Achieving overall exports of $2 trillion by 2027 doable, says CII President

These situations, I think, are obviously undesirable. In a globally interconnected world, industry and corporates have to learn to deal with volatility. To assume that we will have a nice real safe life ahead is unrealistic. How we can build resilience in supply chains and agility into our organisations is, I think, going to differentiate the successful companies from less successful. Our textile industry pivoted, so has our vaccine industry with focus on healthcare. Even Ukraine crisis has thrown up opportunities for us — India’s wheat exports will be at highest level. The government is having to buy less at MSP. The global rise in commodity prices is helping those in commodity business.

Any  increase in policy rate will impact the cost of money for industry. The industry has been preparing for this for sometime. It was expected that interest rate will go up at some point in time, and inflationary pressures will make it important for the RBI to take action. We are expecting the RBI to take that action.  But I feel that balance sheets of Corporate India have been repaired quite significantly. That will help corporates continue with their investment plans, even if the cost of money is going up and demand is strong in India. Profitability has been good for many industries. Capacity utilisation has been strong and I don’t see it [any policy rate hike] as something derailing investment plans. Also, several capital-intensive sectors and leveraged corporate houses had already deleveraged and prepared their balance sheets for the next round of investment-led growth

There are challenges. Even international institutions such as IMF, World Bank have scaled down global growth forecasts. We have to also factor in inflation and interest hike concerns. So, CII has toned down India’s economic growth for FY23 to 7.5-8 per cent from earlier projection of 8.5-9.5 per cent.

April 2022 performance, where exports touched $40 billion, suggests merchandise exports will be sustainable. The focus of government and industry on exports has been high. Trade deals that India is signing will also help. Globally, companies are looking to diversify supply chains, and India is uniquely positioned not only because it is a source, but it can also be market. For these reasons, there is lot of interest on India, especially in electronic manufacturing. But there are few things we need to do to sustain this export performance. I think $2 trillion overall exports by 2027 is doable, but we need to diversify beyond US and EU. You can’t reach $2 trillion focussing on just two geographies — we need to expand it. For $2 trillion overall exports, our merchandise exports need to double and services exports [now at $250 billion] have to grow four times.

I don’t think that India Inc’s Q4 earnings growth had slowed down. Slowdown in earnings in Q4 (January-March 2022) is not the sense we get from our membership. Earnings are robust. There may be some margin pressure because higher input costs may not be passed on. But not enough to derail the positive sentiment. On earnings outlook, it depends on where you are in the value chain and what you are producing. Pretty much for everyone input costs have gone up, but for some input costs have gone up more than others. You will see companies that have benefitted from high commodity prices will be the driver of private sector investments, as they invest to expand capacity. Some of the others will look at margin squeeze as something to ride out of before they make investment plans.

I see the beginning of pivot towards investment led growth for the economy, given the focus in last three years on infrastructure development by the government. For long, India has been focussed on consumption-led economic growth. It is now slowly looking to move to an investment-led growth model on the lines of several advanced countries. CII is telling government that despite the challenges, let us continue on focus on infrastructure development. The Finance Ministry also acknowledges they see the biggest multiplier effect on money spent on infrastructure. I also see that contact-intensive sectors such as hotels and airlines are now coming back, which is some good news

Monetisation of government assets and disinvestment must be focussed upon. This will release capital for better utilisation, and value can be unlocked from those assets. We have fallen short of revised targets, but hopefully, we will be moving forward this fiscal. Even if we are able this fiscal to execute the planned and already announced disinvestments, that will be good.