Union Budget 2024: Former CEO of HDFC Keki Mistry says that only focus on sustained economic growth can alleviate job crisis

As the Union Budget 2024 approaches, Keki Mistry, former Vice Chairman and CEO of HDFC Limited, has outlined critical economic priorities for the Indian government. In a recent interview on Business Today TV, Mistry, known for his deep insights into the financial sector and extensive market experience, emphasized the need for growth-centric policies and effective measures to tackle unemployment. His comments come at a crucial time when policymakers are poised to shape the nation’s economic trajectory for the upcoming fiscal year.

Growth and Job Creation

Mistry emphasized the importance of growth-oriented policies in the upcoming Budget. "The Indian economy is on a strong footing," he stated. "In all my 40 plus years of working, I have never felt so proud of the strength of our economy as I do now." He highlighted that India's growth rate, currently at 8.2%, significantly surpasses the global average, which hovers around 4%.

He stressed that the Budget should prioritize sectors that generate employment, particularly construction, real estate, and infrastructure. "Growth by itself will create jobs," Mistry said. "With a young population and a high number of graduates entering the job market annually, we need to ensure there are ample job opportunities."

Addressing Unemployment and Consumption

Despite robust economic growth, unemployment, especially among the youth, remains a pressing issue. Mistry addressed this concern by suggesting that sustained growth would eventually alleviate job shortages. He acknowledged the current consumption dichotomy, where high-end demand contrasts with lower-income stagnation. "The lower end of the market has felt the brunt of inflation," he explained, noting that rising food prices and increased housing loan rates have disproportionately impacted lower-income groups.

Mistry proposed that tax cuts could stimulate consumption. He pointed out, "Historically, reductions in tax rates have led to increased tax collections. For instance, lowering corporate tax rates to 25% resulted in a significant boom in corporate tax payments." He suggested that a progressive reduction in individual tax rates could serve as a major boost to overall economic growth.

Fiscal Consolidation and Capital Expenditure

Regarding fiscal policy, Mistry anticipates continued fiscal consolidation. He noted that while the Budget might aim for lower fiscal deficits, maintaining fiscal discipline is crucial to controlling inflation. "I expect the fiscal deficit to be lower than initially indicated," he said.

When asked about capital expenditure (CapEx), Mistry acknowledged the government's significant investment in infrastructure but noted a lag in private sector capital investment. He attributed this delay to various factors, including capacity overhang from the pandemic and election-related uncertainties. However, he expressed optimism about increased private sector investment in the near future.

Privatization and Affordable Housing

On the topic of privatization, Mistry indicated that while the government has made strides in this area, the Budget       might provide further clarity. "The privatization program is underway, and I expect the Budget to outline specific goals and timelines," he said.

Mistry also highlighted affordable housing as a key area of focus. He praised previous initiatives like the credit-linked subsidy scheme and urged continued support for affordable housing projects. "Affordable housing is crucial for job creation and has a significant multiplier effect on the economy," he remarked.

Impact of Geopolitical Risks and Infrastructure Financing

Discussing geopolitical risks, Mistry acknowledged the potential impact of rising oil prices on India's economy. He noted that while current oil prices have stabilized, any significant increase could affect GDP growth and inflation. "A $10 increase in oil prices can impact GDP, inflation, and the current account deficit," he explained.

Lastly, on infrastructure financing, Mistry supported the role of specialized institutions like NABARD in supporting long-term infrastructure projects, while also recognizing the potential for banks to contribute more to this sector.