India Inc Needs Capex Growth

India’s future growth would depend exclusively on the private sector’s ability to expand capacity through infusion of capital expenditure just as the government did with investing in infrastructure growth over the past decade. This was the unanimous view of industry leaders and policymakers who attended an event late last week. 

In addition to expanding capital investments, India should aim to leverage its demographic dividend as the world’s most populous country, said the leaders who gathered at the Economic Times Awards for Corporate Excellence 2022 on Friday last. While India leads the services industry, a growth in manufacturing is what would lead it long-term growth prospects. 

Job creation through capex building  

If the country has to attain growth rates of 8% on a sustained basis, there needs to be massive job creation in the economy so that more and more people find gainful employment and leads to better farm sector output through mechanization and improved returns on investment from agriculture through food processing growth, they said. 

The event, conducted in Mumbai, also saw a renewed call from the participants to bring more women into the larger workforce while also extending investments into research and development. All of these alone could help India achieve its goal of becoming a $5 trillion economy in the near future. 

Among the leaders present at the event included Niti Aayog head Amitabh Kant, Apollo Hospitals vice-chairperson Preetha Reddy, Kotak Mahindra Bank chief executive Uday Kotak, Hindustan Unilever managing director Sanjiv Mehta and JSW Group chairman Sajjan Jindal. 

It’s time to match words with deeds

Representing the government perspective, Amitabh Kant exhorted the private sector to match their words with deeds by investing in capacity building that they have spoken of for more than two years now. “It is time we actually did it as in the past few years only a handful of groups have made substantial investments,” he said. 

It was obvious that Kant was referring to the tax rebates that industry has claimed from the government for making such investments without actually doing so. Uday Kotak took up the challenge and urged the government to not go back to a high tax regime but said the private sector would match their words with deeds soon enough.

Boost exports and Rupee-based trade

Echoing the sentiments, HUL’s Mehta said risk appetite at the private sector hadn’t diminished and reminded those present that India cannot afford to slip back into an era of reckless lending and investments. “For India to grow at over 8% and beyond, both the services industry as well as the manufacturing sector have to fire in unison,” he said. 

Agreeing with the sentiment of the government that the manufacturing industry must account for at least a quarter of India’s GDP for better job creation and exports, JSW Group’s Jindal said the world over governments are seeking to promote local industry and manufacturing as they realize the effects of outsourcing this economic advantage to China. 

While Jindal appreciated the production-linked incentive scheme to push local output with an export-oriented focus, Kotak highlighted the risk of an over-dependence on the dollar. He said the power of reserve currency at this juncture in world history isn’t justified and the world must seek an alternative reserve currency soon. 

Most speakers agreed that India could offer an alternative in this regard, given a disunited Europe and the trust issues that others may have with China. “It is our chance. If we can build our institutions in the next 10 years, we can take a shot at becoming the reserve currency of the world,” Kotak concluded.