Need to put more capital in hands of private sector: EY India chairperson

Memani talked of stepping up manufacturing and skilling

One of the major things the new government (after June) should focus on is getting more capital for private players, Rajiv Memani, chairperson of EY India, told Raghav Aggarwal on the sidelines of the Confederation of Indian Industry Annual Business Summit 2024. He also talked of stepping up manufacturing and skilling.

What do you feel about India’s economy?

It is in good shape. If we look at the trends including gross domestic product (GDP), the fiscal deficit, tax revenue growth, and private investment, all are in the right direction.

Has India decoupled from the global economy?

We can’t decouple. That does not mean there is complete correlation but, yes, if there was a stronger global economy, probably our growth percentage would have been higher. This growth we are having is, in many ways, despite not very strong global economic conditions.

The finance minister earlier today (Friday) talked about the need for greater private investment in India. Do you see it recovering soon?

Definitely. Private investment in India is lagging. This is partly because capacity utilisation during the pandemic was not much. Secondly, there is an element of conservatism in corporate India.

Two segments will drive private capex. First would be areas where India did not participate earlier, like semiconductors and defence. The second are the traditional areas. For example, if GDP is growing at 7-8 per cent, you will have to add capacity in steel, cement, etc.

And it is becoming clearer to companies that there is a focus on increasing manufacturing in India and enhancing its competitiveness through that rather than relying on import substitution. Because of that, there would be another round of investment, especially in micro, small, and medium enterprises.

In the next year or two private capex should be higher than the pre-pandemic levels. 

What should be top priorities for the new government?

First, it will be important to get India’s manufacturing story going. For that, more clarity on policy, such as Faster Adoption and Manufacturing of Electric (and Hybrid) Vehicles, is required.

Second, we have to find ways in which more capital can be brought into the hands of the private sector. For that too, policy intervention would be required, whether it is to create a local debt market or look where you can direct provident-fund investment.

Some strategic disinvestment would give momentum. This could be for one or two banks or some companies.

Third, there needs to be focus on health and education, especially skilling. As India goes for capital expansion and if you look at what’s happening in artificial intelligence, it becomes necessary. In this, India can be an important talent base for the world.

Any change in taxation?

Capital gains tax and tax withholding can be simplified. One thing I feel passionate about is the changes in taxation for trusts and foundations so that more wealth can be diverted to philanthropy.