Trade, tech & sustainability: Engines for long-term growth

Finance and Corporate Affairs Minister Nirmala Sitharaman is poised to set a historical precedent. When she presents the complete Union Budget for 2024-25 on July 23, she will become the first finance minister to present seven consecutive budgets.

The Interim Budget of February underscored the government’s commitment towards realising the goal of being Viksit Bharat or a developed country by 2047. The full Budget is expected to further strengthen these initiatives and drive the growth momentum while presenting a comprehensive strategy for long-term economic growth.

Role of the Confederation of Indian Industry (CII)

As India’s development partner, the Confederation of Indian Industry (CII) has been actively engaged in providing constructive policy recommendations to the government and has submitted key proposals for the 2024-25 Budget. Here, I would like to focus on three critical areas—trade, technology and sustainability, which play catalytic roles in fostering inclusive, sustainable and long-term economic growth and are pivotal in charting India’s path towards becoming a developed nation.

Trade

India’s external sector has recorded robust growth in the recent past. Despite a challenging global environment and trade slowdown, India recorded its highest export of $776.68 billion during 2023-24. This can be credited to government programmes such as Make in India, production-linked incentives, export promotion schemes and introduction of WTO-compatible schemes.

The government’s push on capex in consecutive budgets is a well-appreciated move expected to stimulate growth, while powering the infrastructure sector. CII recommends an expansion of capex by 25 percent, which would be required for strengthening the economy’s competitiveness.

The focus on trade is an imperative, given the fast-changing global economic landscape. Elevating India’s status in global trade by strengthening domestic production and deepening our global value chain (GVC) participation are also important to become a manufacturing powerhouse.

With respect to enhancing participation in GVCs, CII has suggested a three-tier import duty structure for making our products more competitive and incentivising value-added trade. Laying out a roadmap towards zero or low duties for raw materials and inputs—higher for intermediate goods and highest for final goods—is recommended.

The remission of duties on exported products scheme is a key initiative aimed at enhancing competitiveness of our products in international markets. Allocating more funds is crucial for higher export growth.

Technology

The tech landscape has witnessed remarkable transformations over the past decade. Initiatives such as Digital India have strengthened digitalisation efforts, with India achieving significant milestones such as expanded internet access, widespread adoption of digital payments and delivery of digital services.

To sustain this and address critical challenges, strategic technology partnerships such as the US-India Initiative on Critical and Emerging Technologies are essential. Forging such collaborations should be initiated with more nations based on the Global Innovation Index, with higher spending on R&D and patent applications.

The government should also look to operationalise the `1-lakh-crore fund to support R&D in private sector. Industry should be engaged in deciding how it is spent.

To make manufacturing future-ready and aligned with evolving technological paradigm, two missions—advanced manufacturing and materials—could be announced.

With the pervasive use of digital technology in daily life, the importance of cyber insurance cannot be overstated. The government could consider launching a comprehensive policy on cyber risk insurance.

Sustainability

India is at the forefront of net zero revolution, with sustainable growth as its guiding principle. It strives to strike a balance between environmental sustainability and economic prosperity. For this, de-carbonisation plans and transition roadmaps should be prepared with industry participation. In addition, a commission on adaptation could be set up to build adaptive capacity, along with launching a national mission on water security to address rising water stress.

The government could consider setting up a green transition fund to realise the goal of net zero by 2070. The fund could be established in partnership with multilateral institutions and the private sector.

The definition of corporate social responsibility (CSR) under the Section 135 of Companies Act 2013 can be expanded to include contributions to this fund as a recognised CSR activity. The existing environmental levies, cesses and surcharges to be used for environment-related activities could be consolidated under the fund.

R&D is an essential prerequisite for achieving decarbonisation targets as it can drive energy efficiency by introducing cost-effective ways to reduce greenhouse gas emissions. Thus a focus on R&D is imperative. We need to enhance national investments in R&D from the current 0.67 percent of GDP to 4 percent by 2047.

A strong focus on these areas in the Budget will give a further momentum to India’s development. Greater external engagement through trade and technology partnerships, leveraging technology for economic expansion and strategic investments in green tech would position India as a global leader of innovation and sustainable growth.

This article was written by Mr Chandrajit Banerjee, Director General, Confederation on Indian Industry. It was first published on 16^th July 2024 in THE NEW INDIAN EXPRESS