EXCLUSIVE | 'If you have GDP growth only for 10 per cent of the population, the consumption growth you need will not happen': CII President Rajiv Memani

"These are unprecedented times..." Even Rajiv Memani's sophisticated demeanour cannot disguise the enormity of the hot seat he's just sat on, as the president of India's biggest business body, the Confederation of Indian Industry (CII).

Global indices are on a spiral, and while India seems to be an oasis of stability, even as Trump-induced confusion reigns in global polity and trade. Memani will have to work closely with fellow India Inc. compatriots and the government to ensure it remains that way.

Stability and continuing the India growth story will be twin-ideals he will have to work at, even as the clarion call of global economic and trade chaos knocks on the door. Here is part one of THE WEEK's exclusive interaction with Memani:

On global uncertainties

Everything that could go wrong, has gone wrong in the last six months! But India has done pretty well.

It's very hard to predict what can go wrong because it's like when you're driving a car on a road, someone can hit you from here, there, wherever. What's more important to see is that if something goes wrong, how do you protect yourself?

That's where I must give full credit to the government. We saw that during COVID as well, and we are seeing that this time—a lot of focus on taking the right long-term decisions.

There is a push for GDP growth, with a greater focus on capital expenditure (capex) versus subsidies. There is also a lot of emphasis on reducing the fiscal deficit, keeping borrowings low, and maintaining high levels of foreign exchange reserves, among other priorities. The Reserve Bank of India (RBI) has been prudent about interest rates, ensuring there is no volatility.

And most important is the supervision of banks. If they see any risk profile building in any segment, whether it's a sector or industry, or individuals, housing, credit card and even micro finance, they will push the brakes very quickly and increase the risk weightages there.

On the reality of trade

From a trade standpoint, India's dependence is much more on services.

Services have gone up, and remittances are going up. So, these are solid, more stable cash flow streams that are coming in.

On manufacturing, given the PLI scheme, we can see the import bill rising significantly going forward. (Like) electronics, semiconductors, and in defence.

There is still a long way to go, but at least you can see that a major shift has happened. There are obviously areas where India can be much more resilient, particularly in those items of the supply chain where we are dependent on one or two countries. I would say we need to probably move faster.

On the post-globalisation world

If something can get challenged, it will get challenged. And the signing of FTAs and building economic relationships around the world, and being a trusted partner to many countries, particularly to the Global South, also adds its own heft overall.

Risks can arise, but how India has dealt with them has been good. It hasn't happened, but in commodity prices or oil prices, building the strategic reserves when the prices are low, having longer-term partnerships with countries, even building a much stronger, more strategic relationship with the Middle East, which was not the case earlier, have all been great success factors.

So, if you look at it from a geopolitical or trade standpoint, the big change is that, by examining globalisation at scale, you're now looking at more trusted partnerships.

Globalisation in its entirety has been challenged, and I think it's sort of withering away. But having these trusted partnerships, trusted relationships, India is doing well, except for one or two pockets. By and large, I think the trusted partnerships have worked very well.

On economic inequality

Economic inequality is a big issue. For any country and economy to progress in the long term, that is not a sustainable model unless you reach much higher levels of income. So, where India's per capita income is, and as the Indian economy grows, there has to be a more equitable distribution.

The question is, how do you achieve it? Probably the way to achieve it is by creating more jobs in the formal sector, doing skilling at scale and of high quality, providing relief so that people who are below the poverty line at least come up.

And then gradually coming up, investing adequately in education and healthcare. On all these parameters, the government is working.

To be honest, this is one area where both industry and government have to look very deeply to see how the bottom 30 per cent of India, their trajectory, whether it's economic, skills or education, is accelerated at a very rapid pace for India to grow. If that does not happen, the growth of India will be challenged going forward. It will manifest itself in terms of consumption demand.

If you only have most of the GDP growth going to the top 10 per cent of India, then the consumption growth of the kind that you need will not happen. And you may have asset bubbles that get created, which makes it difficult for people to participate in the longer-term growth story. Because a lot of their income will go into assets, and those, whether it's in stock markets, real estate or other bubbles that can create.

How skilling can help

The intention is very clear. ELI has just been announced, and details have come out. How do we ensure that they get effectively implemented and the industry also carries that out in full zest?

That is very critical. If there's greater economic activity, particularly in manufacturing and labour-intensive manufacturing, I think that gives it a lot of lift.

We need to get labour-intensive manufacturing right and get skilling right. These two are the biggest levers, apart from education, for moving people up. When you get more skilled people, you create greater economic activity, and you ensure that they get jobs.

Financing is very critical, but that needle has moved with the Jan Dhan, with the formalisation of the economy.

Most of the digitisation or the India stack that's been built, I think, is benefiting many more people because you have direct benefit transfer that's happening, more data about people so that banks can give them (easier) loans, etc.

This is part one of the interaction. Part two of the exclusive will soon be up on theweek.in 

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