A seasoned bureaucrat having more than 40 years of working experience in various government organisations and ministries, Amitabh Kant, India's G20 Sherpa, doesn't need any introduction. He is seen by many as the key governance reformer and policy change agent. Prior to his existing responsibility, Kant was CEO of NITI Aayog (2016-2022) and Secretary of Department of Industrial Policy and Promotion (2014-2016). He has also authored many books such as "The Elephant Moves: India’s New Place in the World", "Made in India: 75 Years of Business and Enterprise", and "Incredible India 2.0" among others. In this interview with Rakesh Rao, Amitabh Kant, who has been instrumental in launching several initiatives including Make in India, elaborates on the country’s transformative journey in the last few years and the potential of the Indian manufacturing sector.

How has the world transformed in the last decade? And how has India progressed during this period?
The last decade has witnessed significant transformations globally and in India, driven by technological advancements, economic shifts, and social dynamics. Some of the changes witnessed around the world are:

At the same time, India has also progressed on multiple fronts.
Economic growth: Over the past decade, India has emerged as one of the largest economies globally, currently ranked 5th in GDP terms and expected to become 3rd by 2027. The country’s GDP growth is projected at approximately 7 per cent for FY 2024-25, underscoring its position as the fastest-growing major economy.

Technological adoption: India has embraced digital technology extensively, leading to the rise of start-ups and significant advancements in sectors like information technology and telecommunications. This digital transformation is pivotal for future economic growth. India is ranked 3rd among the fastest-growing startup hubs in the world after the USA and China.

Poverty reduction: Between 2011 and 2019, India halved the share of its population living in extreme poverty. However, the COVID-19 pandemic temporarily slowed this progress before recovery efforts resumed in 2021-22.

Global integration: India's integration into the global economy has strengthened its diplomatic clout and made it a key player on the international stage. The country is expected to continue this trajectory towards becoming a developed economy by 2047.

Reforms and policies: Significant reforms in various sectors have laid a strong foundation for sustained economic growth. These include improvements in infrastructure, labour regulations, and public sector efficiency, which are essential for attracting investment and fostering development.

The Make in India initiative has completed 10 years. What are the key achievements of the Indian manufacturing sector since 2014-15?
The Make in India initiative, launched on September 25, 2014, has significantly impacted the Indian manufacturing sector over the past decade.

Increased FDI: Foreign Direct Investment (FDI) inflows surged from approximately $ 45.14 billion in 2014-15 to $ 84.83 billion in 2021-22, totalling about $ 667.41 billion from April 2014 to March 2024. This reflects growing investor confidence in India's manufacturing potential.

Growth in manufacturing output: The manufacturing sector's contribution to India's GDP has seen fluctuations, with a target to increase it to 25% by 2025 (originally set for 2022) and achieving notable growth in sectors like automobiles, electronics, and pharmaceuticals.

Improvement in ease of doing business: India's ranking improved dramatically from 142nd in 2014 to 63rd in the World Bank’s Ease of Doing Business Index by 2020, indicating successful reforms aimed at simplifying regulatory processes and enhancing the business environment.

Infrastructure development: The initiative facilitated the establishment of industrial corridors, special economic zones (SEZs), and smart cities, creating a conducive environment for manufacturing activities and attracting both domestic and international investments.

Indigenous manufacturing projects: Notable projects like the Vande Bharat trains and the indigenous aircraft carrier INS Vikrant exemplify India's growing capabilities in advanced manufacturing sectors.

Focus on sustainable manufacturing: India has emerged as the world’s fourth-largest producer of renewable energy, reflecting a commitment to sustainable practices within the manufacturing sector as part of the broader goals of Make in India.

Technological advancements and innovation: There has been a strong emphasis on fostering innovation and research & development (R&D) within the manufacturing sector. The adoption of digital technologies such as Industry 4.0 and IoT has improved efficiency and productivity.

What are some of the missed opportunities by India during this period?
India has faced several missed opportunities over the past decade, particularly in the context of economic development, job creation, and social progress.

Job creation: Despite promises to generate millions of jobs, India has experienced a significant rise in unemployment, with rates reaching the highest levels in 45 years. The unemployment rate for graduates is alarmingly high at around 42 per cent. This failure to create adequate employment opportunities has been attributed to various factors, including the impact of demonetisation & poorly implemented GST reforms that adversely affected SMEs.

Investment in education and skill development: India's education system has not kept pace with the needs of a modern economy. The National Skill Development Mission, launched in 2015, came too late to address the skills gap among the youth entering the labour market. As a result, many young people lack the necessary skills for gainful employment.

Manufacturing sector growth: While initiatives like Make in India aimed to boost manufacturing, India missed opportunities to build large-scale capacities in labour-intensive sectors like textiles and garments. Countries like Bangladesh and Vietnam capitalised on global market shifts, while India lagged behind due to high tariffs and a lack of strategic investment.

Public goods investment: There has been a chronic underinvestment in public goods such as healthcare and infrastructure. This neglect hampers overall economic growth and quality of life for citizens.

Technological advancement and R&D: India has not sufficiently increased public investment in R&D. This lack of focus on innovation limits the country's ability to compete globally in high-tech industries.

In spite of many efforts, India is still very much dependent on imported components/parts and raw materials for key sectors. What are the reasons for it? How can we ensure ecosystem-led development of the manufacturing sector?
India's ongoing dependence on imported components, parts, and raw materials for key sectors stems from several interrelated factors.

Historical trade liberalisation: India’s trade liberalisation policies, which began in the early 1990s, significantly reduced import duties and removed quantitative restrictions. This opened the market to imports without preparing domestic industries to compete, leading to a surge in imports from countries like China in critical sectors such as electronics, pharmaceuticals, and textiles.

Limited domestic manufacturing capacity: Many sectors, particularly electronics and medical devices, have limited domestic production capabilities. For instance, around 88 per cent of mobile handset components were imported till 2015, while over 60 per cent of medical devices are sourced from abroad. The focus has often been on assembly rather than manufacturing critical components.

High production costs: Indian manufacturers face higher costs related to logistics and infrastructure compared to their foreign counterparts. For example, transportation costs within India were higher than those in countries like China, making local production less competitive.

Lack of R&D investment: Insufficient investment in R&D has hindered innovation in manufacturing processes and product development. Without a strong R&D base, Indian industries struggle to produce advanced materials and technologies domestically.

Policy inconsistencies: Frequent changes in government policies and regulations can create uncertainty for manufacturers, discouraging long-term investments in domestic production.

Addressing the problem of import-dependency is crucial for India's manufacturing to progress. India needs to adopt several potential strategies for ecosystem-led development.

Strengthening local supply chains: Developing robust local supply chains is essential for reducing reliance on imports. This can be achieved by incentivizing domestic production of critical components through subsidies/PLI or tax breaks.

Enhancing R&D and innovation: Increasing investment in R&D can drive innovation in manufacturing processes and products. Collaborations between industry and academic institutions can facilitate technology transfer and skill development.

Improving infrastructure: Investing in infrastructure improvements—such as transportation networks, power supply stability, and logistics—will help reduce operational costs for manufacturers and make local production more viable.

Targeted policy frameworks: Implementing clear and consistent policies that support domestic industries can encourage investment in manufacturing capabilities. This includes creating favorable conditions for startups and SMEs that contribute significantly to job creation.

Encouraging sustainable manufacturing practices: This will enhance competitiveness while addressing environmental concerns. This includes investing in clean energy technologies.

With the need to reduce carbon footprint growing, what would be your advice to Indian manufacturers and the government?
To address the growing need to reduce carbon footprints, Indian manufacturers and the government must adopt comprehensive strategies that prioritise sustainability and innovation. Recommendations for Indian manufacturers are as follows:

At the same time, the government should also take several measures to support the growth of Indian manufacturing sector.

Enhance infrastructure for renewables: Investment in infrastructure that supports renewable energy generation and distribution is essential. This includes upgrading the electricity grid to accommodate a higher share of renewables.

Facilitate access to green financing: Establishing financial mechanisms that provide easier access to funding for green projects can accelerate the transition to low-carbon operations. This could involve partnerships with financial institutions to create green bonds, blended finance or loans.

Promote public-private partnerships (PPPs): Encouraging collaborations between the public sector and private companies can lead to innovative solutions for reducing emissions.

Implement strict emission standards: Setting stringent emission standards across industries can drive manufacturers to adopt cleaner technologies and processes. Regular monitoring and enforcement of these standards will be crucial for compliance.

Support research in low-carbon technologies: The government should fund research initiatives focused on developing low-carbon technologies, including carbon capture and storage (CCS) and green hydrogen production, which are crucial for hard-to-abate sectors.

Are we doing enough to adopt modern manufacturing technologies to improve our global competitiveness?
India is making strides in adopting modern manufacturing technologies to enhance global competitiveness, but there are still challenges and opportunities for improvement. The Indian manufacturing sector is increasingly embracing Industry 4.0, which includes the use of AI, Machine Learning (ML), Internet of Things (IoT), and robotics. These technologies are transforming traditional manufacturing processes into smart factories, enhancing operational efficiency. Technologies like 3D printing are gaining traction, allowing manufacturers to reduce lead times and waste while enabling customization. Despite this, the overall adoption of advanced manufacturing technologies is still in its early stages and India needs to overcome several challenges.

Skills gap: A significant barrier to the widespread adoption of modern technologies is the skills gap in the workforce. There is a need for training programs that equip workers with the necessary skills to operate advanced manufacturing technologies effectively.

Investment requirements: Implementing modern manufacturing technologies o en requires substantial upfront investment. Many small and medium enterprises (SMEs) may struggle to allocate resources for such technological upgrades.

Infrastructure limitations: While progress is being made, India still faces infrastructural challenges that can hinder efficient manufacturing operations, such as inadequate logistics and power supply.

Some of the recommendations for improvement are:

What challenges do you foresee for the Indian manufacturing sector in the next few years?
The Indian manufacturing sector faces several challenges in the coming years, which could hinder its growth and global competitiveness. Addressing following challenges will require coordinated efforts from both the industry and the government.

Regulatory hurdles: Complex regulations related to land acquisition, labour laws, and environmental compliance can deter investment and slow down project implementation.

Skilled labour shortages: Despite a large workforce, there is a significant gap in the skills required for modern manufacturing processes. This is partly due to inadequate vocational training.

Inadequate infrastructure: The manufacturing sector suffers from poor infrastructure, including transportation, power supply, logistics, etc. This increases operational cost & reduce competitiveness.

Access to finance: MSMEs which are crucial for the manufacturing sector, often face difficulties in accessing finance due to high-interest rates and stringent collateral requirements.

Global competition: Indian manufacturers face stiff competition from countries like China, which have more developed manufacturing ecosystems and lower production costs.

Limited investment in R&D: India’s investment in research and development remains low compared to other countries, limiting technological advancement and innovation.

What is your outlook for India’s manufacturing sector for the next 5 years?
The outlook for India's manufacturing sector over the next five years is promising, driven by government initiatives, increased foreign investment, and a growing domestic market. The Indian manufacturing market is projected to grow from $ 310.30 billion in 2024 to $ 523.70 billion by 2029, reflecting a compound annual growth rate (CAGR) of 9.11 per cent. India has seen a significant rise in FDI inflows, with a reported increase of 69 per cent from 2014 to 2024, totalling $ 165.1 billion. This trend is expected to continue as global manufacturers seek to diversify their supply chains away from China, positioning India as a favourable alternative.

Sectors such as electronics, automotive, and pharmaceuticals are expected to drive growth. For instance, the electronics manufacturing sector is projected to quadruple to $ 450 billion by FY 2029-30, with a CAGR of 25 per cent. The government's PLI schemes are designed to bolster these sectors further. Ongoing investments in infrastructure, including industrial corridors and smart cities, will enhance the manufacturing ecosystem, making it easier for businesses to operate efficiently and competitively.

India's manufacturing sector aims to achieve exports worth $ 1 trillion by 2030, bolstered by strong growth in manufactured good. This ambition aligns with the government's goal of increasing the manufacturing sector's contribution to GDP.

However, several challenges need to be addressed to maximise the potential of the Indian manufacturing sector. Some of the strategic recommendations would be: