Green shoots in private capex are visible: Assocham President Sanjay Nayar

Nayar talks about Assocham's priorities, pick up in private capex and the startup ecosystem

After leading private equity (PE) firm KKR in India for a decade, Sanjay Nayar has taken over as president of the Associated Chambers of Commerce & Industry of India (Assocham) to steer the industry body at a crucial time. Nayar, who is also the founder of Sorin Investment Fund, spoke to Dev Chatterjee from Europe about Assocham’s priorities, pick up in private capex and the startup ecosystem. Edited excerpts:

You are taking over as Assocham president at a very crucial time as geopolitical tensions globally are rising and interest rates are up… What’s the road ahead?

While I kept very busy during my tenure with KKR, I always wanted to spend my time contributing towards the nation’s development. Today, I am well placed to spend time in facilitating the industry-government vision of India’s growth, leveraging my four decades of experience in the financial and capital markets. Going forward, aligning with the government’s priorities will be the top priority for us. Micro, small and medium enterprises (MSMEs) have to be further facilitated with ease of doing business so that their growth propels the country. I am keen to work with the stakeholders to understand what to do with private savings as overseas savings are flowing in, but local savings are being crowded out. It is critical for India to get savings into mutual funds and investments in small and medium enterprises (SMEs). At the same time, innovative ways of financing Indian companies have to be explored. Another priority for India is to get a more skilled workforce and convert the youth into a demographic dividend. Focus on skilling and reskilling in high-technology segments will allow India to emerge as a preferred partner in the global arena.

What’s your view on private capex and when do you expect Indian companies to start investing?

I think the domestic industry needs to step up its capex though the trend is already visible. With consumption going up and incentives such as productivity-linked incentives (PLI) being provided, we expect a turnaround in private capex soon. We are beginning to see some green shoots already. The private sector is venturing out into many sunrise areas such as semiconductors, renewable energy, green hydrogen, hotels, aviation, technology and mobility, among others. Even in the traditional sectors, we are noticing an uptick in investment, particularly from auto, cement, metals and PLI.

What’s your view on the Indian startup ecosystem? Do you think more needs to be done to encourage startups?

At Assocham, we recently led the Startup Mahakumbh, which was very well received by all stakeholders, given its impact on the industry and the way startup founders were able to table issues. The government has done its bit for startups and now it is up to the private sector to pick up the baton and run. In the coming year, we will focus on facilitating these companies in their journey towards growth. We will take their concerns to the government, while also hand-holding them in strengthening governance, financing, and designing strategy.

What needs to be done to encourage foreign direct investment (FDI) in Indian manufacturing?

On the FDI front, on a quarter-on-quarter (Q-o-Q) basis, the flow is slower for various reasons. Some of these are geopolitical headwinds and high global interest rates. Though on a trend basis, FDI flow to India has been growing as we have recently seen in the case of semiconductors and electric vehicles. The central government has been very consistent in its efforts to create a facilitative ecosystem that attracts FDI. We do expect some tweaking in FDI policies. The India growth story will be based on large infrastructure projects and it is a critical area for the country to attract FDI. Post elections, if privatisation of banks happens, FDI will flow into the sector.

A new government would be taking over after the general elections. What are your suggestions on the immediate priorities?

All stakeholders across sectors are working on identifying the next wave of reforms needed for growth and also highlighting short-term measures for each sector. It is time to boost private sector investments. We need a lot more investments across sectors and should focus on easing the burden of spending from the government balance sheet. While the Centre has been very prudent in managing the fiscal deficit, we have to bring down the total debt-to-GDP level. One way would be for India to reinvigorate the National Monetisation Pipeline as foreign capital is amply available. Monetising national assets, especially roads, bridges, highways, oil and gas pipelines, will be essential for realising the vision of a developed nation.

Do you expect corporate earnings to pick up?

Recent surveys indicate growth in India Inc’s profits in the last few quarters. Some moderation is expected due to the cyclical nature of some sectors and rising input costs. Given the strong fundamentals of the Indian economy and the government’s capex push, we are confident that the domestic ecosystem will grow. Corporate earnings are expected to be good, but the cost structures of companies have to come down.