Amitabh Kant: Bringing down the cost of our logistics to globally competitive levels will be a big milestone

The cover of Made in India: 75 Years of Business and Enterprise; and G20 Sherpa and author Amitabh Kant.

A 1980 Kerala cadre Indian Administrative Service (IAS) officer and CEO of the NITI Aayog from January 2016 to July 2022, Amitabh Kant has had a hand in formulating some key policies that have shaped the way we do business in India today.

His latest book, Made in India, looks at some of these policies - from Make in India to Start-up India and production-linked incentive or PLI scheme. In an email interview, Kant spoke about these policies, the next big milestone for India Inc., AI4Bharat and the role of public vs private enterprise.

Made in India begins with a sort of stocktaking of what has happened so far – what would you say has been India’s biggest policy success post-liberalization?

We’ve had several success stories as a direct result of the reforms of 1991. For instance, our IT (information technology) and ITeS (IT-enabled services) industry is a global leader, and has played a leading role in the transformation of our economy.

We also saw our civil aviation, telecommunications, banking, and insurance sectors emerge as growth drivers.

Not just industries, but also our outlook towards entrepreneurship changed after these reforms. New jobs and skills were in demand in the market. Indians had more options in their careers, rather than be restricted to a few choices.

Overall, I think the policy success has been a quadrupling of our per-capita incomes since 1991. In the ~ 40 years before reforms, our per-capita incomes only doubled. This shows the impact of the reforms.

To my mind, the biggest success has been the Digital Public Infrastructure (DPI) that we have created identity, bank accounts, fast payments, credit wealth management, insurance – all through a digital process – paperless and cashless. This has technologically pole-vaulted India in a big way.

What would you say is the biggest achievement of the Make in India initiative? And what has it struggled with?

Make in India was about making India an easier place to do business, attract FDI (foreign direct investment), and introduce a revamped intellectual property rights (IPR) regime. I think we have succeeded on all three fronts.

Our ranking in EoDB (Ease of Doing Business) parameters improved massively, a 79 rank improvement in the World Bank’s index. The FDI regime has been revamped, with more sectors opened up for FDI along with an easing of processes. Finally, we have a totally new IPR regime. The time taken to file patents and trademarks has reduced considerably.

Public enterprises will continue to thrive in strategic sectors. However, in non

-strategic areas, private enterprise must lead the way. - Amitabh Kant

Our policy response was to introduce the production-linked incentives (PLI) schemes. The PLI schemes have been put in place for a limited time to promote size and scale in manufacturing. At the same time, we have committed massive investments in transforming India’s infrastructure to bring down the cost of logistics.

Going ahead, state governments will have to take the lead in ensuring the success of India as a manufacturing powerhouse. Reforms in land and labour will free up factor markets. Ensuring access to uninterrupted and affordable energy is another.

What would you say is the next big milestone for India becoming an integral part of the global value chain?

Bringing down the cost of our logistics to globally competitive levels will certainly be a big milestone. Moving up the value chain, development of local industries, and integrating our MSMEs (micro, small and medium enterprises) will be the next big milestones.

At the same time, it will be important for India to decarbonize our industries and transport systems. The world is increasingly demanding low-carbon products, and we must be prepared for this shift. We must be the first country in the world to industrialize without carbonizing.

What should be the role of public enterprise, as private players take the economy forward?

The State and therefore public enterprises will continue to matter, however, their roles in the economy will need to be realigned. Public enterprises will continue to thrive in strategic sectors. However, in non-strategic areas, private enterprise must lead the way.

The public sector has to emerge as a facilitator of growth. It must create an enabling environment for the private sector to invest and thrive. The most prosperous countries of today, along with the ones with the best results in human development, also have a vibrant private sector driving growth.

Take the example of some of the leading countries in the World Bank’s Ease of Doing Business Index in 2020: New Zealand (1), Denmark (4), South Korea (5), Norway (9) and Sweden (10). All these countries have robust publicly funded health and education systems, and strong social security nets.

So we need both: a strong and efficient public sector along with the private sector. Only then can we sustainably finance social security schemes.

One big challenge and one big rewarding moment for you around the Start-up India policy?

I think one of our most challenging tasks during Start-up India was arriving at a consensus definition for start-ups. At the time Start-up India was launched, in 2015, India had a lot of regulatory cholesterol. The same rules would’ve been applicable to start-ups, hampering their growth prospects. We wanted to ensure an easy environment to do business. So we needed to come up with a definition for start-ups, ensuring they would be exempted from these rules and regulations.

However, given the dynamic nature of the start-up ecosystem, this was an extremely difficult task. We worked tirelessly with stakeholders from government, startups, corporates to come up with a definition.

Will Indian hardware manufacturing catch up to India’s IT services industry any time soon, both in terms of revenue and reputation?

We have always been better in the software game than in hardware. Our competitiveness in the manufacturing space was hampered by a lack of size and scale, along with high cost of logistics and doing business.

As highlighted earlier, we have seen a paradigm shift in India’s manufacturing prospects. PLIs have been introduced in IT hardware mobile manufacturing, telecom and networking products, amongst others. For instance, reports now suggest that in the next 3-5 years, around half of all iPhones will be made in India.

We have also launched the India Semiconductor Mission (ISM), to drive India’s long-term strategies for developing semiconductors and display manufacturing facilities and semiconductor design ecosystem.

With PLIs, ISM, infrastructure investments, and ease of doing business, our hardware industry is poised to catch-up in terms of quality and competitiveness for the rest of the world.

Are you concerned or excited by the potential of AI for India and the world? Why?

I just had a fascinating meeting with Sam Altman of OpenAI. I think there is a lot of potential in AI, not just for India, but also the world.

We are also embracing AI in governance. The focus of AI4Bharat is on building open-source language AI for Indian languages, including datasets, models, and applications. We are aiming to democratize access to AI and ensure social and inclusive growth for India.

However, as this is a growing space, we must strike a balance between regulation and innovation.