Strong action to spur consumption, investments and net exports will take GDP growth rates much higher, according to Mr. Vikram Kirloskar, President, Confederation of Indian Industry (CII) and Chairman and MD, Kirloskar Systems Ltd and Vice Chairman, Toyota Kirloskar. The CII President was addressing his first press conference after assuming office.
“This is the right time for India to think big and envision GDP growth rate of 10% to greatly improve development outcomes. With a landslide electoral victory and new Council of Ministers in place, we expect the Government to engage strongly with industry to ideate and implement impactful policy solutions for double-digit growth,” stressed Mr. Kirloskar.
He added, “Given recent data releases, CII is according high attention to four key issues of energizing growth, generating new jobs, deepening India’s overseas footprint, and energy security. CII is focussing on strengthening the Indian industry’s role in policy solutions as well as targeted action initiatives under the theme of Competitiveness of India Inc: [email protected] – Forging Ahead.”
With GDP growth moderating in the last quarter, the CII President emphasized four key drivers for reinvigorating the growth rate, namely boosting consumption, investments, public expenditure on social and physical infrastructure and net exports.
Consumption will be greatly encouraged by reducing the personal income tax burden, adding more disposable income for consumers, noted Mr. Kirloskar.
“As the Government has greatly improved ease of doing business, it must now focus on significantly slashing the cost of doing business. Mega connectivity and storage projects are required across the country for lowering logistics costs which render Indian goods uncompetitive,” he stated. The required policy actions include cutting interest rates, rationalising taxes on equity capital, addressing delayed payments from the public sector, and improving logistics.
CII has submitted policy inputs to the Government for the upcoming Budget which include measures such as cutting corporate income taxes to 25% for all companies and progressively lowering the rate further to 18% without exemptions. It has also called for removing Minimum Alternate Tax and cutting Dividend Distribution Tax in its pre-Budget submissions.
The CII President requested the Government to maintain high public outlay on infrastructure such as electricity, roads and highways, telecommunication and other transport as the next growth driver. CII estimates that $1 trillion is required for infrastructure in the next 5 years.
In his press conference, the CII President suggested a triple-pronged approach for job creation, relating to employment intensive sectors, skilling, and labour reforms for enterprise creation. He placed a strong emphasis on accelerating growth in job-creating sectors such as construction, hospitality, logistics, healthcare, and the financial sector, among others. According to CII, construction and healthcare alone can create 20 million jobs in the next 5 years.
“Creating manufacturing jobs at scale can be done by facilitating enterprise creation and undertaking labour law reforms along with social security measures. Industry-led skilling through skill vouchers, incentivising new hiring of certified workers, and vocational education at school level will raise skill levels,” added Mr. Kirloskar.
CII has a strong agenda for skilling and connecting youth to jobs through Multi-skill Centers, apprenticeship initiatives, and Model Career Centers, among other programs. These efforts reach out to 1 million youth each year and CII plans to multiply this to impact 10 million youth.
Foreign trade and investment
As global trade dynamics are rapidly transforming and global value chains are shifting, India has the opportunity to capture a larger share of the world goods and services market. Boosting net exports and enhancing overseas investments is imperative for the nation at the current juncture. India should target merchandise exports of $400 billion for 2019-20 from $331 billion now, stated Mr. Kirloskar.
“We need to find alternative schemes compatible with WTO to support exporters. While there has been a considerable improvement in overall ease of doing business, trade facilitation must ensure seamless connectivity to external markets. Trade financing too needs immediate attention of the Government as only 1% of total commercial banks’ lending goes towards trade financing,” said the CII President.
The Government has identified 12 champion services sectors for export promotion which require tailored policies for addressing domestic and external impediments. Similarly, transfer pricing policies and faster procedures can improve the climate for multinational companies investing in India.
On free trade agreements, Mr. Kirloskar noted that a better strategy should be in place to leverage their benefits as these have not resulted in significant export outcomes. He suggested fast-tracking FTA negotiations with the EU. The new trade policy should support FDI for better integration into global value chains, said the CII press release.
CII has shared a compendium on trade facilitation with the Government and would continue to work on the 12 champion service sectors. It has also launched a comprehensive study on FTAs to articulate the country’s offensive and defensive FTA interests.
Promoting sustainable transportation solutions
Sustainable mobility is key to addressing climate change, where India has taken a global lead.
“It is important for the Government to lay down a roadmap for the transition towards electrification of the transport system while ensuring continuity and certainty of FAME 2 and providing freedom to industry to ensure this change. In addition, Government policy needs to be technology agnostic towards all green technologies,” stressed Mr. Kirloskar.
CII’s policy recommendations for reducing carbon emissions and oil dependency in the transport sector include supportive green technology policy, developing infrastructure for electric vehicles such as charging and batteries, and integrating e-mobility with renewable energy.