This special issue of India Today asks: How can India become a global giant? That eventual outcome is not in doubt. If we keep growing at the 6.5 per cent we have averaged for the past 30 years, we will soon be one of the three largest economies in the world. We will go on to be a huge economy by 2047, by dint of having the world’s largest population. But we will not yet be rich—as an upper-middle income country, we will be well below today’s developed world. To do better, we must place manufacturing and the ambition of Indian firms at the heart of development.
First, a word about policy: this is not an article arguing that the government must do a list of things. The state’s role, in my view, is to limit itself to only those things that only it can do. In manufacturing, the state should primarily adopt a hands-off approach—don’t choose technologies, don’t select firms, don’t promote particular industries, and don’t incentivise particular sectors. That is, enable all of Indian industry; don’t attempt to pick winners. Our industrial policy should seek a future that looks like Germany, with thousands of specialised world leaders, rather than China or South Korea, each with a few dozen giant state-sponsored champions.
But if I ask less of the state to make us a great power more quickly, I ask much more of Indian industry. As I have argued at length in my book, The Struggle and the Promise: Restoring India’s Potential, Indian industry must strive to be more of these four I’s: inclusive, international, innovative and independent.
1. Inclusive: In the 1990s and 2000s, the Indian consumer goods industry grew at a rate faster than GDP. The latest Economic Survey indicates that consumption is growing at 4 per cent, roughly half the rate of GDP growth. This is a failure of inclusion. We have millions eager to become first-time buyers of restaurant meals, refrigerators, hospital services, holidays, motorcycles, ready-made clothes and toothpaste. We need to bring 700 million more into the consumer class. If we do this, we will create wealth for all of Indian industry. This will take a focus on skills and education in everything Indian industry does beyond its gate. The 2024 budget supports this activity with incentives for internships; it is in our collective industrial interest to improve school outcomes and skill our population.
2. International: Indian firms must increasingly operate around the world, investing in brands and markets. As Martin Wolf recently pointed out in a talk in Delhi, if our trade to GDP ratio stays at the same level, Indian firms should, in 20 years, expect to export more than our total current GDP.
Are we gearing up to do so? Do we have the confidence to allow the world’s best firms (yes, including Chinese ones) to invest in and sell in our market, as we use their inputs to add value and export our goods around the world? Are we pushing our commerce ministry to sign preferential trade deals with Asia, Africa and Latin America, markets that will provide most of the world’s growth for the next 20 years? Indian industry is welcomed around the world. We are seen (unlike our northern neighbour) as benign. We should take advantage of our welcome.
3. Innovative: Indian industry is more skill- and capital-intensive than other countries at our level of development. Industrial success, thus, requires much greater focus on R&D. Indian industry’s investment in R&D is around 0.3 per cent of GDP. We need to expand this by many times to match the world average of 1.5 per cent. I have written at length about this both in my book and in my columns. Let me focus on one point here: ambition. Do we aspire for world leadership, as multinationals with Indian roots? Have we developed products and services that truly lead the world, that meet the needs of consumers and industry better than any other firm does? And are we backing up that ambition to lead with investment on the ground, in world-leading manufacturing plants with the capacity to serve global demand?
4. Independent: Decades of Licence Raj bred a private sector that looked to government for protection and favours. A private sector dependent on the government cannot speak with an independent voice. Post 1991, the Licence Raj retreated, but the deference that industry accords to government continues as a hangover. We must deal with the government as equals, praising where praise is due, but criticising when criticism is called for. We must stop asking the government for things. Let the government respond by trusting industry to do right. And let industry repay that trust. Industry and government must be as tough, demanding and unforgiving of each other as they are mutually respectful.
The author is Co-chairman, Forbes Marshall, and Past President, CII. His book, The Struggle and the Promise: Restoring India’s Potential, has been published by HarperCollins
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