Assocham expects India to show ‘above trend growth’ for the next few years

India has spent several years resolving its financial sector issues, and most are fundamentally resolved. Banks have dealt with NPAs and raised capital, so capital adequacy ratios are pretty good. Besides, in the last few years, various corporates have deleveraged balance sheets, so they have become a little bit healthier.

Now, is there a reason to invest? We had one year of negative growth (Covid), but most of that has been made up over in the current fiscal (FY22). (According to) the next year’s forecast, we are looking at a 7-8 per cent growth. There is a relatively good chance that all the pent up demand there of Covid will start getting more deeply and directly manifest.

So as we get out into the post-pandemic economy, I expect India to show above trend growth for next few years.

The government is doing all the right things in terms of keeping the fiscal deficit at a level which is both, stimulating the economy and not so high, that it is becoming a problem for the government raising capital. Besides, the PLI schemes hopefully allow manufacturing to get more deeply embedded, job creation, etc. Encouragement of green economy is also very positive.

The risks are from the external world, where we know that the US Fed has already started increasing interest rates and will start sucking liquidity out. The second is energy shock (crude oil and gas situation), arising particularly out of what is happening in Europe thereby, taking energy prices to a level where it begins to become a negative shock to the Indian economy in terms of inflation.

High commodity prices will eventually find their way into end pricing. We (RE sector) as users of steel, aluminium, copper, etc, have seen that happening. And therefore in the bids that happen, inevitably people will start factoring in higher capital costs and there will be a higher tariff for end consumer.

There will be some inflationary impact of all this. So the question is what is the RBI thinking? We know that CPI is around 6 per cent, which is the top end of RBI’s level. The RBI must be hoping that it stays at that level so that they do not have to increase interest rates.

Our job is to facilitate interaction between what the sector requires and what the government is able to deliver. There are three to four areas which can help MSMEs.

One is more credit flows. We have to find the ways in which government, through public sector banks, can lend more easily, and perhaps, at lower rates. A couple of other things which the government could consider doing is how MSME clusters can be created. For instance, for the solar manufacturing industry, if manufacturing develops around an area, can we also develop an MSME eco-system around it to supply components?

A lot of MSMEs do not have R&D capabilities and we need them to have that. We need to build links between academic institutions and MSMEs.

All indications are that green hydrogen is an important way for us to reduce dependence on fossil fuels. To develop this market, there are two things that have to happen.

First is technology development. The electrolyser industry is at a very early stage and there is no large-scale manufacturing. As industry develops, you will see prices coming down. Also as technology improves in renewables, the cost of RE power that goes to make green hydrogen will also come down. This will help the cost of green hydrogen to come down to $2-3 per keg from $4-5, in the next four to five years.

The remaining savings can come from government policies. For instance, today there is still a fairly high customs duty on electrolyser imports. The GST on renewables has been increased to 12 per cent. In batteries also, the total import duty and GST adds up to 35-40 per cent. This adds to the cost. So we have to bring the taxes down. If we address that, we can get down the cost to $1.5-2 a kg.