New Delhi
Unlike in many countries, private investment is surging and household consumption is growing beyond pre-pandemic levels, according to Sanjiv Puri, president of the Confederation of Indian Industry (CII) and chairman and managing director of consumer goods conglomerate ITC Ltd.
Puri added that with global trade expected to improve significantly from 2024-25, India’s consumption and growth story will gain further momentum.
Citing data from the Statistics Ministry, Puri said investment in fixed assets such as factories and machinery in nominal terms accounted for 23.8 percent of gross domestic product (GDP) in 2022-23, up from 22.4 percent in 2019-20, before the pandemic. “We are on the right track,” Puri said.
Gross fixed capital formation (GFCF) at current prices is: ₹$57.2 trillion in 2019-20 ₹According to the Ministry of Statistics, it will reach $91 trillion by 2023-24.
Increased profits and investment
Puri also noted that retained earnings at Indian companies have risen over the past decade, indicating that a lot of corporate profits are being reinvested in operations and investment.
Citing a CII analysis of corporate profitability data, Puri said retained earnings of over 6,000 private sector companies increased year-on-year. ₹From $0.23 trillion in 2014-15 ₹It will reach $1.17 trillion in 2021-22 and then ₹It is expected to reach $1.18 trillion by 2022-23. Besides retained earnings, companies are also using debt and equity markets to fund expansion.
Citing a CII business survey, Puri said capacity utilisation is now over 75 per cent and improving cross-border trade this year will boost consumer demand. “Capacity created across the world in the pre-COVID period will also have to be absorbed. And there will always be a lag effect. But look at the drivers we have in place now — (low) corporate tax rates, ease of doing business, better logistics, production-linked incentives. After a long period, we are now seeing manufacturing booming. Directionally, it is absolutely right,” Puri said.
Private non-financial corporate investment ₹Fixed assets such as plant and machinery are expected to reach $19.35 trillion in 2023-24. ₹According to data from the Ministry of Statistics, the total amount of GFCF in 2012-2013 was 11.13 trillion yuan, and its share of total GFCF increased from 35.4% to 36.2% during the same period.
Reserve Bank of India Governor Shaktikanta Das said on June 7 that investment activity continued to gain momentum on the back of continued growth in non-food bank lending, while merchandise exports also picked up in April on improving global demand.
The World Trade Organization (WTO) said in April that it now expects global merchandise trade to decline by a larger-than-expected 1.2% in 2023, before growing by 2.6% in 2024 and 3.3% in 2025.
Supply chain transition benefits India
Puri said the supply chain transition and energy transition taking place around the world will create new opportunities for India too.
“Agriculture is also an opportunity as the world faces a food and nutrition crisis. The Food and Agriculture Organisation of the United Nations estimates that global food production needs to increase by 70 per cent by 2050. And that has to happen as natural resources deplete. Additionally, the agricultural value chain is also called upon to support biofuels,” Puri said, adding that agriculture has huge potential as India has more arable land than many other countries.
Asked whether the bankruptcy law, which allows lenders to take over management of companies that default on payments, would have any impact on companies’ risk tolerance, Puri said the quality of investment also matters and without good quality, investments are not sustainable.
Puri argued for moderate tariffs with certain exceptions for sensitive sectors where specific reasons are required, and warned that weak global demand has raised concerns over possible inflow of dumped goods into the Indian market.
“We need to be aware of that,” Puri said, adding that China has spare production capacity and dumping would lead to unfair competition.
With the Supreme Court having struck down the electoral bond system as unconstitutional earlier this year, Puri said Indian industry also supports a more transparent political funding system.
“CII always believes in transparency and policies that bring about transparency. It is up to each company to decide which avenue they choose. But we always encourage transparency and openness because fundamentally there is nothing wrong with it. It is legally permitted,” Puri said about political funding by companies.
Because elections in the country are not publicly funded, political parties rely on donations from the private sector, including from corporations.
