Central and state governments should make collaborative efforts to bring down fuel taxes and it will help in controlling inflation and revive the consumption cycle, says newly elected President of the Confederation of Indian Industry (CII) Sanjiv Bajaj, in an exclusive interaction with Fortune India.
"In the last few years, when the oil prices were down, fuel taxes have been increased in the country. So CII would like to suggest to the central and state governments to take collaborative efforts in cutting taxes for a period. It will start the consumption cycle again," he says.
Bajaj says India has the potential to become the manufacturing hub of the world in the next 4-5 years as the geopolitical tussle of China and the West opens up a tremendous opportunity to India.
CII projects a GDP growth of 7.4%-8.2% in FY23. The immediate challenge before the country is the influx of war in Ukraine, says Bajaj. "What hurt the common man at this point of time are the fuel price hike and food prices. We are seeing forecasts of a normal monsoon. It means hopefully the food price issue will be addressed reasonably soon. But the fuel price remains an issue," he elaborates.
Bajaj suggests the collaborative model of central-state governments for fuel tax fixing can be like that of GST council. "GST council has worked well despite the political differences outside. The periodicity at which the council meets, and the items they take up and clear together are impressive," he says.
Consumption will drive demand and lead to higher production and new capacity creation, he says. "In a way, we are fortunate in the last two decades that a very strong component of India's GDP is the domestic consumption. We need to support it," he adds. India's GDP can grow to $9 trillion by 2031, and $40 trillion by 2047, from the current $3 trillion, he adds.
In the medium term, CII will recommend a few more sectors to include in the PLI scheme for expanding the export potential to attract foreign investment. Some of the segments like footwear, leather manufacturing and tourism are job creators, says Bajaj. The employment linked incentive for this kind of sector will help move the consumption cycle, he adds.
The export will be another significant area that will help in boosting the economy, he says. "The country is signing sensible and thoughtful FTAs, protecting our legitimate interests. For instance, in the FTA with the UAE, there is a clause of "melt and pour" for steel exports to qualify as domestically produced products from either country. It is essential to prevent misuse of the agreement by third countries. The UAE has also agreed to facilitate market access and regulatory approval within 90 days for Indian pharmaceutical products and medical products," he says.
There is a continuous review mechanism for FTAs, recognising that the world is changing, Bajaj says. India recently signed FTA with Australia. There is also an early harvest agreement with the UK. "We have confidence and experience, access to capital and large R&D capabilities to significantly ramp up exports. The geopolitical situation has opened a window for attracting foreign capital and becoming the manufacturing hub of the world," Bajaj says.
Bajaj says the government is encouraging companies to tell what they need and then unleash the animal spirit. "If we don't leverage ourselves in this window of 4-5 years, some other countries will do. The world will not wait. The days of distant sourcing are gone. It was not replaced by near sourcing, but sure sourcing. India can give greater confidence, comfort and security to the world," he adds.