To target India GDP growth rate of up to 10 percent by 2023-24, the total investment requirement is estimated at $5.74 trillion, says CII president Vikram Kirloskar.

CII Pitches For Land, Labour Reforms To Achieve Double-Digit GDP Growth

With the Narendra Modi government beginning its second innings with a greater mandate, the Confederation of Indian Industry on Monday pitched for a series of economic reforms, including in critical areas of land and labour, to take India's economic growth to double-digits in the next five years.

To target a gross domestic product growing by up to 10 percent by 2023-24, the total investment requirement is estimated at $5.74 trillion, or around Rs 397 lakh crore, for the next five years, CII president Vikarm Kirloskar told reporters in Mumbai.

Of this, the total investment required for infrastructure sector is estimated at $1.18 trillion for the next five years, while for non-infrastructure—including agriculture and industry—to be $4.56 trillion, he said.

It is critical to continue with the same pace of economic reforms, Kirloskar said, adding the kind of mandate this government has received from the people, "we wish the government will undertake reforms in the areas of land, labour and capital".

On land reforms, Kirloskar said the private sector is facing difficulty in getting land for manufacturing units and states have a huge role to play in this regard.

On labour reforms, he suggested formulation of a national employment policy and encouraging states to provide fixed-term employment, besides incentivising companies for creating employment. Besides, the government needs to bring in Direct Tax Code and the last leg of reforms in Goods and Services Tax.

Strong action to spur consumption, investments and net exports will take India’s GDP growth rates much higher, and this is the right time for India to think big and envision GDP growth rate of 10 percent to greatly improve development outcomes, he said.

"With a landslide electoral victory and new council of ministers in place, we expect the government to engage strongly with industry to ideate and implement impactful policy solutions for double-digit growth," Kirloskar said.

India's economic growth in the January-March quarter of 2018-19 slowed to a five-year low of 5.8 percent due to the poor performance of agriculture and manufacturing sectors.

With GDP growth moderating in the last quarter, the CII president emphasised four key drivers for reinvigorating the growth rate: boosting consumption, investments, public expenditure on social and physical infrastructure and net exports.

"Consumption will be greatly encouraged by reducing the personal income tax burden, adding more disposable income for consumers," Kirloskar said, adding that various government initiatives—including PM-Kisan to double farmer incomes by 2022—will help drive rural consumption and generate demand.

To boost consumption, CII also proposed a reduction in income tax, rationalisation of taxes on equity capital and addressal of delayed payments emanating from the public sector.

Commenting on rationalisation of taxes on equity, CII president-elect Uday Kotak said that equity is costlier than the debt due to the imposition of various taxes.

On liquidity crunch, Kotak said liquidity is available but at a higher cost so there is a need to increase the quantum and also ensure avoiding distortion or crowding out.

"In the last 24 months, the big success area of this government has been the small savings schemes. A very large amount of money has moved into small savings which are financing the fiscal deficit. In most of these schemes, the rates are higher than 8 percent. However, bank deposits competing for financial saving provides 7-7.4 percent," Kotak said.

The ability of banks to drop deposit rates are linked to the interest rate offered by sovereign schemes, he said, adding there is a need to move towards more linear and balanced financial savings across the Indian economy that will make the price of the money more attractive for users which effectively can give a boost to consumption.

On headwinds faced by the Indian economy, Kirloskar said a consumption slowdown—especially in rural areas—and moderation in industrial growth, rising oil prices, global protectionism and trade tension among others.

With regard to fiscal deficit, Kotak said it is an important number and there is a need to ensure a reasonable control on it.

"We will have to work towards stimulus either at fiscal or at monetary or a combination for kickstarting economic growth... We should control it. Quality of fiscal deficit is more important than quantity," he added.

Elaborating on improving employment in the country, he suggested a triple-pronged approach for job creation, relating to employment-intensive sectors, skilling, and labour reforms for enterprise creation.

He placed a strong emphasis on accelerating growth in job-creating sectors such as construction, hospitality, logistics, healthcare, and the financial sector, among others. According to CII, construction and healthcare alone can create 20 million jobs in the next five years.

Talking about India's external trade, he said India should target merchandise exports of $400 billion for 2019-20 from $331 billion now.

"We need to find alternative schemes compatible with WTO to support exporters. Trade facilitation must ensure seamless connectivity to external markets. Trade financing too needs immediate attention of the government as only 1 percent of total commercial banks' lending goes towards trade financing," he added.

On free trade agreements, Kirloskar said that a better strategy should be in place to leverage their benefits as these have "not resulted" in significant export outcomes.

He suggested fast-tracking of free trade negotiations with the European Union, pending since 2013.

On the proposed mega trade deal among 16 countries, or Regional Comprehensive Economic Partnership agreement, he said India should negotiate equal market access with all the member nations, including China.