The Economy: Path from $4tn to $30tn
STORIES, ANALYSES, EXPERT VIEWS
India is set to become 4th largest economy by year-end and the 3rd largest in three years.
Stressing that India and Pakistan can no longer be hyphenated, Amitabh Kant (India’s G20 Sherpa & former CEO Niti Aayog) writes “Maharashtra’s economy is larger than Pakistan’s; Tamil Nadu’s is the same size. India’s $4tn economy is over 10x that of Pakistan. BSE and NSE’s capitalisation is 200x that of Pakistan Stock Exchange. Companies like HCL and Axis Bank command a market capitalisation equivalent to Pakistan’s entire stock exchange. LIC’s (Life insurance company) assets under management ($640bn) are nearly 2.5x of Pakistan’s national debt. Pakistan’s forex reserves: $16bn, India’s: $680bn.”
PM Modi has said post-Op Sindoor, the path to peace goes through power. If a $4tn economy gives India so much heft, “imagine what a $30tn+ economy could do.”
Transformative reforms
So, now is the time to place ourselves among the most powerful economies with transformative, not incremental, reforms. Kant suggests the following.
Less regulation: “Overregulation increases the cost of doing business by raising compliance costs…. Excessive licensing, sector-specific controls, and proliferation of circulars and NOCs need to be eliminated….”
Rationalise GST: GST has enabled formalisation and encouraged ease of doing business. "It’s time to rationalise GST rates and slabs, and simplify processes to reduce the compliance burden for small enterprises….”
Ease of borrowing: Kant suggests “we must liberate financial markets to ensure adequate and reasonable business borrowing rates. RBI must create a roadmap to phase out the statutory liquidity ratio (SLR), which compels commercial banks to buy govt bonds. While this enables govt to finance the fiscal deficit, it curbs the availability of finance for MSMEs and impacts the development of a commercial bond market. Freeing up the SLR requirement will help reduce borrowing costs for private businesses…”
Make for world: Kant agrees that "our tariffs on intermediate goods and inputs are too high and must be brought down to push manufacturing in India. High tariffs on critical inputs, particularly in electronics, automobiles and machinery, blunt PLI scheme’s effectiveness. They also keep Indian companies out of global value chains. Non-tariff barriers, such as quality control orders (QCOs), must be rationalised….”
Need for speed: India is a major importer of batteries, solar cells and modules, motors, controllers and wind turbines in the clean tech sector. “If we don’t ‘Make in India’, we’ll never become energy-independent. So, speedy implementation of the Clean Tech Manufacturing Mission is critical. Thrust on infra must continue. High-speed rail and dedicated freight corridor projects must be sped up. Public-private partnerships must be rekindled, bringing more private investment in infra. Labour laws and Factories Act are outdated and need a complete overhaul…..”
Brain gain: India, says Kant needs “to attract top-tier scientific minds. We should aim to attract 500 distinguished academics from top 100 global universities over five years, requiring them to spend at least six months annually at an Indian host institution. We must create 1,000 research sabbaticals for academics from the top 200 global universities. Speedy implementation of India AI Mission will ensure we build sovereign frontier models…..”
