Message from ET Awards: To lift growth and create jobs, a manufacturing push is vital

When hope and restlessness play out freely and a patina of optimism covers the lurking fears, one tends to believe that the big bets are worth the risk. The long rope to manufacturing, balancing geopolitics and economics, and the support to local businesses to gradually reduce the dependence on China appear like a tactical gambit, not a reckless wager. Covid has waned, company balance sheets are stronger, and banks, no longer laden with sticky loans, are hungry to lend.

“I am sure the Indian private sector is ready. Are you?” said finance minister Nirmala Sitharaman, smiling at some of the best minds of India Inc gathered on Friday evening at The Economic Times Awards for Corporate Excellence 2022.

Amid the Ukraine war, worries of a looming recession in the West, and dismal private sector capex growth last year, the question on everyone’s mind was: Will FY24 be the turning point?

Corporate India is veering toward New Delhi’s policy doctrine that a big push to manufacturing is vital because the services sector alone can’t lift growth and create jobs. Backed by lower tax and higher government spending, will they then take the plunge?

ET Awards

“The private sector will come back… Have patience. Don’t suggest any increase in tax. We have managed geopolitics and economics brilliantly. A lot has happened on the ease of doing business though more needs to be done,” said Kotak Bank chief executive Uday Kotak during a panel discussion at the event on Friday.

The government’s production linked incentive (PLI) schemes are only for five years. That’s “the time we have to be more competitive than China,” said Amitabh Kant, India’s G20 Sherpa. With NPAs at a new low, and corporate and bank books looking good, now is the time for the private sector to take risks, said Kant.

Participating in the discussion, Sajjan Jindal, chairman of JSW Group, said the US has realised the folly of handing over control to Chinese companies through outsourcing deals. Having sensed it wasn’t the right way, the Biden administration is supporting local industries.

“India is doing the same. The benefits will show up in the coming years,” said Jindal.

The scepticism about China, originating in the China+1 strategy and deepened by the pandemic, is spreading. Reacting to the possible decline in the supremacy of dollar as a reserve currency, Kotak said, “All our money is in the nostro accounts and somebody in the US can say you can’t withdraw it from tomorrow morning… We are at a crucial time in world history where the world is desperately looking for an alternative currency. Which country can take that position? Europe can’t. UK, Japan don’t have the heft. China has a major issue about trust with many countries. Can India do it? It’s a long, sustained walk.”

As the debate over dollar hegemony rages, a slew of immediate and pressing issues confront India: the imminent risk from hardening rates, the tussle between services and manufacturing, the stress of reintroducing a defined benefit pension scheme, and financing the leap towards green manufacturing. Though the risk of a recession in western markets impacting India exists, the contagion risk from Fed hikes has subsided with many monetary authorities, particularly in emerging markets, decoupling from the US central bank, said the finance minister.

“Returning to the old pension would burden states with more than they can take, and after five to 10 years the load would balloon. But the discussion on the old scheme has been subdued in the last few months,” said Sitharaman.

The theme of services or manufacturing is never an either-or story, said Sanjiv Mehta, MD of Hindustan Unilever.

“Manufacturing has to move up for jobs and collateral gains… Today, India is the largest Unilever market in volume terms. In a few years it would be the largest in value terms. Unilever is no exception. In the last few weeks, several global companies invited me to talk about the India story,” said Mehta, a co-panelist.

In surviving the manufacturing race, it could soon become incumbent among companies to go green. “Global warming is real. We can’t go on burning fossil fuels. Renewable power is the way forward. But customers would not pay the extra cost for green steel. In India, the government won’t pay. So, it could be funded through a cross-subsidy with some tax on coal,” said Jindal.

Companies that go digital and green would command a high valuation and attract more capital, said Kant.

However, according to both Kotak and Mehta, a sustainable growth path requires building Middle India, the smaller businesses, and inclusive growth to push up demand.

In his welcome address at the ceremony, Samir Jain, vice chairman and managing director of the Times Group, said that a “gender budgeting” initiative by the government could unleash the potential of Indian women. Delivering his address, Times Group managing director Vineet Jain said the government’s decision to bring in a lower-tax regime with no exemptions offers a glide path toward a lower fiscal deficit.

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