Mr Amitabh Kant, CEO, NITI Aayog talks about how the current government’s reforms to make India Easy and Simple; at AIMA’s 3rd National Leadership Conclave 2017.
Amitabh Kant, CEO, NITI Aayog sharing his thoughts on Government and Business: What Should be the New Equation? at #AIMANLC
It’s great pleasure to be here on this very fascinating subject of government and business. My belief is that the government’s job is to lay down the policy framework and the private sector’s job is to create wealth in society and if you look at India over the years, the government had itself made India very complicated, very complex and a very difficult place to do business because over the years we have added a lots of rules, regulations, procedures, paper work, acts, all of them. And these procedures and paper works have made it very difficult for the private sector to create wealth and therefore this particular government in the last two and half years has attempted to make things extremely easy and simple. They have scrapped 1198 laws. This is unparalleled, unheard in India’s history so a lot of laws have been scrapped. It has tried to make India easy and simple for the private sector to do business. For instance, the number of forms for import and exports was 11 and 9 which has been brought down to a mere 3. You can register a company in one day today. You can register startup in just about an hour and MSME in just 5 minutes today. So the entire focus of this government has been to make India easy and simple, cut down paper work, digitize everything and put everything online. And since most businesses are done in their state, the government’s view is that states become easy and simple and therefore we initiated the competition among states. We ranked states, we said we will name and shame states.States were ranked, a year before Gujarat came number one. But last year in the ease of doing business Gujarat was dethroned and Telangana and Andhra became number one. But the good part was that Jharkhand and Chattisgarh moved up. And they have done a lot of reforms. So similarly my view is that the government must create a huge sense of competition among the states and put it in public domain. And we are doing the same thing in education, in health, in water management from NITI AYOG on outcomes.
So the government has moved away from inputs and outputs to outcome based management. And we are doing this competition across on vast number of outcome indexes among states so that they can become easier and the people come to know how their states are performing. So name and shame the states put it in the public domain. And therefore over a period of time, I envisage that states will become easier and simpler to do businesses.
Second I think the role of states in terms of carrying out a vast number of structural reforms up to enable the private sector to grow and blossom. And in the last two years, we’ve had the bankruptcy law coming out which to my mind is very critical and very important simply because India must allow companies to fail also. You know failure is a very integral part of the business and there is nothing wrong in failing. Every single outstanding entrepreneur in the world has actually failed first and then flourished. And therefore what the bankruptcy law will do is to allow quicker and faster failures and allow exit of companies. So bankruptcy law, national company law tribunal and I think the mother of all reforms, the GST are all path breaking measures towards bringing structural reforms in India’s society so that private sector can grow and flourish.
Thirdly, I think it is important that there is a huge focus in bringing factor productivity reforms. In the long run, if our ambition is to grow at high rates of 9 to 10 percent. It’s not possible till India doesn’t become a very efficient society and an efficient economy. And I think the challenge is enhancing productivity in India. Because at the peak of its growth, when the Japan was growing, its total fact of productivity grow at a very rapid rate so did in Korea’s case. And therefore to my mind, in the long run, it’s very important that we not only digitize and put everything online but use technology to leapfrog. One of the key things that is being done is that you know since India is the only country with the billion biometric, it is the only country with billion mobile. I think the challenge is to use mobile as the key driver of the growth as we done in digital payments, made the mobile the bank, Made the mobile the wallet for everyone and actually if India does this we will be leapfrogging by about a decade ahead of other countries. No other country will be able to do this. Because if you are using your mobile to do all your payment based on AADHAR and on your IRIS, no other country has biometrics. You will actually be making in the next four to five years, you will be making debit cards, credit cards, ATMs, POS machines all irrelevant and actually mobile will become the key driver of your growth. And therefore the key challenge for the governments today is how do you use tech, how do you lay down the policy which will enable technology to leapfrog in many ways. And I think one of the key things this government has tried to do is to use AADHAR to bring in greater efficiency in the Indian system. Use AADHAR to ensure that leakages are removed because Indian systems and several government schemes of subsidies, scholarships, payment of salaries etc. were riddled with leakages. And therefore when you link them all with AADHAR and DBT (Direct Benefit Transfer), you will ensure that India becomes very efficient society and all the leakages and there are huge benefits which are floating by simply linking up with AADHAR payment of salaries, payment of pensions, payments of across the border all government benefits. So we’ve just had pilot projects, not only in UJALA scheme but in fertilizer which a is very complex area. We have just done this pilot of 16 districts and fertilizers and it’s been very successful experience where a lot of leakages we’ve been able to remove in terms of fertilizers simply because of ensuring that fertilizer is merged with neem. So neem coated fertilizer and ensuring that we are able to link it up with AADHAR.
So government of India today is using technology in many ways to ensure that we are able to make a quantum jump.
Fourthly I think the one of the key challenges is our regulatory mechanism and we have a lot of regulatory bodies across several sectors. I think the challenge for government is to make our regulatory bodies very extremely progressive and keep them at arm’s length from the government and ensure that in sectors like power etc., our regulatory bodies are able to bring in market related prices. Unless you are not able to do this it will be very difficult to power sector to survive. So the challenge is that the regulator must look at the market and decide on prices based on good market prices. And this will enable the private sector to grow and flourish in the long run. And therefore my personal view is that a lot of evolution, a lot of training, a lot of progressive mindset has to come into our regulatory bodies. And they must remain at arm’s length from both state and central government.
So this is my perspective of the government but on the private sector my view is that the private sector must solely be responsible. No country in the world can grow for long period without the private sector creating wealth. And the private sector must become the key driver of India’s economy and India’s growth. It’s not possible for India to grow for long period of time till India’s private sector. And it’s not just that foreign direct investment keeps coming but till India’s private sector doesn’t become the key driver of India’s growth. And therefore it is very necessary to ignite growth momentum in India’s private sector. And for this to happen I think we need predictability, consistency and clarity of long term policy. It’s not that we keep tinkering with the tax policy on regular basis to allow individual companies, but the policy framework must be very predictable, consistent and full of clarity over a long period of time. And this clarity over a long period of time will enable private sector to grow and flourish and that is important.
So private sector’s key job must be to create wealth in India’s society and India’s framework today. I think one of the key challenges for India today is that private sector must become the key driver of providing skills. If you look at countries like Germany, the skill training is all done by the private sector. I mean there is no ministry of skills in Germany. Actually the private sector pays a higher component for those who are skilled, but in India it is very difficult to find the private sector who is willing to pay a higher amount of salary for a skilled worker. He is not available at a premium. So the government of India which keeps on training people is finding it difficult to find jobs. And to my mind it’s the responsibility of the private sector to train. It’s the private sector to skill people and the private sector to pay the higher amount for those who meet a skill. So the skilling is the integral part of the private sector and that is critical. The third key important point is that it is very difficult for India to sustain its growth for a long period of time you know till we don’t have growth with jobs. It will be politically very difficult for governments to survive without job creation. And therefore while manufacturing is moving towards manufacturing 4.0, manufacturing is getting digitized but India is very large and vast country and their several labor intensive sectors. Textiles, food processing, gems and jewelry, leather etc. and these are sectors where India needs to create a vast amount of jobs and I think great amount of entrepreneurship. So these are the areas where we need private sector to drive growth where jobs can also become very critical component. So my personal view is that India’s philosophy has to be growth with jobs. India’s philosophy has to be to create skills with a very predictable, consistent and clear policy over a long period of time. And I think make India extremely easy and simple place where private sector can create wealth for India and for India’s society. Thank you very much ladies and gentleman.
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