Make In India started the process of ease of doing business, it opened up FDI further and accelerated Infrastructure creation. Ten years on, Amitabh Kant, India’s G20 Sherpa, says that this is the beginning of the India manufacturing story and that India should not veer towards protectionism. He bats for predictability in tax policies and says that states need to work aggressively to make ease of doing business a reality. In an exclusive chat with Moneycontrol, Kant delves into the wins for India and the challenges ahead in its manufacturing journey.

The ten-year anniversary of India’s celebrated Make in India programme comes amidst a workers strike at one of Make in India’s biggest success stories. A strike by workers at the Samsung factory in Sriperumbudur has gone on for weeks. Amitabh Kant, one of the key architects and champions of Make in India, says that such incidents have the potential to hurt India’s reputation as a manufacturing destination.

Edited excerpts:

What would you think have been the biggest wins for Make in India and for India?

The first thing I would say is that we started focusing on ease of doing business because over the years we've added so much of rules, regulations, procedures, paperwork, acts. When we launched Make in India, the first thing that we started doing was that we started automating processes, rules were rationalised, digitised, departmental procedures were merged and streamlined.

And when we started, we jumped up 79 positions in the World Bank ease of doing business. But we were not doing it for World Bank, we were doing it for ourselves. So, the first year we started ranking states on ease of doing business, Gujarat came number one. The next year, Andhra beat Gujarat. The third year, Telangana beat Gujarat and Andhra. The good thing was that Jharkhand and Chhattisgarh, which were 24th and 25th, they improved a lot and they came 4th and 5th. And if you look at this year, Kerala, of all states, has come number one. So, states are competing on ease of doing business, which I think is a great thing.

And we've also abolished 1,500 old laws. Now, this is remarkable. This has never been done in any country anywhere else in the world. So, first was ease of doing business. The second was opening up of foreign direct investment. We used to clear procedures on case by case basis. A huge number of bureaucratic hurdles have been done away with. The foreign investment promotion board has been abolished. The country has increasingly opened to FDI. More sectors have been opened up to the automatic route. 97% of the investment coming into the country comes through the automatic route. FDI has been opened up in defence production, construction, railway, insurance in a big way. And many sectors have seen foreign investment thresholds rising as well.

In 2014, FDI stood at about close to $34-35 billion. In financial year 24, this number stood at $70 billion, but in ‘22, it had touched $84.8 billion. So, FDI was the second big thing that was done, opening up in a very big way. The third thing that we focused on was the national intellectual property rights policy, which was introduced. Overall, the IPR regime in India, and the technical manpower was strengthened by about four times.

The average time taken for examination of a patent application used to be 72 months that time. It has now been reduced today to just five months now. It varies between five to about 20 months, but most of them are getting cleared within five to six months. The patent office is granted over 1,00,000 patents in 24 compared to just 40,000 in financial year 2014. Trademark registry is committed to issue the examination report within 30 days post receiving the trademark application. The period of examination of trademark application has reduced from 13 months to less than 30 days.

So, these are far reaching measures that were taken as far as the make in India was concerned, and that gave a major thrust. And then, we introduced the production linked incentive scheme. And the PLI schemes were launched across 14 sectors. And we've had investment over Rs 1.23 lakh crore being realised till March 2024.

So, this has been really the story.

When we talk about the PLI schemes, I think that's something that is a given and it's been documented also that's giving manufacturing a big push specifically in the electronic sector. I just want to get a sense from you on why is it that the scheme has been more successful in certain sectors, and not as successful in some other sectors?

Yeah. So, Shweta, you know, it covers across 14 sectors. The objective of production linked incentive scheme was to create global champions. Let's get it clear that global champions would also mean that there will be backward forward integration, you will have MSMEs, you will have smaller players. When Maruti came in, you had a number of MSMEs also coming in. And the intention was that you will have four or five large champions in each sector. The scheme was originally conceptualised within NITI Aayog, it had clear benchmarks, that you will go big, bigger, biggest, five years, you keep raising the production, and you have to achieve it.

Now, India's smartphone exports have seen huge, huge growth since then, they've touched a value of about $15 billion. And today, smartphones are actually emerged as the fourth biggest exporter in a very short time. Now, this scheme has also succeeded in several other areas. But I'm sure that this will succeed in many, many more areas. But the gestation period was about three years. So, it will succeed in battery manufacturing, it will succeed in automobile manufacturing, it will succeed in many more areas, probably a year or two more, you'll have to wait to see the size and scale. The other challenge has been that some ministries never thought big.

In some sectors, the intention was to create global champions, they didn't want to create large champions. So, it has worked, including in food processing and textile, where it has created jobs, but it does not create a big champion. But the objective should be to create large champions. And I see this happening in the $10 billion incentive scheme to build semiconductor display design ecosystem in India. It has worked in air conditioning sector, it has worked in many, many sectors, and you will see many more good results coming out in the future.

So, you're saying some of these ministries were a little more focused on building domestic champions, such as textiles and food processing.

That's right, because they are job creating sectors, the employment became the objective. Whereas, the objective with which we had started was that we create some large champions, the large champions will grow in size and scale, and they will have a backward forward integration with MSME, they will in turn, create many more jobs. Now, that can happen in sectors like mobile manufacturing, that can happen in large industrial areas, that can happen in electronic manufacturing.

In some other sectors, you do not have such large champions, but we'll have this when gigafactories are getting created. But as a consequence of the PLI scheme today, you have almost about 100 gigawatt of battery manufacturing being announced in this country. So, you will see India emerging as a champion of battery manufacturing, you'll see India emerging as a champion of electronic manufacturing, you'll see India emerging as a champion of EV manufacturing in due course, it'll take one or two more years, but two years down the line, you'll have many more large success stories.

I want to bring in your thoughts on China. So with the pandemic, there was this whole China plus strategy that a lot of countries were looking at. However, India could have capitalised on that opportunity in a more aggressive manner. In terms of its progress in capitalising or building on that opportunity, it could not do so, it could do so in some sectors, but in many others such as textiles, it couldn't. So, going forward from here, what are the big opportunities that you see for India? Do you think India still has that window open? And specifically, what sectors do you think can really build on this, getting the world to make in India?

No, you have a huge window of opportunity open, you're growing at about 8.2%. China is growing at 3 to 4%. So, you will see a lot of China is going to become a more complex nation, it'll have less of predictability and consistency of policies. You will see a lot of manufacturing shifting to India in due course, India is a very large country, some manufacturing may have gone to Vietnam, but India's domestic market will give you that potential to do many more manufacturing. So, in the next five to six years, you'll see a lot of new investments coming into India.

The challenge is that even today, if you look at the top 30 companies of USA, almost 75 to 90% of the manufacturing still is in China. And that will take some more time to come to India. But you will see many more fresh investments coming into India. And my view is that India has been rather futuristic in some of these areas. You know, starting the India AI Mission with over Rs 10,000 crore, starting the National Quantum Mission with Rs 6,000 crore, starting the Semiconductor Mission with RS 76,000 crore and the Green Hydrogen Mission, all of these will lead to a lot of fresh investments in India.

I foresee that in due course, India will see a lot of more investment moving to India, as it has done in the case of electronic and the smartphone sector. And the reason why I say this is because India is the only country with a huge, large size and scale of market, domestic market. And therefore, my view on manufacturing is that the best is still to come for India.

I want to bring in your thoughts on several policy measures that we've taken, we've raised trade barriers, there's been a certain degree of protectionism, not only from India, but from across the world. So, as the world gets more protectionist, how do you see that panning out for India? And do you think trade protectionism is a good way forward for India if it wants to become a competitive manufacturing destination?

No. So my belief is that India should never be protectionist. Every time India has grown at 9 to 10%, it has grown when exports have grown. So, India must penetrate global markets, India must export in a very big way. The only way for us to grow over a three-decade period at 9 to 10% is through exports. Japan, Korea, Taiwan, China, all have grown on the back of exports. Exports are the key to our growth strategy. And therefore, India cannot afford to be protectionist, it must be a very innovative nation as far as exports are concerned.

If you want to be an integral part of global value chain, you should be able to import at low prices and import your components at low prices, import your inputs at low prices, do value addition, and then export to the global markets. That's the way global value chains happen. And that's the way it's happening in the case of smartphones. That is why you are becoming a major manufacturer. Now, don't expect value addition in India to take place overnight, it'll take three to four years. And when you spread it over three to four years, India will also become a component manufacturing nation.

So, what you will see in due course is that India will become a component manufacturing nation, it may take you three to four years, you may have to go through a route of being a joint venture partner with some of these companies. But over a period of time, that is the way to gradually build up your manufacturing over a period of time. Because that's the way China became, it was tied up with Japanese companies, it tied up with Taiwanese companies, it tied up with German companies to push manufacturing there. And over a period of five to six years, it started doing component manufacturing and became the manufacturing centre for the rest of the world.

So, what you are seeing in India today is the beginning of the manufacturing process, it'll take you another four to five years to do component manufacturing. China is a creation of America, the American companies outsourced all their manufacturing to China, America lost the art of manufacturing. America is now trying to get manufacturing back in high value added sectors, through the Inflation Act, the Inflation Reduction Act, through the CHIPS Act, it is trying to get manufacturing backs.

And what you will see in India is that on the basis of competitiveness, India will get manufacturing back. Now, why it will get manufacturing back is because it has focused on ease of doing business, it has focused on building manufacturing areas like the industrial corridors, and it'll get manufacturing back because it has focused on innovation. So, the new areas of growth, AI mission, etc, will enable you to do that. And the fact that you are now building industrial corridors, that is creating 12 new industrial towns with plugs and play facilities for industries, large parcels are being made available, like you've created in the part of the Delhi-Pune corridor, you've created Dholera. Now, all this is a creation of world-class infrastructure, which will enable you to bring in manufacturing into India.

So, it will be plug and play. And the other big thing that will happen is that India has invested in infrastructure. The central government capex has jumped from 1.7% of GDP to about 3.4% of GDP between 2014 and 2024. Now, that means that India has made expressways, roads, highways, we are the only country which is making about eight airports, we are building about close to 30 kilometers of road, we are doing about 12 kilometers of railway tracks per day, and 30 kilometers of roads per day. And this, our position in the World Bank logistic position has improved radically. And to my mind, this creation of infrastructure, this ease of doing business, these corridors, all will lead to very huge results in the coming days.

We've taken a very strident view on China, and we've been discouraging a lot of our businesses to get imports from China. Do you think we should look at this from a very practical perspective, this whole engagement with China, and maybe we should ease up on our imports on China, we continue to import a lot from China. But when it was, so there are approvals that have been put in place and so on. So, just want to get a sense from you on does India need to do a rethink on that?

The Press Note 3 was issued when we had a border challenge with China. And that was necessary, it was called for. It was called for because after 2014-15, we had allowed Chinese companies to come into India. But if a neighbouring country creates challenges on the border with you, you have to act. And India acted very strongly, took action on many of their app companies, many of their software companies, India took action on many of the investment companies.

Now, India, to my mind, it is better to see that investments come from China rather than increasing our imports from China. It's better that we are able to bring in larger scale of investments rather than just importing from there, so that there is greater level of investment, there's greater level of value addition within India itself. And for that, I think the government will keep calibrating policy as the position on border improves over a period of time.

Talking about ease of doing business, in the last several months, we've seen a whole host of GST notices, income tax notices being sent to a lot of companies, small, medium, upcoming sectors, startups, and so on. So somewhere, when an environment is that you see the tax administration go into an overdrive, it really undoes a lot of the ease of doing business perception and the work that's gone into it. Because currently, a lot of businesses are struggling with this. They have to deploy a lot of their time, energy, resources into contesting these tax notices and so on. Where are we on this? Do you think GST council needs to take a view on this? Do you think the finance ministry needs to take a view on this?

So, it's very important that if we want to become a manufacturing nation, then the tax policies have to be very predictable, very consistent. And it has to be done with a long term perspective in mind that India needs to become a very easy, very simple nation. Processes must get fully automated. Rules need to be rationalised and digitised. And the departments must make sure that they don't overstep this because they do long term damage to India becoming a manufacturing nation. Nobody is more aware of this than the minister, irmala Sitharaman, because she's also been the industries and commerce minister herself. And she has acted very promptly whenever such a challenge has arisen.

In my view, the challenge is not so much with just the government of India. I think the states now need to actually dismantle a lot of rules, regulation and procedures. All states must compete with each other to become easier and simpler. And that will enable a lot of more investments to come in. The action really has to be at the state level right now.

So, currently, even as we recount all the successes of Make in India in terms of the targets that Make in India has set for itself in terms of creating employment, increasing the share of manufacturing and national GDP and so on, it continues to lag behind. So, what next for Make in India? How do we make Make in India an engine of growth of jobs and of course, of building global champions? What would be your reforms prescription from here on, not only for the policymakers, but also for businesses?

I think the production linked incentive schemes must get fully implemented speedily. That's critical to be able to build an ecosystem for manufacturing across these 14 sectors. The second would be that we should push for the early creation of new industrial towns with plug and play facilities for industries, so that land parcels are made available for allocation. The third would be that states must push for greater ease of doing business in a very big way. That's very important. The fourth would be that I personally feel that the FDI regime should be opened up more in many other sectors, including insurance, etc. And we need to give it a far more vigour and energy and approach each one of those companies which has not invested. Fifthly, I would say that we need to push the national infrastructure pipeline in a very big way, because the more you push for infrastructure, the better it is.

And lastly, I would say that the new missions created by India, the National Quantum Mission, the AI Mission, the Semiconductor Mission, and the Green Hydrogen Mission will be the key driver in cutting-edge areas of growth. And the last point I want to make is that India needs to become a very innovative nation. That is very critical.

The private sector investment on research and innovation is still very low as compared to other countries, and therefore the government putting in about a lakh of crores for research and innovation for sunrise sectors, that scheme needs to be now vigorously implemented, because that will make India a very innovative nation for the future as far as manufacturing is concerned. Innovation is the key, and our ability to push for innovation will also lead to bringing in a lot of more talent into India, and talent will then attract investments.

In terms of ease of doing business, what are the key three things that you would like to see the government to really act on, which you think could be a game changer in giving investors more confidence in investing in manufacturing facilities?

So, the first and foremost would be to scrap all rules, regulations, procedures, which have been put in place. Look at them in a suo moto manner, completely afresh. Secondly, decriminalise all these outdated rules and regulations that have been put into place. Thirdly, implement the labour laws that have now been passed by the parliament, which are pending with the state governments, implement them on a very fast, rapid manner. And fourthly, I would say is that create at least 10 champion states, which will drive India's growth story. If India grows, if India has to grow at 9 to 10 percent, you need 10 states to grow at rates of 10 percent plus. So, these 10 states would be very critical for India to be able to grow at high rates in the coming years. And it's very important that we have 10 champion states.

We are seeing protests right now at the Samsung facility in the South where the workers are protesting and the strike has gone on for a very long time. In incidents like these, labour reforms have always been a contentious issue. They're politically also very fraught with challenges. How do incidents like these pan out for India, for its perception as a country where you can come and do business and build value?

No, it needs to be sorted out by the state government on topmost priority. It's the labour strike has just begun a couple of days back. This is happening in Sriperumbudur and the Tamil Nadu government needs to put all its machinery behind it and sort it out because a lot of investments in automobile, electronics, etc. have gone into Tamil Nadu. If it has a spiralling effect, it will have a detrimental impact on India's manufacturing and on India's image. So, the state government must take the responsibility and set it right on topmost priority.