New Delhi: Businesses need to step up their research and development spending, and the industry expects the government to sustain the growth in budget allocation for capital expenditure as these two would help the Indian industry to become more competitive in global markets, Harsha Vardhan Agarwal, president of Federation of Indian Chambers of Commerce and Industry (Ficci), and vice-chairman and managing director of Emami Ltd, said.
In an interview to Mint, Agarwal also downplayed the government’s concerns that private sector salaries were not keeping pace with their multi-year-high profitability, saying that the need to retain talent ensures salary increments in the private sector.
“It is not that the industry does not increase salaries, because if they did not, workers would move to competitors. Businesses always look for capable, talented people. Private sector will always try to retain people because manpower is the biggest asset that a company can have. Whatever they need to do to retain, motivate them, they always do, they need to do,” Agarwal said.
Chief economic advisor V. Anantha Nageswaran had said last week that staff cost of private-listed companies has been coming down and companies have used profits to deleverage. Nageswaran said it is time to engage in a good combination of capital formation and employment growth as well, as without that, there will not be adequate demand in the economy for business’ own products to be purchased, Business Standard reported on 5 December.
Agarwal said factories are running at about three-fourths their capacities and distressed asset purchases by businesses are revitalising idle production lines, suggesting that capacity utilisation in factories is at a sweet spot, signalling impending pick up in private investments.
As per our study, the utilization of manufacturing capacity is now to an extent of 74-75%, and we have typically seen that it sets a very sweet spot where industries start looking at further expansion or capital investment.
“The balance sheets of many industries have been deleveraged and it now opens up the opportunity for those companies to go into further round of investment. As per our study, the utilization of manufacturing capacity is now to an extent of 74-75%, and we have typically seen that it sets a very sweet spot where industries start looking at further expansion or capital investment,” he said.
But there is urgency in businesses stepping up innovation spending to counter competitive pressures, particularly from Chinese imports—a concern the industry body has taken up with the government. Businesses expect a 15% rise in government’s capital expenditure in the FY26 budget as it will reduce logistics costs and improve business competitiveness, he said. Central government’s effective capital expenditure allocation, including grants to states for asset creation, stands at ₹15 trillion in FY25, a near 20% increase from a year ago.
“The government has been taking initiatives in the right areas. Our expectation would be that they continue in that direction. Our recommendation is a 15% improvement in the government’s capex even next year,” Agarwal said.
Inclusive growth is crucial for India to achieve the developed-country status, as a large part of the population live in rural areas. Having more women in the work force and supporting small businesses are important, he said.
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#Industry #spend #expect #govt #capex #growth #sustain #Ficci