum wages or creating opportunities
Prasanta Sahu: We have seen that the countries with which India has FTAs, the industry has not been able to take full advantage of it. Why is that and what are industry bodies like CII doing to disseminate information to smaller units? Also, there are concerns over whether the industry will pass on the GST benefit to the consumers. What can CII do about this?
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The FTAs that have happened recently, particularly, when you look at the UK, Australia and others, we feel reasonably positive. And what CII has been doing is, one, taking delegations to the respective countries to see how these trade relationships happen. And also, through our various regions, talking about what each of the FTAs are doing. CII in partnership with the Ministry of Commerce are doing a lot of these sessions. On GST, I think that’s a genuine concern. We will ensure that this benefit is passed on. What CII has realised is that trust is very important. If you are looking at long-term success for the country, for business, trust within the industry and trust between industry and government and stakeholders is very important.
(Right) Rajiv Memani, Chairman and CEO – EY India, and President, CII, with Sukalp Sharma, Deputy Associate Editor, The Indian Express at the Noida office. (Express photo by Tashi Tobgyal)
Sukalp Sharma: The government has voiced a concern about private capex not picking up enough, while it is doing all the heavy lifting. Could the GST rate rationalisation lead to a pickup in private sector investment?
Yes, I think so. Definitely capacity utilisation should get better and that will increase capex. Having said that, there are two-three things. One, there is no concrete number to suggest that private capex slowed down. So, if you look at an ICICI Securities report of all listed companies in India and their balance sheets, private capex in 2024-25 had grown by almost 20 per cent or so to Rs 11 trillion. So, I would say that it is not that private capex is not happening. I definitely do foresee that because of the volatility and the distraction that is there in business right now, some of it may slow down. But we must do the things that we are talking about in terms of reforms and ease of doing business.
Today, if you start a project, it takes you six to nine months to get a piece of land, then six months to get environmental clearances, then three months to get forest clearances. Then, getting NOCs. Or, if you want to build a hospital, you have to get 70 approvals, for a hotel, 50 approvals. If some of them can be crunched up, it would get the capex momentum going.
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Private capex has been happening, the potential to do more is much greater, GST is one leg of the stool, it will definitely enable better capacity utilisation, greater sales and, therefore, greater economic impetus to do it. But equally important are the other factors that need to be simplified. For instance, in terms of the number of audits that are done, the manner in which they are done and how you deal with decriminalisation. If there is a mistake of Rs 1 crore in some computational error, you can have prosecution for a year and if it is Rs 5 crore, you can have prosecution for three years. These are things where we should just have compounding.
Aggam Walia: Because of tensions with the US, India is sort of cosying up to the Chinese. Does the industry have an independent view on how India should deal with China?
One area where industry is very keen that India engages with China is to look at building the supply chain for manufacturing in areas such as EVs, electronics and components. For instance, with the new component policy that’s come out, for India to get technology and capital goods it’s very important that we have partnerships and joint ventures with Chinese companies.
So, by and large, Indian industry is keen that those joint ventures, technology tie-ups, visas, and freedom to travel are maintained. At the same time, India has a large trade deficit with China. That’s because India is exporting electronics in a significant way and a lot of the components are now imported from China and other places. But you want to ensure that if there is dumping, there are anti-dumping agencies and if you have minimum protection agreements, those protections are there. You also want to encourage manufacturing, technology transfer and capital equipment purchases because a lot of items that India wants come from China. The Indian industry is very keen that the government has a more proactive stance and a more clearly laid out policy which is unambiguous in the way we interact with China.
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P Vaidyanathan Iyer: The industry hasn’t quite kept pace on the employee income front. While profits have risen 4x in the last four years, wage growth has been in single digits. Could India Inc do better? This could help boost consumption and economic growth.
I have two or three different strands of responses. First, for India to grow and become economically strong, the bottom 30 per cent has to grow. The industry has to address it, whatever it takes to be competitive, be it through skilling, what the minimum wages should be, how we create opportunities. There are different ways to address it.
Second, to compare profit growth and wage growth is like comparing apples and oranges. For instance, you could have a bank which has had a profit growth of 30 per cent, but you cannot have wage growth of 30 per cent. And in some years, you would have negative growth. It doesn’t mean that the wage growth will be negative. We had a very strong, secular growth post-Covid. I think what it should translate into is greater economic activity, greater opportunities and, therefore, greater competitiveness for talent.
The third thing is you have AI coming in a big way and there is tremendous pressure on competitiveness. So, if you combine all these forces, it won’t be easy to say that ‘just pump-up wage growth’ because then you could have issues with competitiveness. Also, in many ways, faster displacement using technology will happen, it’s a matter of time. The bigger challenge and opportunity for India (more than US tariffs) is actually technology and AI.
Sukalp Sharma is a Senior Assistant Editor with The Indian Express and writes on a host of subjects and sectors, notably energy and aviation. He has over 13 years of experience in journalism with a body of work spanning areas like politics, development, equity markets, corporates, trade, and economic policy. He considers himself an above-average photographer, which goes well with his love for travel. ... Read More
