Private investments flat, but pickup in demand seen: CII Chief Rajiv Memani

New Delhi: Private investment stayed flat in the last three-six months as companies are finding it challenging to envisage manufacturing amid an uncertain tariff structure, though it is currently seeing a revival in line with an improvement in the demand environment, said Rajiv Memani, president, Confederation of Indian Industry (CII).

"I won't say it has gone down, but it is kind of flat in the last three to six months. But we can see an acceleration happening as the demand environment picks up especially with the interest rate reduction," Memani told ET, adding that land and environment approvals should also be expedited.

Private firms announced new projects worth ₹3.5 lakh crore in the quarter ended June, sharply rising from ₹1.4 lakh crore a year earlier, according to the Centre for Monitoring Indian Economy. However, it was the lowest level of private investments in four quarters. On urban consumption, Memani said there is some slowdown, especially in the lower-to-middle-income category.


FTA, investment
He noted that India previously used to take a long time for inking free trade agreements (FTA) with the West. That scenario has changed, with all nations including India presently evaluating trade pacts with trusted partners.

"I think it's a positive change, but it is a big change. We are signing up with large countries where we have complementarity of relationships...not with countries we are competing with," said Memani, adding such pacts also create a bigger market opportunity besides generating interest from micro, small and medium enterprises.

On issues that India should be wary of while negotiating FTAs with developed countries, he said, "You have to be trusting and verifying everything...let's go in step by step rather than trying to boil the ocean in one go."

Insisting that India has to create efficiency by unleashing further reforms on land, logistics, energy, and labour productivity, even at the state level, he also called for more investments in R&D. "We need to act with more speed and look at either reforms and allocations towards R&D and also some of the production linked incentive (PLI) schemes or schemes like PLI which require some initial support," Memani said.

Shocks, Foxconn
On how the industry is preparing to deal with shocks such as China suspending rare earth exports, he said companies are reducing their financial risks, taking lesser debt, and relying more on equity.

The industry chamber is assessing the extent of India's reliance on global supply chains. Citing the instance of compressors, Memani said the critical parts are imported and that CII is engaging with the government on ways to address the issue and areas where PLI support is needed.

China has recently recalled its engineers and technicians from the Indian factories of Taiwanese contract manufacturing giant Foxconn and Memani said the Centre has been cautioning the local industry that such things can happen, urging it to be prepared. The government, he noted, has been proactive and offered PLI schemes.

GST reforms
Memani said CII's suggestions on goods and services tax (GST) reforms include rate rationalisation and slab structuring, subsuming all taxes in the overarching framework and input tax credit which impact industry competitiveness. "I think it's very important that we find ways and means to bolster the income and resilience of the bottom 30%," Memani said.

Another reform pertains to assessment audit processes wherein states have their own separate audits with each raising different issues and asking different sets of information. "What we have recommended is that there should be a standard operating procedure. Secondly, can we just do the audit once at least for the MSMEs. So these are newer issues that are coming up," he said. The last GST reform is technology-linked where for smaller companies, CII has recommended lesser compliances.

Manufacturing, AI
"Within some sectors, there are areas where we have dependencies in China...each industry is trying to see how the gross value add can improve. So if you look at electronics, how can you bring it up to late 20% or early 30% in the next five-six years," Memani said, pointing to disabilities in certain sectors. The CII has set up an AI Centre of Excellence to help companies become more efficient. "We are seeing early signs in some industries-information technology and financial services. I think there is a clear need that India should be the AI capital of the world," said Memani.