Need advance preparation steps for delayed monsoon, says R Mukundan

CII has asked the govt to implement reform measures across sectors to boost "speed of doing business" as the industry is bothered about bottlenecks in multi-modal infra and high power costs, he said

India must start advance preparations now to deal with the effects of delayed monsoon this year by rolling out incentive schemes for farmers at the state level, R Mukundan, president of the Confederation of Indian Industry (CII), told Sudheer Pal Singh and Gulveen Aulakh in an exclusive face-to-face interview in Delhi. The country's largest industry body has asked the government to implement reform measures across sectors to boost "speed of doing business", as the industry is bothered about bottlenecks in multi-modal infrastructure and high power costs, he said. Edited excerpts:

 

These are times of crisis and uncertainty for businesses. How do you assess the economic situation and the government's response?

 

India has to continue on the growth path. The world is going through three broad crises — the crisis of geopolitics, defence-related tensions, and the broad spectre of technology disruption. In these times, the industry's current focus is on engaging with the government on even greater reforms. This is necessary so that we are better prepared as we emerge from these crises. Why should we be okay with 6.5 per cent GDP (gross domestic product) growth rate, why not aspire for 8 or 9 or even 10 per cent? We have an understanding of what the government is working on, and we have had an engagement with them in terms of what the industry would like to put forward.

 

What are the key areas requiring urgent reform?

 

The industry is demanding different buckets of reforms, including the foundation reforms at the core, followed by factor reforms and future-ready reforms. Technology and sustainability represent future-ready reforms, and we need to get ready for them. As part of foundational reforms, the starting point is going beyond ease-of-doing business to cost-of-doing business, and improving the speed-of-doing-business. India is among the faster growing economies of size and significance. We should continue to build growth momentum and take it forward. For example, allotment and demarcation of land and power supply for projects have to happen on time. That is where speed of execution becomes important. The second foundational reform area is agriculture and rural economy. India has the second-largest arable land in the world. We should not just be surplus for India, we should be surplus for the world. The Gujarat micro irrigation model is a success. Why can't we replicate it? The third foundation piece is MSMEs (micro, small, and medium enterprises). We should be able to make our industry globally competitive. The last piece of foundation reforms, which is actually a lesson from the West Asia crisis, is that we need to do more exploration and lot more critical mineral mining.

 

Many new areas are now open for exploration and mining in general, but we should now get companies to explore and find the mineral wealth. We need a policy that allows a minimum price for this work, and some kind of price stability mechanism established. The same is true of bioethanol. Whether sugar prices go high or oil prices go high, we should have a policy that can enable steady demand. We have made some suggestions to the government on that.

 

What are the factor-level reforms you have highlighted?

 

As part of the larger factor reforms, the industry is always bothered about two specific areas. First is infrastructure, where a lot of development has happened across roads and rail etc. But the issue is more about multi-modal development and reducing friction between modes. We need some fine-tuning there. The second area, where there are real bottlenecks despite massive growth, is the power sector. On the renewable energy front too, there are issues related to storage, distribution, and transmission. This is the set of reforms we have said India should focus on. If these two factors are addressed along with speed-of-doing-business, it would take care of many issues.

 

What are some of the biggest pain points that you see emerging for the industry from the West Asia crisis? And how do you assess the government's response to those pain points?

 

We have seen huge coordination within the government — between the Department for Promotion of Industry and Internal Trade (DPIIT), and the ministries of commerce and industry, external affairs, and finance — to manage the situation. The finance ministry moved rapidly to create short-term fixes to make sure the crisis is handled. For medium-term solutions, we have seen the government figuring out new areas to open for trade. Our exports have continued to grow during this time because the industry pivoted very rapidly. It was during the recent tariff issue. And now that we have discovered the markets, it is a permanent feature. We want to continue to spur growth even when the tariff issues are sorted out. In terms of larger longer-term issues, one of our future-ready solutions is to form a goods and services tax (GST)-style council for concurrent subjects. GST has been a positive initiative where there is congruence. We need to get more of it in areas which are concurrent, and ensure that states come on board.

 

What are the top two-three areas where such congruence is needed?

 

Land is a good example. You can't create the world's largest land bank without states' involvement. Similarly, the issues of power cost and water infrastructure cannot be addressed without states' involvement. Having a single point of contact and approval works for any big foreign investment. We have to ensure capacity-building there. A lot of good work has happened on this front but we have to do more. For example, Punjab needs a very high level of interventions like this. They have to diversify their crop and go beyond rice and wheat. They have to have more food-processing capacity. It is true for many northeastern states too.

 

Have you also discussed specific steps to take care of the issues likely to arise from delayed monsoon this year?

 

In the short term, we have to worry about the delayed rain. We need to prepare for it in advance. States need to start rolling out schemes and planning for fodder. We need to start planning for water for our cattle and, of course, give farmers more drought-resistant seeds. We should be able to give them early-harvest varieties where the production time is very short. Every crop has such varieties. And the good news is that our reservoir levels are slightly better than what was the case before. Our buffer stocks are also good.

 

What exactly is the issue on power front? Hasn't the classic problem of high discom losses been taken care of to a large extent?

 

The losses may have come down significantly but if you look at the state of finances of discoms today, the issue persists. For example, the cost of power varies from state to state, and that difference is as high as double in some states. And some of the states with very high power rates are the most industrialised. So, their further growth could be impacted if the issue is not addressed. CII has the data points to support the government on this. The states which have done exceedingly well in terms of power sector reforms have metered the rural distribution to make sure that what you offer as free power is actually metered and measured.

 

What are the specific recommendations on land and labour fronts?

 

On labour, the reform has been announced but it is now more about operationalising it. Now the industry and the government should together focus on upskilling and reskilling. India already has the second-largest arable land, and now we should also try to reach the point where the country has the world's largest industrial land. Our ambition should be to create a land bank which is available and is the biggest in the world. Also, this should not come at the cost of agriculture or anything else. We need to keep it as productive as possible.

 

What are the industry's suggestions for the government to get it right on fiscal and taxation issues?

 

Among the future-ready reforms, the last bucket is fiscal and monetary policy. The path of fiscal consolidation should continue. There are some issues on the taxation front which need fine-tuning, and we will highlight them. On monetary policy, we have had an excellent run. One part of that is managing the external monetary situation, and we have some suggestions on boosting FDI (foreign direct investment). The three areas which need to work together to get success on this front are: finance, commerce, and external affairs. One area where they intersect is free trade agreements (FTAs) and moving towards free trade utilisation. This deals with crucial questions like how we promote exports and how we engage in making sure that brand India is given even more power. As for creating industry champions in the form of large corporate entities, production linked incentive (PLI) schemes are important. We need to create champions who can generate capital for future growth and compete with the best in the world.

 

Under the future-ready reforms umbrella, apart from sustainability, what are the industry's specific recommendations on tech side?

 

We have very specific suggestions on technology and research & development (R&D) side. We recommend targeting seven to eight key sectors for the PLI scheme, with a heavy emphasis on R&D and technology. Priority areas should include high power capabilities, advanced data processing, and accelerated digital adoption, alongside a massive drive to launch thousands of low-Earth orbit (LEO) satellites.

 

We need to invest a lot more in aerospace. Creating a PLI scheme for aerospace is going to be very critical. Similarly, defence has become more tech-driven today. We need to create tech capabilities on the offensive side too, and these are indigenously available. There is no reason why India cannot be the number one producer of drones. We have given a list of action areas to the government, which are traditional but also high-tech.