Challenges of Transforming India

Summary

Delivered as the A. D. Shroff Memorial Lecture under the joint auspices of the Forum of Free Enterprise and the A. D. Shroff Memorial Trust in Mumbai on 14 October 2016, and published as a booklet in January 2017, this lecture by Amitabh Kant—then CEO of NITI Aayog—opens with a single diagnostic: India was growing at 7.5 per cent per annum, but nothing short of 9–10 per cent sustained over three decades would be enough to lift its entire population above the poverty line. At India’s 2016 per capita income of US$1,580, the difference between 7 per cent and 10 per cent growth by 2032 was the difference between a per capita of US$4,000 and US$6,800—and, at the higher trajectory, the complete elimination of poverty.

Kant structures his argument as a checklist of seven interlocking challenges. The first is the complexity of doing business: 1,159 redundant Acts had been scrapped, company registration reduced to a single day, import-export forms cut from 9–11 to three, and India’s World Bank Ease of Doing Business ranking improved by 12 positions—yet state governments remained the real bottleneck, and a 100-point inter-state ranking exercise (Gujarat first, Andhra Pradesh second, Jharkhand and Chhattisgarh third and fourth) was being used to create competitive pressure. The second challenge is integration into global supply chains: FDI grew 53 per cent in two years while global FDI fell 16 per cent, making India the world’s top FDI destination ahead of China. The third is the startup ecosystem: India already hosted roughly 19,000 startups with a market value of around US$75 billion, and Kant projected 100,000 startups and US$500 billion in market capitalisation by 2024–25. The fourth is innovation: some 1,400 multinational corporations had relocated global innovation centres to Bangalore and Hyderabad, with GE reducing its ECG machine cost from US$20,000 in the United States to US$1,800 in India and the per-test charge from US$20 to US$1.

The fifth and most structurally urgent challenge is urbanisation. By 2050, roughly 700 million Indians will live in cities—requiring, in Kant’s phrase, the creation of two-and-a-half Americas’ worth of urban infrastructure. Because land, gas and water are now scarce, copying the American car-centric model would require four planet Earths; India must instead pioneer innovative, low-carbon urban forms. The sixth challenge is gender parity: women contributed only 17 per cent of GDP (compared to 39 per cent in Sub-Saharan Africa and 41 per cent globally), and closing that gap by 2030 would add US$700 billion to output. The seventh challenge is institutional modernisation: the Medical Council of India, the UGC and the AICTE were all designed for a 19th-century state and needed root-and-branch redesign. Kant closes by invoking the 14th-century poet Amir Khusrau to argue that no structural reform will suffice without a renewal of popular spirit and civic pride—the government cannot do Swachh Bharat alone if citizens keep creating filth.

Key points

• India needs to sustain 9–10% annual GDP growth for three decades to eliminate poverty; at 7% growth, per capita income reaches US$4,000 by 2032, but at 10% it reaches US$6,800 and poverty is eliminated.

• The Modi government scrapped 1,159 redundant Acts and reduced company registration to one day; state-level ease-of-doing-business rankings introduced competitive pressure, with Gujarat, Andhra Pradesh, Jharkhand and Chhattisgarh leading.

• India’s FDI grew 53% in two years (2014–16) while global FDI fell 16%, making India the world’s top FDI destination; but Kant warns that no country has sustained long-term growth on foreign capital alone.

• India had roughly 19,000 startups worth approximately US$75 billion in 2016; Kant projected growth to 100,000 startups worth US$500 billion by 2024–25, citing CultureAlley’s ‘Hello English’ app (nine million learners) as illustration.

• Approximately 1,400 multinationals relocated global innovation centres to Bangalore and Hyderabad; GE cut its ECG machine price from US$20,000 to US$1,800 in India and the per-test charge from US$20 to US$1.

• Urbanisation is the most critical structural challenge: 700 million Indians will move to cities by 2050, requiring infrastructure equivalent to two-and-a-half Americas, but replicating the Western car-centric model would demand four planet Earths.

• Women contribute only 17% of India’s GDP versus a global average of 41%; achieving gender parity by 2030 would add US$700 billion to output.

• India’s labour laws, framed in the socialist 1970s, are incompatible with 9–10% growth; Kant calls factor-market reform (land and labour) essential, noting that productivity efficiency accounted for 79% of China’s GDP growth during its high-growth decades.