From an expectation of a rate cut in the upcoming monetary policy review to the new low of ₹90 to a dollar volatility, from trends showing private capex is growing to an idea of having an Indian sovereign wealth fund, from privatisation of state electricity boards to having a mechanism for tax dispute resolution — Rajiv Memani, President, CII (2025-26) and Regional Managing Partner of EY Africa India Region, Chair – EY Growth Markets Council, in conversation with CNBC-TV18’s Timsy Jaipuria, talks about the next steps and concerns for India’s growth blueprint.
Q. Just to begin with, today the Indian rupee has found a new low. We have seen the level of 90 getting breached. What is the view of CII?
Ans: I think from an industry standpoint, the view is that, you know, we don’t — industry doesn’t — like volatility. As long as whatever market trends are and the rupee is behaving on that basis, I think that’s fine. But if there is too much volatility, I think then it starts impacting people. I think right now people are just starting to see, you know, where it eventually settles, and then I think people will take a view on that.
Q. When we talk of export competitiveness at this level of rupee, how do you see what is in stride of India, especially when it comes to the economic trends?
Ans: I think overall the Indian economy has done well. You’ve seen last year’s, last quarter’s GDP numbers. You see relative to what’s happening in the world.
I think the Indian economy has been doing very well. But we are also in a situation where the global economy is underperforming. Each country is having its own trade policy. In that environment, to look at exports and also the India-US trade deal and the impact of that — I think when we look at our exports, we have to look at it in that context.
I think definitely from an export standpoint, you know, rupee reaching 90 will add to either the export revenues or to the profitability of exporting companies. We should not forget that services are now 45% to 50% of our total export basket. And I think that definitely a large part of the services’ raw material cost is in rupee. I think that definitely makes the services more competitive.
And in some areas where the exports are very reliant on imports as well — whether it is gems & jewellery or whether it’s crude exports — there obviously the domestic value addition is not that high. Therefore, the impact is not that much. The import also rises in a similar way.
But overall, if you were to ask me, I think just looking in an isolated way at how it impacts exports, I think it does impact exports positively. And from a macroeconomic standpoint, you know, the current account balance is not much of an issue right now in India. You know, the interest rates are very benign. Inflation is very benign. I don’t think there’s any macroeconomic risk because of what’s happened to the rupee-dollar ratio. I would say yes, it will add to the competitiveness of exports.
Q. You also spoke about the trade deal with the US. As you know, we were to see a deal by the fall but it has not happened. What is your expectation now? By when can we see the trade deal happening and what are the nuances that are keeping the trade deal on hold and what should be in India’s stride once the deal is struck?
Ans: So, you know, if you actually look at the overall context, I think in terms of the trade agreements that India has done or is in the process of negotiating, I think it’s unprecedented. You know, we have signed with the UK, we have signed with AFTA, we have made very good progress with the Middle Eastern countries. We are starting discussions with Israel. We are in advanced discussions with the EU. Australia has been signed. We are starting conversations with New Zealand.
If you look at the overall context, I think what we have done on trade discussions has been very positive. I think, so far as the US is concerned, I mean, you know, we are reading it from the press and in discussions that these are complex conversations which have not only commercial but other aspects to them as well.
I think as and when they get solved, you know, we will wait to hear.
But I think we have to look at it as an industry also — definitely a trade deal is very important with the US. I think it will have a very positive impact on the economy.
But we have to look at it from the lens of overall national interest. I think economic interest is a subset of national interest. You know, hopefully it gets signed soon and whenever it gets signed, I think it will be good for the Indian economy.
Q. Coming to the Prioritised Actions for Competitiveness Transformation (PACT) report prepared by CII… Can you give us brief highlights?
Ans: Yeah, so firstly it’s not a report in that respect. I think what we call that is really prioritised actions for enhancing India’s competitiveness and transformation. And the way we went about it was really to get feedback from the ground. We engaged with almost the entire membership of CII through our sectoral committees, and each of the sectoral committees gave very clear inputs, insights into what are the four or five points are that will make a difference to that sector and how it will impact the overall competitiveness of the country and how it can lead to greater GDP growth.
I think to summarise this report in a short time will be difficult, but I can probably give some five key highlights.
First thing — manufacturing is very important for India and we have to have a clear manufacturing policy. The government also has been very proactive.
What we did was, in one of the other studies that CII did, we looked at the top 50 imports that India has and analysed them in three or four buckets.
One — those which are very hard to replace like mineral oil. Second — those with low chance of replacement like fertilisers. But then there’s a wide category where those imports can be replaced.
But whether India has the technology, what is the demand, what is the global demand-supply situation, what is the customs duty policy required, do we need any PLI incentives — these were analysed.
What we have recommended to the government is that we should have a clear strategy for these 40–50 items, with an inter-ministerial group, working with industry to set up capacity.
Because this has the potential to replace $300–350 billion of imports.
If you can substitute that and add $20–30 billion of incremental value to GDP, then in three years you can look at $70–100 billion of imports being replaced through manufacturing and value addition in India.
The second area is factor cost of production — ease of doing business, power cost, logistics, and new sectors.
Q. What does the report talk about private capex?
Ans: The report is looking at ways in which private capex can be enhanced.
One way is obviously those items that we’re importing.
To get private capex, many things have to play out, and I think private capex is growing. I think yes, not at the same pace at which the government may want for various reasons, but it is growing and growing well. And we are hopeful that in the next 12 months, that will accelerate further.
But if you look at efficiency in factor cost of production — power cost, for example. Today, because of cross-subsidies, industry is paying about ₹1.50 to ₹2 per unit higher. Even if you do your own captive plants, the access charges are high. And accumulated losses of state electricity boards are almost ₹6–7 lakh crore. You have to solve for this.
Privatisation of state electricity boards or providing an additional license in each state is required. It’s not easy — politically it’s not easy. Therefore, the Centre has to provide some incentive or disincentive to nudge states. That will create long-term efficiency.
Another example — government stocks valued at ₹45–50 lakh crore.
If you can create a pool of ₹5–10 lakh crore and use that for large strategic projects — like high-speed rail — that can create manufacturing capacity.
Can we create a $50 billion sovereign wealth fund focused on advanced manufacturing and strategic assets abroad? Logistics: multimodal parks — 35 were planned, 5 done; can we accelerate? Greater PPP? Private sector operational management? Likewise, labour.
Q. You recently saw labour codes coming in. What is the impact?
Ans: In the last six months, the amount of reforms the government has done is praiseworthy — GST, labour reforms, rare earth policy, etc. But there are other areas — like the Shops and Establishments Act. For GCCs, one big request has been standardisation. Are GCC employees workers or not? Overtime rules, working hours, etc. Uniformity is important. These may be smaller areas, but have big impact.
Q. What does the report say on taxation?
Ans: Definitely. Two or three key areas. One — alternate dispute resolution.
We have outstanding tax disputes of almost ₹31 lakh crore. 70%–80% stuck at CIT (Appeals). We have suggested ways to unlock this — advance rulings, mediation, handling CPC issues, etc. GST: reforms positive, but audits — a company operating in ten states has ten audits. Can central audits be consolidated? Later state audits, too.
Customs: government rationalised tariff lines to 8–10 bands. If we rationalise further, like GST, it will reduce disputes.
For capex, the industry has suggested accelerated depreciation as a nudge, especially for domestically manufactured goods. Current depreciation is 10–15%. Can we make it 33%? This won’t cost much and will boost manufacturing.
Q. The monetary policy review is on the anvil. Expectations?
Ans: Inflation is probably at its lowest. Growth numbers are positive but global growth is weak. Interest rate differential with China, Europe and others is still 3%–5%.
If India’s macroeconomic conditions — exchange rate, volatility risk — allow, then reduction in interest rates would be preferred by industry to enhance competitiveness in a volatile global environment.
A rate cut is the anticipation, but there are many moving parts — rupee-dollar impact, global factors. If those risks are manageable, then looking at GDP growth, inflation, fiscal deficit and global interest rate trends — one would generally look at lowering interest rates.
