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Private investment should come back this year and while high inflation is a concern, higher food prices will help the rural economy to a certain extent, Confederation of Indian Industry President TV Narendran said.

At 7.5-8% growth in the current year, India would still be the fastest-growing economy, he said, proposing a production linked scheme (PLI) for furniture and capital goods as well.

On the accidents of fire in electric two-wheelers, he said that the government asking companies to recall their vehicles is the “right” step before adding that electrification is inevitable.
Growth and capital investment

CII had earlier expected growth to be 8.5-9.5% in the current fiscal. It expects lower growth now.

“7.5-8% (growth) makes us the fastest-growing large economy…We feel private sector investment will come back this year,” adding that many indicators such as GST collection, airline passengers, and mobility indicators are positive.

Narendran said chemicals and metal have witnessed the maximum private sector capacity expansion post-pandemic and production-linked incentive (PLI) schemes can be considered for furniture and capital goods. “I think the expectation of the government is that private sector investment will get crowded in once the government spends on infrastructure and I think that is happening,” he said.

Replying to a question on whether high will delay CAPEX revival, he said the biggest announcements in private sector CAPEX has been in the metal sector and that would continue because high commodity prices mean even more incentive to invest in growth for the metal sector. Inflation concern
He suggested a more nuanced approach to inflation.

“Overall inflation, from a macroeconomic point of view, is obviously not good because it hurts households,” Narendran said, adding it hurts the poorest of the poor the most.

Higher food inflation, however, also raises rural incomes.

“Inflation in food prices, to some extent, also helps rural households because the income goes to them and even today when you see wheat prices going up and wheat exports growing for India, that helps the rural economy. So, it's a bit of a mixed bag,” he said.In the case of steel and cement, he said high prices are because all sectors are linked to global events and value chains.

The prices of coking coal, one of the largest components of steel, have fluctuated thereby exerting pressure on steel companies to try and pass on some of those cost impacts to the customers.

These higher prices have, however, allowed the steel industry to become profitable, pay back debt and announce more investment.

“If you want private sector investment, then you have to allow them to have healthy balance sheets and be profitable so they can reinvest in growth. And which is exactly what's happening in India,” Narendran said.

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