At least Rs 1.5-2 trn capital infusion is needed: Ficci chief Sangita Reddy

Sangita Reddy
Weeks before the Union Budget is unveiled, Sangita Reddy, president of the Federation of Indian Chambers of Commerce and Industry (Ficci), tells Subhayan Chakraborty that increased spending by the government is the need of the hour, even if the fiscal deficit target slips for the moment. Edited excerpts: 

What measures have Ficci suggested to the government to get the economy out of the consumption slump?

Our foreign exchange reserves are among the highest and our fiscal deficit is under control. The large numbers show there is room for some bold steps. The first of those should be to infuse at least Rs 1.5 - 2 trillion into the economy to boost consumption, which will spur investment in the production cycle.

But won’t ratings agencies cut sovereign ratings if the fiscal deficit widens?

Our ratings can be maintained if hand-in-hand with the infusion of capital comes a significant well-articulated disinvestment plan. If there's a time-bound plan to raise Rs 3-5 trillion through disinvestment, which is more than adequate to cover the spending, it won’t affect the ratings.

Are you happy with the way the disinvestment process has moved so far?

No. I think it needs a more focused approach. It needs a higher level ministry, or a minister in charge.  I don’t think any of the companies on the sell list should be retained. But the government can take a look at what the rate of the sale is, or whether it can retain some stake while selling a majority stake.

Manufacturing output had shrunk multiple times over the past few months? How can be arrested?

More clusters should be created since raw material production, manufacturing, and port access are in different places now. 
Countries like Bangladesh have reduced this gap and brought down transport logistic costs. Also, we need to be very cognizant of the fact that many of our industries have a very limited competitive advantage — neither land, nor labour cost, nor logistics. We only have the power of the Indian entrepreneur and India’s market size. But in the industries of the future, there is almost a level playing field. Pushing into areas like robotics, 3D printing, and artificial intelligence will bear significant fruits. With a focus on the environment, the world is also moving into conservation, waste processing,  water management, and green energy. There should be more focus on these areas not only by industry, but also the government.

The crash in rural demand is because of the stress in the agriculture sector. What can be done?

Comprehensive agriculture policy is required, which will combine the needs of irrigation, changing the crop types and utilisation of unused land tracts. Livestock and dairy, two important sectors, also need to be covered by it and it will spur exports and be a growth engine for the economy. We have also called for a Rs 2-trillion investment into the farm sector, encompassing both private and public investments. 

What changes in policy can be implemented to attract more private participation in agriculture?

People believe that with time, agriculture's contribution to GDP will go down and that the number of people working in agriculture will also reduce, down from the current 53 per cent. But in India, agriculture's share of the workforce will always be above 25-30 per cent, if we do it right. So food processing, improved warehousing, and a focus on exports are needed. We have discussed a plan to create cooperatives with common warehousing and processing facilities, which may be 51 per cent owned by a private entity so that investments and marketing help flows easier. Production of oilseeds, groundnuts, flowers. and even coffee or tea can be boosted this way.

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