India Will Have To Grow At Over 9% To Achieve $5 Trillion Economy Dream By FY26: CII President Narendran

The new CII president also batted for a strong fiscal stimulus and Government expenditure program.

Mumbai: The Confederation of Indian Industry (CII) newly appointed President Mr. T V Narendran, pegged India’s GDP growth rate for 2021-22 at 9.5% on Thursday and believes that India needs to grow at over 9% in the next three years to achieve the $5 trillion economy dream by FY2026.

“Ultra-high frequency indicators strongly presage growth recovery following the second wave of the pandemic. Moreover, with the recent uptick in mobility indicators, traffic congestion index, and daily railway passenger movement, we believe that a 9.5% growth rate can be achieved this year,” said Mr. Narendran, CEO and Managing Director of Tata Steel Limited, who took charge as President, CII on May 31, 2021.

According to Mr. Narendran, with the majority of the population vaccinated by the end of this year, implementing big-ticket reforms in factor markets and the financial sector, and a large fiscal stimulus, India will reach the critical US$5 trillion mark by 2025-26.

However, India will reach the $5 trillion economy only by FY 2030 in the pessimistic scenario with a GDP growth of 5%, anticipating the third wave of COVID-19 occurs with a significant impact upon lives and livelihoods when no considerable reforms are announced, and the fiscal push to growth remains negligible.

Mentioning that growth needs to pick up to 9% by 2024-25 with public expenditure, reforms, and vaccination as key levers, the President stated, “The cumulative impact of the two waves on incomes and consumer sentiment, coupled with the increase in household medical expenses in the second wave, is likely to affect consumer demand for some time. As the economy reopens post the second wave, a dual-pronged Government strategy is required to boost consumption and support industry till the demand is well-entrenched.”

The new CII president batted for a strong fiscal stimulus and Government expenditure program. “CII estimates that there is fiscal headroom of up to Rs 3 lakh crore, and this amount can be channelized towards direct cash transfers to the vulnerable people, the higher allocation for MNREGA, short-term GST rate cuts, and lower excise duty on fuel. Demand can also be revitalized through a time-bound tax concession of interest rate subvention for home buyers, a LTC cash voucher scheme as done last year, and extending the Atmanirbhar Bharat Rozgar Yojana till March 31, 2022," said Mr. Narendran.

CII urged for expansion in the Reserve Bank of India (RBI) balance sheet to meet the demand exigencies of the pandemic and suggested a range of measures for accelerating vaccination. As per CII estimates, an average of about 71 lakh daily vaccinations is required over June to December 2021 to administer at least a single dose to all adults. For this, the vaccine availability must increase by two times.

Mr. Narendran advocated for an empowered Minister of Vaccination to accelerate the vaccination program including in rural areas, procurement and distribution of vaccines to states based on scientific criteria, and monitoring progress through a daily dashboard.

Mr Narendran also called for support to industry through an increase in Emergency Credit Line Guarantee Scheme (ECLGS) to INS 5 lakh crore and extension of the scheme to March 31 2022 and inclusion of more distressed sectors such as retail. He further suggested long-pending structural tax reforms such as the inclusion of ATF and other fuel products under GST to be considered.

The CII President emphasized, “As businesses reopen, their credit needs must be met and the financial sector should be able to absorb pandemic-induced non-performing assets.” A corpus may be set up as a pandemic pool to cover the risk of losses from future pandemics.