Budget 2022: PLI Scheme has encouraged investments; Ease of Doing business should be simplified further, says TV Narendran, CII President

T V Narendran, President – CII and CEO & Managing Director, Tata Steel Limited, talks about the economy and the visible challenges, discussions that were held at a meet with Prime Minister Modi, the investment that the industry can commit in the next 3-5 years, government schemes and its impact, demand from the government including the stimulus package, credit cycle, budgetary expectations and inflationary pressure among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: What kind of challenges are visible in the economy as the year has started and it was expected that the year will be quite good as demand was strong but there is a small roadblock in front of us?

A: At the CEOs poll conducted at the CII’s National Council meeting that was held last month, a general sense was very optimistic as everyone was seeing an increase in their profitability, demand, deleveraging has happened and exports was fine. So, overall, it was positive and we were seeing that the private sector investment has started going back to the old levels and its beginnings was visible, which was positive. But, now, we are seeing that the sentiment because of the third wave has turned a bit fragile from a consumption point of view and we have to see that how we can nurture the consumption back to where it needs to be because it is true that the household expenditure has been hit because people have invested more on healthcare than they have planned to and many household incomes have been hit, particularly in sectors which have been impacted by the COVID like restaurants, hospitality and tourism-related business among others. So, it is a mixed bag but I think, the overall sentiment is positive and we have to see the impact of the third wave and if its impact is not so significant from the economic point of view and the COVID itself is the milder version of the earlier variants than I think we will be back on track in next month or so.

Q: Prime Minister Narendra Modi, recently, held a meeting that was represented by you as the industry head. What are your expectations as the government is quite upbeat on the growth element, which is a big agenda of the government this year? What were the important points of the meet?

A: Pre-budget meetings are being held from the government’s side and meeting with the Prime Minister was one of the meetings which were had with industry representatives. So, he called us to hear about what were our thoughts was, what our sentiments were, what our ideas were, the finance minister and the commerce minister were also there. We raised our issues with them there and at that point, one of the points we discussed was about the Wave-III and the booster shots among others. So, a policy has been announced. The second thing we said is that we should continue to make the government’s investments. Even the fiscal deficit has been pretty much as planned, in fact, revenue collection has been better than the plan.

Q: Going forward, a kind of investment is needed for the next three to five years. How much investment do you think the industry is ready to commit?

A: Some sectors, whose recovery has been good, like the metal sector where recovery has been strong, profitability has been good and deleveraging has happened, I think the investment has already been announced. If you have a look at the steel sector, then I think at least Rs 100 thousand crores of investment has been announced for the next few years. I think, the industry is investing at least Rs 15,000-20,000 crore per year. Similarly, the chemical sector is another sector - we are seeing – is investing. If you look at the private sector investment over 10 years chemicals, metals and power sectors were the big drivers of the private sector investment and now we are seeing that the new sectors that are emerging are electronics manufacturing. We are seeing that domestic and international investments are coming from the sectors which are being encouraged through the PLI scheme. So, we are positive and I think that the private sector investment has actually pretty reached the pre-pandemic levels and if this continues and wave-III impact is not so disastrous then I think we are back on track for private sector investment.

Q: From the perspective of Atmanirbhar Bharat, the government has announced many schemes in the last two years. What kind of impact it is having on the growth of the sectors and economy and by when its results will become visible? Also, does the industry has any specific demand from the point of tax easing or government has done enough?

A: PLI Schemes have been very good and very useful. For some sectors, it is not such that you are investing because of the PLI scheme but the PLI scheme helps the investment here. PLI scheme, I think, is a welcome step and Make India, For India, is a good intervention from the government’s side. So, I think, it is a very positive step. As far as tax is concerned, I think, generally, most of the tax recommendations - like reducing corporate tax, simplifying it and many more - from the side of CII have been done, so, we have also told the finance minister that we will not have a wish list on taxes. But I think, a couple of things that we should continue to look at like the cost of ease of doing business. On behalf of CII, we have made a suggestion that we can create a Cost of Doing Business Index so that we can compare different states, we can compare India as an investment destination Vs other companies competing with India. Because India is geologically rich and due to investment in these sectors, you are creating economic activity in some of the chorus parts of the country. So, I think there is an opportunity for us to look at the effective tax rates and cost of doing business in some of these sectors.

Q: The government has announced a stimulus package in the past. Do you think that there is a need for a similar package at the moment especially for the hospitality sector, travel & tour, which was hit the most during the COVID times and has uncertainties for the future as these are the sectors which are shut first of all?

A: Correct. There are a few sectors that have recovered well and they do not need support but there are many sectors that need support like the hospitality sector and all the high touch service sectors, which has been impacted will need support. MSME will continue to need the support that they have got. We need to see how we can help those segments of the MSME segments which have been impacted. In addition, more investment is needed in the health infrastructure and India’s current health expenditure is 1.3% of the GDP, it is higher than what it was earlier, but if seen, it should be 3-4% because its main impact is that the health infrastructure, particularly at the state level and the local level is not that strong, then the household expenditure is impacted, which can hurt the sentiment as far as consumption is concerned. People are constantly worried that there will be a wave-III and wave-IV of COVID and no one knows the kind of expenses that will be required for it. So, they will keep differing expenses till then they are not clear that we are behind this. These are the areas where I think the government can provide some support, reduce risk also for the lower socio-economic strata, MGNREGA scheme. These are the support that should continue till consumption is back on track.

For More Details Watch Full Video Here:

Q: RBI has taken repeated steps specially to address the issue of liquidity. What can be done to get the credit cycle going again especially if we look ahead to rising interest rates this year?

A: Obviously, if seen then the central banks across the world are looking at inflation. Some of the inflation will come down because it has been caused by the recovery being faster than most people thought. So, as the supply chain will settle and is calibrated, I think that a lot of that inflation will settle to more normal levels. Rest of the inflation, which can be structural which the central banks’ I guess are more concerned about. If seen in India, interest rates are a significant impact on the cost but the good thing is that most of the capital-intensive sectors have been deleveraged. So, it is not necessary that they need to borrow to invest because you can also invest from your cash flows. You can also use other ways of raising funds beyond the traditional approach of going to the banks.

Q: When we talk about the opportunities and the sectors that will perform the better and the government has a special focus on those like electronics, component manufacturing, electric vehicles and semiconductors. What kind of support does the industry need in these areas from the government?

A: These areas, if you look at them then for the future of India, i.e., India for the next 20-30-40 years, I think technology and knowledge-intensive sectors and sectors, which are preparing for the new climate economy, I think, these are the two sectors which are still emerging and government’s support is required there.

Q: If we will have a look at the budget as a big event of the year. What is your outlook for the budget and the what the industry is asking for from the government this time and where the booster dose should be provided? 

A: As I have said investment by the government in infrastructure particularly should continue, I think, that is very important for multiple reasons. So that should continue and this is the number one request. The second request is that support is needed for the sections of the society and the industry who have been hurt very badly by the COVID so that jobs are supported, incomes are supported and household consumptions can come back. The third point is to have a long-term road map for a strategic sector like technology, climate-change-related sectors among others so that we have a policy roadmap and infrastructure roadmap in those areas. Fourth is to work on the cost of doing business and ease of doing business, there are many-many suggestions that we have given over the years, many have been implemented but this is always a work in progress because the expectations and competition will keep changing in these areas. So, these are some of the areas. Of course, finally and most importantly it is to continue to focus on health and education because that will bring long-term value for the country and in health particularly is very-very urgent. In education also, more than 30 million students have been impacted by what has happened in the last two years. So, we need to have health and education back on track as we will see the impacts of this in the years ahead.

Q: Inflation is a big worry and the government also believes that there will be a spike. How much the industry is worried about it and do you think that it will have an impact on the demand? Also, what is your view on the rural economy and its growth in the long run? 

A: Inflation, obviously, is a concern for everyone, particularly, for the industry if there is an inflationary trend for input cost then the question is how much of it you can pass on and how much of it will impact the margins. So, that is always a concern for the industry. But as I said, some of that inflation on the input cost should settle down as supply chain rebalancing or the recovery. The second part is that inflation has an impact on the lower socio-economy strata more than the higher the higher-economy strata because inflation hits the household expenditure significantly. So, that is a concern and that is something that has to be looked at.