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    Coming decade will see an upsurge in capital expenditure across many sectors: Kumar Mangalam Birla

    Synopsis

    Mr Birla said "On one hand we have public spending, such as the National Infrastructure Pipeline, whose size at 1.5 trillion dollars is even larger than what is being undertaken in the United States as part of their infrastructure stimulus. "

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    Digital India envisions perhaps more than 40 percent of the economy around digital," he said.
    Kumar Mangalam Birla, chairman of Aditya Birla Group on Friday said that the coming decade will see an upsurge in capital expenditure across many sectors. He was virtually addressing the annual general meeting of the Kolkata-based Indian Chamber of Commerce (ICC). Describing it as the Decade of Capex Mahotsav, he said that capex or investment spending fuels and sustains future growth.

    Mr Birla said "On one hand we have public spending, such as the National Infrastructure Pipeline, whose size at 1.5 trillion dollars is even larger than what is being undertaken in the United States as part of their infrastructure stimulus. The infra plan covers all areas like roads, ports, airports, waterways, electricity, and telecom. Imagine the impact of an execution pipeline of nearly 300 billion dollars every year, and what it would do to stimulate economic activity. The NIP is being enabled and facilitated by a far-sighted initiative called GATI SHAKTI, where 16 ministries come together to act in a coordinated way, you might say like a symphony orchestra. The government has also begun unlocking infra-assets through its Asset Monetization Programme, which in its initial years will release 6 to 7 trillion-rupee funds.

    Beyond infra push, is the fact that both bank and corporate balance sheets are in healthy shape today. The “twin balance sheet” problem, with stress caused by excessive bad loans, and over leveraged corporates, is truly behind us. As capacity utilization has risen, this is the time we will see a private sector led capex revival, which will persist for several years. Added to this is the geopolitical factor of China plus one. Many global investors are looking to diversify away from China, and India is an immensely attractive destination for such investments.

    The Aditya Birla Group chairman feels that 2021 is the new 1991. This year marked thirty years since the landmark economic reforms of 1991. Those reforms were partly triggered by a foreign exchange crisis which necessitated pledging gold to get emergency foreign loan assistance. And then the dramatic unshackling of the economy led to an investment boom creating a high-growth trajectory. As a result, India today is a 3 trillion-dollar economy and has the fourth highest stock of foreign exchange in the world, a far cry from the crisis of 91, he said at the ICC AGM.

    "Similarly, I think 2021 too will be remembered as a watershed year just as 1991. Be it consolidation of Labour laws into a modern labour code, or the conviction in fixing legacy issues plaguing sectors like power and telecom there is a palpable boldness in the Government’s recent reform initiatives. 2021 is also the year when long-term reforms like GST and the Insolvency and bankruptcy code came into their own and have started delivering strong outcomes. In some ways, the Indian economy I believe is undergoing a set of economic reforms currently whose effect could be as profound as the effect that the 1991 reforms had on the following decades," he added.

    Talking about the Indian economy, he said that one of the important dimensions is the Indian economy’s rapid transition from formal to informal. India’s economy has had a large informal sector, which consists of unregistered firms, or workers who lack social security, and activity which is not fully in the tax net. Despite the tag of “informal” it is a substantial contributor to output and employment. The disadvantage of too high a proportion of the informal sector is that it fails to get formal funding and capital which thwarts growth, workers don’t get social security, contract enforcement is difficult, and the economy is deprived of precious tax resources. Due to the rollout of GST and instant electronic authentication by Aadhaar, the extent of informality is shrinking. In fact, thanks to the Jan Dhan Yojana, wherein 350 million no-frills bank accounts were opened in record time, it was possible for the government to use direct benefit transfer. This was crucially helpful during the pandemic and continues to be relevant to all social security schemes. Informal to formal transition can be captured by various metrics. The data from digital transactions and rise in registration of firms and workers in pension schemes, is showing that the share of the informal economy may have shrunk considerably in the past couple of years. What the informal to formal transition does is that it helps mainstreaming economic activity.

    Mr Birla identified two recent mega trends in India - one is the deepening of the digital economy and second is the transition to an increasingly green economy.

    "The lockdown induced by the pandemic might have pushed us all in accelerating the pace of digital adoption even more. Whether it is payment systems, exponential growth around e-commerce and platform/s, cloud-based services of everything from taxes and payroll to inventory and enterprise management, the digital economy is just chugging ahead. Indians currently consume over 12 Gigabytes of data per SIM per month. That is higher than most peer and advanced economies including Korea, China, Japan, UK, and Australia. Every sector is being disrupted by digital innovations. The fiber optic backbone is getting stronger and is the architecture on which resides the digital economy. Digital India envisions perhaps more than 40 percent of the economy around digital," he said.

    Explaining India's transition to an increasingly green economy, Mr Birla said "We have delivered on some of our Paris commitments ahead of time. In his Independence Day speech this year, the Prime Minister announced five major initiatives, of which the first one is hydrogen. It is the cleanest fuel imaginable, because when you burn it, you get water vapor. Just as we saw rapid fall in the capital cost of solar energy equipment, the cost of making green hydrogen will surely fall sharply in the coming years. Even the European Commission has put its might behind hydrogen. India is blessed with nearly 350 days of sunshine annually. Solar energy has already achieved cost parity with coal and fossil fuels. Ordinary applications like solar pumps in agriculture are transforming the lives of farmers. A combination of solar and hydrogen has the promise of making India energy independent, or even an energy exporter."

    He also spoke about the growth of entrepreneurial talent in India which has added to the country's growth story. "This year we have already seen the birth of 35 unicorns. Many are first generation entrepreneurs, whose raw energy fired by their imagination has created immense value. India has received record inflows of FDI in the form of private equity which is fueling the unicorns. Indian entrepreneurs are building businesses at scale, leveraging the power of technology, and also solving homegrown problems. In the process they are addressing a billion consumers," he said at the ICC AGM.


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