CII president and ITC CMD Sanjiv Puri is arguing for tax cuts, reduction in fuel cost and interest rates, along with raising govt capex by 25% to help revive consumption demand, while proposing a three-tier customs and GST structure. Excerpts from an interview to TOI.
How is FMCG looking and do you see signs of major slowdown in consumption?
Growth is lower, which is also evident from company results that have come out so far. Going forward, with better monsoon and produce, agriculture has done better. Food inflation has been sticky, and if that moderates, it will help consumers. As public capex is picking up, it will also help consumption. We expect an interest rate cut in the near future, which will provide relief because lower EMIs will leave more money in people’s pockets. Rural consumption is moving upward, urban is flattish.
In terms of supply chain issues, how much of that is a bottleneck for growth and as well as inflation?
Agriculture has about nearly half of the workforce in India. When incomes improve in that value chain it can have a material impact on the growth in consumption. Consumption is the biggest piece of the Indian economy. Reform in that sector is extremely critical. We have suggested next generation reforms, which involve the states significantly. We have suggested some institutional mechanism be created to build consensus, on labour, agriculture, land and power. Specifically on agriculture, there have been good policy interventions around farmer collectives, the thrust on technology and digitisation. We need to strengthen it and accelerate that. At the same time, it’s a sector that is very vulnerable to weather shocks. We should set up a national commission on adaptation and agriculture resilience.
President Donald Trump has vowed to impose tariffs on China and other countries including India…
The global situation as far as geopolitics, geo economics is concerned, has been volatile. Uncertainty is going to remain. So, what happens in this specific case, we will only get to know at that time. What is it that we need to do in that situation? Remember, in this whole dynamics today, this issue about supply chain diversification and supply chain realignment and supply chain resilience are very important sectors across the world. Second, the world is going through an energy transition. Climate change is a big topic. Third, the world is going through digital transformation. Fourth, the world is facing demographic challenges. Fifth, the whole world is facing food and nutrition problems. Security is becoming a challenge. While there is uncertainty and volatility, if you look at it from a window of these larger opportunities and what we need to do throws up many possibilities. There’s no doubt that many purposeful policy actions have happened in the past. When the world is seeing so many challenges, our macros are strong, we’re talking about 6.4% growth despite transitory factors. We need to build on that and take care of these global opportunities.
We need the thrust on public capex. We are recommending a 25% increase within the fiscal glide path. We are also suggesting a progressive divestment of public enterprises. First it can be up to 75%, then 51% .
Why is private investment not happening at scale in a growing economy?
The last full year data available is 23.8% in 2023, higher than pre Covid levels. The capital goods industry is saying its order books are in good shape. An internal CII survey shows that about 35% of people say that this year they are investing more. Next year, 45% expect to invest more. So directionally, it’s in the right path. The question is how to make it more? It ultimately comes down to the demand because you can even make that investment. But ultimately, unless you use the capacity, the economic impact is not great. Idle capacity does nothing.
