India Inc could play a lead role in our economy’s global emergence
PremiumA confluence of initiatives has taken us to a stage from which our ambitions can be achieved by easing the last few constraints
As India celebrates its 75th year of Independence with the Azadi ka Amrit Mahotsav, we stand at the cusp of a new emerging world order. With a $3.2 trillion economy, India aims to achieve a $5 trillion economy within this decade. India has emerged as one of the world’s fastest growing major economies and is expected to be among the top 3 in the next 2 decades.
Let us look at our journey so far and challenges ahead. India was left a poor nation by the British Raj. As former PM Manmohan Singh had commented, “The brightest jewel in the British crown was the poorest country in the world in terms of per capita income at the beginning of the 20th century." Post-independence, a number of public sector enterprises were established, especially in heavy industries sector, which our first Prime Minister Jawaharlal Nehru called “temples of modern India". Economic liberalization in 1991 unshackled the entrepreneurial spirits of Indian enterprise and allowed the private sector to play a pivotal role in a free market economy.
The initiative to liberalize the economy brought the services sector into focus that today contributes more than half of India’s gross domestic product (GDP) and attracts 55% of foreign direct investment. However, for a country of India’s size and scale, the manufacturing sector has to be the primary growth engine to fulfil the aspirations of a new India. Here, I appreciate the government’s clarion call of “Make in India, Make for the world". Specific initiatives like Skill India, Digital India and Startup India, to name a few, have helped propel India’s rapid growth. These initiatives have spurred entrepreneurial energies. We now have over 100 unicorns with a total valuation of $332.7 billion. These are widely recognized as important engines of growth and job creation.
Our bold targets of economic growth need robust infrastructure support. Union minister Nitin Gadkari recently quoted former US President John F. Kennedy as saying, “American roads are not good because America is rich. America is rich because American roads are good." Gadkari has committed to ensuring Indian roads and highways are at par with the US’s. This goes with the Centre’s broader focus on major infrastructure and logistics projects for India to leapfrog into a new era of growth.
While we have many reasons to be cheerful, key challenges remain for Indian enterprises.
First, India needs to address its ease of doing business climate. In 2021-22, manufacturing constituted 17.4% of our GDP, up slightly from 15.3% two decades ago. By comparison, Vietnam’s manufacturing sector more than doubled its share of GDP in the same period. India still scores low on ease of doing business. Each industrial project needs contiguous land parcels and timely environmental and regulatory clearances, which remain challenges.
Second, the cost of doing business in India is still high, with various regulatory and bureaucratic procedures that ultimately hurts India’s image and chances of becoming a preferred global manufacturing destination. A single-window clearance system is the need of the hour.
Third, we need to fix our productivity matrix. According to McKinsey data, India lags far behind in productivity even though we have cheap labour. Manufacturing productivity in Indonesia is twice India’s, while in China and South Korea it is four times higher, though they have costlier labour. This should be an eye-opener for us. If we are to compete globally, we need to fix our productivity issues. We cannot expect incremental gains at the global level with the baggage of old mindsets and a ‘chalta hai’ (anything goes) attitude.
Fourth, we must upskill our workforce for India to be an attractive destination for global manufacturers. This is the only way we will move up the value chain to more value-added categories. Indian firms must work on scale and quality if they are to break into the big league of global supply chains.
Last but not least, Indian enterprise should be given support and encouragement to expand their operations on a global scale here in India. If existing entrepreneurs with investment on the ground here are happy, then prospective investors will be encouraged to look at India as a favourable manufacturing destination.
Consistency of state policies is fundamental to investor confidence. Court judgements cancelling 2G licences and coal block allocations have caused irreversible setbacks to both the economy and investor sentiment, resulting in huge losses of money and time. Many steel and power plants became insolvent due to lack of coal and millions lost their livelihood. The single most important reason for the recent power crisis and shortage of coal was the de-allocation of coal blocks. Since 2014, the government has made commendable progress in regular auctions of coal blocks for commercial use, and this will ensure our coal shortage would be a matter of history in the next 4-5 years. In a couple of decades, I expect all these coal mines to be consigned to history too, and we hopefully move completely towards clean energy sources.
The government has shown both intent and will to carry out pro-industry and pro-people reforms. Prime Minister Narendra Modi has acknowledged the contribution and role of the private sector as an important engine of growth and employment. “The role of India’s private sector is as crucial as the public sector," he said. Over the past seven decades, public and private sector enterprises have complimented each other and produced results.
Recently, the Prime Minister asserted that 32,000 unnecessary compliances had been removed for the ease of doing business. India has earmarked $1.5 trillion for the national infrastructure pipeline project. The PM Gati Shakti project was established to bring 16 ministries (including of railways and roadways) together for national infrastructure connectivity projects. India has already achieved its annual export target of more than $600 billion and is aiming for an ambitious $800 billion worth of goods and services exports in 2022-23. All these developments and initiatives augur well.
Indian businesses can hold their own in the fiercely competitive world of global business. The rise of a self-reliant India on the global stage is imminent. In my view, India’s time has come to take its rightful place in the global order, and it will be led by Indian enterprise.
Naveen Jindal is chairman of Jindal Steel and Power Ltd and a former member of Parliament
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less