Sanjiv Puri, Chairman and Managing Director, ITC Ltd, and President of CII, addresses a press conference, in New Delhi on June 13, 2024.
| Photo Credit: ANI

Industry body CII on Thursday made a case for pushing reforms in sectors like land, labour, and agriculture by the Modi 3.0 government to accelerate economic growth estimated to be around 8% in FY25.

CII President Sanjiv Puri said several policy interventions in the past put the economy on “a much stronger wicket”.

“The growth rate is poised to touch 8% during the current year, marking the fourth consecutive year of above 7% growth.

“The growth estimate hinges critically on addressing unfinished reform agenda on priority, in addition to improvement in world trade prospects aiding our exports, twin engines of investment and consumption doing well and expectations of a normal monsoon among other factors,” Mr. Puri added.

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Expressing optimism regarding the economy’s performance, he said, “Very clearly, we are expecting all three sectors of the economy – agriculture, services and industry – to fire and do well next year.” Mr. Puri added that CII expects inflation to be between 4-4.5% in FY25.

Addressing his first press conference after becoming CII President, Mr. Puri, Chairman & MD, ITC Ltd, said private sector investment, which has been an area of concern, was robust and broad-based across sectors.

“Private sector investment has been an area of concern sometime back, but the good news today is that it is in the right trajectory… it is robust. It had dropped to 20.7% of GDP and it is now at 23.8%, which is more than the pre-Covid levels,” Mr. Puri said.

About the outlook for rural consumption, Puri said, “We certainly see green shoots of pick up in rural (demand)… the expectation for a good monsoon and better crop yields leading to improved realisations that augurs well for the rural economy.”

The industry body has also suggested rationalisation of rates with three slabs and inclusion of sectors like petroleum and real estate that are presently out of its ambit, besides infrastructure status for the hospitality sector.

“As far as GST is concerned, what we are saying there can be three slabs and there are areas like petroleum real estate that are outside the ambit… be included in the GST,” Mr. Puri said.

On reforms related to land, he said CII suggests a moderation in stamp duty to lower the cost of acquisition for economic activity and improvement in efficiency with measures like setting up of a state-level land authority and digitisation of the procedures.

Mr. Puri outlined a 14-point agenda for the new government for driving the next phase of economic transformation.

Many of the next generation reforms lie in the state and concurrent domains and require tough consensus building to take them forward, he said, adding that the inter-state institutional platforms on the lines of GST councils can be created.

Employment-linked incentive (ELI) schemes with appropriate outcome indicators can be launched for labour-intensive sectors with high growth potential such as toys, textiles and 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, Mr. Puri said.

“Priority should be given to further easing the regulatory and compliance burden through simplification, rationalisation and decriminalisation of regulatory approvals and compliances, time-bound clearances using the National Single Window System, strengthening alternate dispute redressal system and adoption self-declaration/third party certification and deemed approvals, wherever feasible,” it stated.

It also recommended interventions in the areas of land, power and logistics to reduce the cost of doing business.

CII also pitched for tax reforms to continue to help boost the investment climate. On direct taxes, the government may consider laying down a roadmap for rationalising and simplifying the capital gains tax and the TDS provisions, the CII chairman added.

Former president Ram Nath Kovind, chairperson of the High Level Committee (HLC) on One Nation One Election, being greeted by a delegation of Confederation of Indian Industry (CII) before the fifth meeting of the committee, in Jodhpur, on Feb. 3, 2024.
| Photo Credit: PTI

Expressing its support to simultaneous elections that would synchronize the electoral cycles at the central and state levels, industry body CII said ‘One Nation One Election’ would enhance governance efficiency, and foster economic development.

The Confederation of Indian Industry (CII) presented its views to the High-Level Committee on One Nation One Election (ONOE) on Friday. The High Level Committee on One Nation One Election, chaired by former President Ram Nath Kovind held its fifth meeting.

“CII’s view was based on the economic benefits of streamlining the electoral process, that would enhance governance efficiency, and foster economic development,” the industry body stated.

It argued that asynchronous multiple elections lead to frequent disruption in policy making and administration, leading to uncertainty about the government’s policies.

“It also affects the working of the Government due to its officials being roped in for election duties. Investment decisions by the private sector tend to slow down prior to the elections,” said CII.

“Further, it leads to delays in project implementation, as the Model Code of Conduct gets imposed,” it added.

The industry body emphasised that simultaneous elections, thus, offer a propitious solution by effectively reducing the project implementation delays and a likely cost savings of approximately half the total expenses incurred by the Central and State governments in administering elections.

Chandrajit Banerjee, Director General, CII, said, “In view of both the economic losses and the slowdown in policy-making CII suggests that India should revert to cycle of simultaneous elections.”

“CII believes there are two options of doing this ‘one is a single five-year cycle and the other is a two-stage simultaneous election with a gap of at least 2.5 years between the Lok Sabha elections and the state elections in the interim period”.

Chandrajit Banerjee. Photo: Special Arrangement

The first Budget of the Amrit Kaal [golden age] made a visionary and bold statement for bolstering the near-term and medium-term growth potential of the economy. The Finance Minister deserves compliments for delivering a sagacious Budget which had the right ingredients for strengthening the domestic demand drivers in the near term, without compromising on the fiscal prudence path. The Budget did well to lay down an ambitious road map for guiding India’s growth in the Amrit Kaal period through its focus on inclusive development, prioritising green growth, urban upgradation, strengthening financial sector prowess and digital infrastructure.

With the headwinds facing global growth this year, it was imperative to give both consumption and investment the requisite boost to support growth. The Budget did not disappoint on this front.

One of the key highlights of the Budget was the continued improvement in quality of expenditure led by a thrust on capital spending for the third year in a row. The sharp 33% rise in capital spending budgeted for 2023-24 is in line with CII’s suggestion and lends credence to government’s vision of improving the economy’s growth potential through a push to overall productivity of the economy and creation of jobs. Indeed, this implies that share of capital spending in total expenditure will rise to 22.2% as compared to an average of 13.3% in the pre-pandemic period. It is notable to mention here that the meteoric 71% rise in railway outlay budgeted in 2023-24 is also likely to augment the capex rise.

In line with CII recommendation, the continuation of the performance driven ₹1 lakh crore interest-free loans scheme for State capex in the next fiscal is a welcome move and will pave the way for greater participation of States in the nation-building process.

At a time when there are incipient signs of recovery in private investments, higher public capital expenditure was crucial to crowd in private investments and catalyse a more broad-based recovery in private investments. It is notable to mention here that the capex thrust of the government over the last few years has been visionary, with its capex spending to GDP ratio leapfrogging to 3.3% in 2023-24 from long-term average of 1.7 per cent of GDP (2008-09 to 2019-20).

The other critical growth driver apart from investment which has got support in the Budget is consumption. It is well known that consumption demand remains one of the highest contributors to India’s GDP at around 60% and thus is critical for economic recovery as we emerge from the challenges posed by the global uncertainties. High frequency data suggest that consumption demand has started to recover mainly on release of pent-up demand. However, with the pent-up release of demand likely to have a finite life, the support to consumption extended through rationalisation of personal tax rates will go a long way in increasing disposable income of the common man and is indeed a welcome move.

The rise in capex is expected to be supported by trimming of the huge subsidy bill which is budgeted to come down by over 28% coupled with a healthy 22% growth in gross tax revenue in the next fiscal. This has helped the government to balance the spending needs for supporting growth and the need for fiscal stability very well. CII has been suggesting a gradual glide path for fiscal consolidation, to not stifle growth impulses and preserving macroeconomic stability. Thus, the paring of the fiscal deficit to 5.9% of GDP for 2023-24 from 6.4% of GDP in 2022-23 and following of a glide path to bring it down below 4.5% by 2025-26, is a prudent move in line with CII suggestions. Fiscal discipline translates into fiscal stimulus for all sections of the economy through lower interest rates.

Further, the Budget laid down a strong agenda for boosting the rural economy, which is home to two-thirds of population, and is looking for steps to improve incomes and push demand. In this regard, the move to set up Digital Public Infrastructure for agriculture which will enable inclusive farmer-centric solutions through relevant information services for crop planning, access to farm inputs, credit and insurance is a welcome step. It will increase efficiency gains in agriculture, thus improving farmer incomes.

In addition, the slew of measures to improve the ease of doing business through reduction in compliances, adopting PAN as a single business identifier, and introduction of Digi Locker are noteworthy. They will go a long way in improving the overall competitiveness of the Indian economy.

Overall, through a wide-ranging array of landmark policy measures, the Union Budget 2023-24 has retained its focus on growth, while maintaining fiscal discipline. While cushioning the growth recovery over the immediate time horizon, the measures are also expected to lay a solid foundation for charting economy’s ascent over the next 25 years.

Chandrajit Banerjee is Director General, Confederation of Indian Industry