Economy
Private investments taking off; consumption growing: CII president Sanjiv Puri
Summary
- With global trade expected to do much better in 2024-25, India’s consumption and growth story will get further impetus, says Sanjiv Puri, who is also the chairman and MD of ITC
NEW DELHI : Private investments are taking off, and household consumption, which has crossed pre-pandemic levels, is growing, unlike in many countries, 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 do much better in 2024-25, India’s consumption and growth story will get further impetus.
Quoting data from the ministry of statistics, Puri said investments in fixed assets like plant and machinery in nominal terms was at 23.8% of gross domestic product (GDP) in 2022-23 compared to 22.4% in the pre-pandemic year of 2019-20. “It is in the right trajectory," Puri said.
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Gross fixed capital formation (GFCF) in current prices had grown from ₹57.2 trillion in 2019-20 to ₹91 trillion in 2023-24, according to the statistics ministry.
Profits, investments up
Puri also pointed out that retained earnings of Indian companies have gone up over the past decade, which suggests that more of corporate profits are being ploughed back into operations and investments.
Quoting a CII analysis of corporate profitability data, Puri said retained profits of a panel of over 6,000 private sector firms have gone up from ₹0.23 trillion in 2014-15 to ₹1.17 trillion in 2021-22, and further to ₹1.18 trillion in 2022-23. Besides retained earnings, businesses also tap debt and equity markets to finance expansion.
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Puri said quoting a CII survey of businesses that capacity utilisation is now above 75% and that improved cross-border trade this year will aid consumption demand. “Whatever production capacities were created all over the world in the pre-covid period also have to be absorbed. And there will always be a lag effect. But look at the enablers we have in place now—(lower) corporate tax rate, ease of doing business, better logistics and production-linked incentives. After a long period, we are now seeing manufacturing taking off. It is directionally, absolutely correct," said Puri.
Private non-financial corporations invested ₹19.35 trillion in 2023-24 in fixed assets like plant and machinery, compared to ₹11.13 trillion in 2012-13, while their share in overall GFCF has clawed up from 35.4% to 36.2% in the same period, according to data available from the statistics ministry.
Reserve Bank of India governor Shaktikanta Das said on 7 June that investment activity continues to gain traction on the back of ongoing expansion in non-food bank credit, and merchandise exports expanded in April with improving global demand.
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The World Trade Organization (WTO) said in its April forecast that world merchandise trade volume is projected to grow 2.6% in 2024 and 3.3% in 2025, following a larger-than-expected contraction of 1.2% in 2023.
Supply chain transition to benefit India
The supply chain transition and energy transition taking place in the world will also offer new opportunities for India, Puri said.
“Even agriculture is an opportunity because the world is facing a food and nutrition crisis. The Food and Agriculture Organisation estimates that by 2050, world food production has to go up by 70%. And that has to happen with depleting natural resources. And on top of that, agriculture value chains are also supposed to support biofuels," said Puri, adding that there is much potential in agriculture because India has more arable land than many other countries.
When asked about whether the risk appetite of businesses is in any way affected by the Insolvency and Bankruptcy Code, which allows lenders to take over management control of companies defaulting on payments, Puri said the quality of investments is also important as investments cannot be sustainable if its quality is not right.
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Puri advocated moderate customs duty rates with certain carve outs for sensitive sectors where required for specific reasons. He also cautioned that because of the sluggishness in global demand, there are concerns emerging about possibility of dumping of goods into Indian market.
“We have to be cognizant of that," Puri said, adding that there is surplus capacity in China and dumping will lead to unfair competition.
The Indian industry is also in favour of a transparent political funding scheme, Puri said when in the context of the electoral bond scheme being struck down by the Supreme Court earlier this year as unconstitutional.
“CII always believes in transparency and policies that bring transparency. It is for individual companies to decide which instrument they choose. But we will always recommend transparency and openness about it because, principally, there is nothing wrong about it. It is legally allowed," said Puri, referring to political funding by companies.
Political parties depend on private donations, including from companies, as elections are not state-financed in the country.
