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Contents t Setting the Context Economic Outlook and Challenges ASSOCHAM Theme: 2013-14 14 Economic Security of India ASSOCHAM Roadmap for 2013-14 14 2
SETTING THE CONTEXT Economic Outlook and Challenges 3
FY14 to fare better Normal monsoon to support domestic consumption Govt. s development spending to stimulate investments t Growth Appears to be bottoming out Inflation Price pressures have ebbed WPI inflation close to RBI s comfort level Inflation moderated despite fuel and electricity revisions Govt. successfully limited fiscal deficit below 5% in FY13 Has set a target of 4.8% for FY14 Fiscal FY13 fiscal consolidation commendable Current Account Addressing external vulnerability on Govt. s radar Moderation in gold imports Govt. s thrust on relaxing capital account controls 4
but some concerns remain Growth Inflation Fiscal Current Account Private sector capex yet to recover Retail inflation remains elevated Risks of a fiscal slippage Structural weaknesses persist Productivity has deteriorated Upside risks from rise in crude prices/weaker Rupee Upside risks to oil subsidy Food security bill could add 02% 0.2% to fiscal deficit Slow improvement in domestic supply Financing of CAD becoming critical 5
Global l headwinds d add to concerns Tepid global growth US Fed tapering Geopolitical risks Barring US & Japan, key economies continue to display weakness Eurozone continues to grapple with recession China growth momentum slowed Expectation of withdrawal of incremental liquidity to impact EM assets- o o Currencies Equities Any rise in oil prices, will adversely impact India s o Capital inflows o CAD o o Inflation Fiscal Deficit The Indian economy has witnessed an increasing global interconnectedness in the last two decades Channels of transmission of global shock to the Indian economy Trade, Capital flows/finance and Confidence 6
Addressing concerns through h reforms: So far While the reform momentum has picked up since Sep-12, the current domestic and global backdrop requires the government to up the ante to make India a preferred investment destination Fiscal Subsidy Management Deregulation of petrol and diesel prices Hike in retail urea prices by INR 50 a ton Rationalization of LPG cylinders External Account Withholding tax on overseas borrowing by local companies cut from 20% to 5% Hike in gold import duty and temporary ban on sale of gold bullion and coins Investment Revival Committee headed by Road Secretary - authority to clear highway projects Cabinet Committee on Investments pushes delayed projects of INR 74,000 cr. Financial markets Limit utilization period for FIIs on GoIs and corporate bonds reduced by 15 days to 30 and 60 days respectively 7
Boosting confidence through h FDI reforms Commitment to the nation s reform agenda: Cabinet meeting with the Hon ble Prime Minister i on July 16, 2013 on FDI reforms across key sectors to boost investor confidence. Liberalising FDI caps in key sectors Insurance, Telecom, state-of-the-art Defence production Allowing more FDI under automatic route Oil Refineries, Commodity, Power & Stock Exchanges, Single-brand Retail Reviving i growth and investments in the Economy Vital solution for the ailing economy, the falling rupee and CAD 8
Indian economy at a critical juncture Domestic Macro Imbalances 40 Savings Investment (% of GDP) Low investment growth and 35 deteriorating productivity led to decline in India s potential growth by ~200 bps 30 over the last five years to ~6% now 25 2006 2007 2008 2009 2010 2011 2012 2013 Source: Planning Commission i of India Build on the positive momentum to revive Investments and Savings Reinvigorate Manufacturing and incentivize Exports to secure India s Economic future 9
ASSOCHAM THEME Economic Security of India 10
ASSOCHAM SSOC Theme h 2013-14: 20 3 Economic i S Security i Economic Security the core of the Chamber s agenda for 2013-14 Securing the nation s economic future crucial to the long g term growth viability and sustainability Economic Security closely linked to the to making growth inclusive in the long run 11
Economic Security backdrop Business Confidence Index 114.1 (Dropped 4.5% Q- o-q) Currency Exchange Rate Alarming depreciation of the Rupee to sub-60 levels UN Human India needs to increasinglyi look at Development Poverty Line rather than just the Index Bottom Line India has fallen 2 spots to 136 as of 2013 World Bank Ease of Doing Business Index 132 out of 185 countries Growth drivers in place for domestic market - Increasing incomes, surge in consumerism & demand Business climate and confidence need to improve to capitalize on growth potential Govt. s objectives of Fiscal Consolidation and job creation laudable - ASSOCHAM will fully support these initiatives 12
Cii Critical lfactors to achieve Economic Security Consistent regulatory setup Reforms in critical sectors Stable political environment Economic Security State level engagement 13
Driving i inclusive i growth through h our States t Geographically equitable growth by working with states Identifying reform areas to achieve an integrated agenda for inclusive growth Performers* Laggards* ASSOCHAM firmly committed to reigniting the growth at the grassroots * Representation of Indian States based on their performance in Healthcare, Education and Infrastructure given their per capita consumption Source: A Report Card for Indian States Pranjul Bhandari (Mint May 31, 2013) 14
Addressing challenges in the Energy Sector (Energy and Ecological Security) Recent Measures by the Government Gas pricing formula from Apr 14: ~USD 8.40 per mmbtu, closer to globally traded prices Debt restructuring plan for discoms - Banks believed to have restructured loans of INR 14,700 cr. given to Haryana and Tamil Nadu discoms Partial deregulation of diesel prices - oil management companies can hike prices Gas pipeline infrastructure bi being set up across India Further Measures for Energy Self-Sufficiency ( Vision 2030 ) Power - Market linked tariffs to ensure commercial viability Supply bottleneck: Global participation in coal exploration, focus on renewable energy Discoms debt recast plan Buy in from state governments to make the plan work Increased participation by Indian companies in global M&As 15
Boosting Manufacturing Activity it (Livelihood and Economic Security) Recent Measures by the Government Central PSUs, such as SAIL, RINL and MOIL roped in to help boost manufacturing activity by scaling up investments in greenfield projects National Manufacturing Policy (NMP) including NMIZs Clearance and approval mechanisms at the state level Gujarat, Maharashtra, HP Further Measures and Reforms to Reinvigorate Manufacturing NMP and NMIZs implementation single window clearance Replicating i a CCI-like clearance mechanism at state level l for smaller projects Speedy implementation of Land Acquisition Bill 16
Building Infrastructure t to stimulate t growth (National and Economic Security) Recent Measures by the Government Setting up the Cabinet Committee on Investments to fast track approvals recently cleared delayed projects worth INR 74,000 cr. The Delhi-Mumbai Industrial Corridor initiative to boost industrial and infra development ECB norms / asset restructuring guidelines relaxed for infrastructure companies Further Measures and Reforms to Develop Infrastructure Implementation of the National Public Private Partnership Policy DMIC MC timely and speedy implementation e of projects active participation pat of the state governments, clearances and power / gas availability critical Streamlining the land acquisition process for infra projects 17
Increasing growth in the Agriculture Sector (Livelihood Security) Recent Measures by the Government Food Bill Ordinance providing adequate quantity of food grains at affordable prices Liberalization of multi-brand retail stimulating investment in back-end infrastructure Further Measures and Reforms to Boost Agriculture Growth Implementation of Food Bill procurement, subsidy impact, Public Distribution System Mechanization of small farms presently, only 40% level of farm mechanization Long term reforms in irrigation to reduce reliance on seasonal monsoon FDI in Agriculture new technology to improve productivity 18
Key macro and structural t reforms Implementation of GST - coordinating with states crucial Can increase India s GDP between 0.9% and 1.7% in medium term and between USD 325 bn. and USD 637 bn. in the long term Implementation of DTC Enhance economic efficiency of the tax system by eliminating distortions and increase the tax-gdp ratio Enactment of Companies Bill Improve corporate governance and further strengthen regulations such as CSR, e-governance and women directors 19
Kick starting ti an investment-led t revival Utilising PSU cash surplus to boost investment Surplus funds estimated at ~INR 2.8 Lakh Cr. can be invested by PSUs themselves for capex or investment purpose. Investing in Urban Infrastructure to sustain growth Investment of INR 39 Lakh Cr. required over next 20 years in urban infra. Facilitating urbanization critical to sustaining India s economic growth momentum. Focusing on the North East as the future growth engine India s Gateway to the East - abundant natural resources & pool of educated human capital. Need to replicate Project Himayat for skills development & employment. 20
ASSOCHAM ROADMAP Realising the Vision 21
Promoter Chambers key to a Unified Vision i Bombay Chamber of Commerce & Industry Cochin Chamber of Commerce & Industry Indian Merchants Chamber PHD Chamber of Commerce & Industry The Madras Chamber of Commerce & Industry Chamber s unified strengths to address Economic Security Promoter Chambers key to increase national footprint - coordination with local chambers Economic Security requires localised li action steps for each region Enabling quantum leap in Nation wide activity it and footprint t 22
ASSOCHAM Blueprint for 2013-14: Strategize >> Actualize Position as Knowledge and Thought Leader Events and research on sunrise sectors building quality rather than quantity Focus on States to mobilise growth and investment Help in national building and recognise State Governments best practices Forge partnerships with global counterpart organisations Increase traction ti with Ministries i i like External Affairs and key Embassies Augment and engage the Membership base Reinvigorate and engage the National Councils 23
Thank You 24