India can grow at 9-10% if reforms on labour, privatisation, clean tech are pushed: Amitabh Kant

India has the potential to grow at 9-10% per annum over the next three decades if the government accelerates reforms on labour, privatisation, clean technology and skill development, said Amitabh Kant, Ex-Sherpa of G20 India and Former CEO of NITI Aayog, in an exclusive interview to CNBC-TV18 at Network18's Reforms Reloaded event.

“GST simplification is a great thing that will push the consumption story, create demand, improve capacity utilisation and lead to further investments in the Indian economy. But GST should just be the beginning of an accelerated reform process,” Kant said, adding that global challenges like supply chain breakdowns, protectionism and geopolitical tensions require India to move faster on structural changes.

Kant underlined the need for quick implementation of labour laws already passed by Parliament, fast-tracking of disinvestment and asset monetisation, and stronger emphasis on free enterprise. He also stressed that India should leverage the clean tech mission announced in the Budget to reduce dependence on imports in solar, wind, batteries and electric vehicles.

“We need to push for skill development in a very big way, because demographics are in India’s favour. If India is going to provide 30% of the manpower for the world by 2047, growth with jobs is critical,” he said.

Calling for a sharper focus on privatisation, Kant argued that the government has “no business to run hotels” and should restart the process, including the privatisation of IDBI Bank. “I’m optimistic it will happen early, because the earlier you do it, the better it is for the government and for India. These things should not be delayed, or else fatigue sets in,” he said.

Kant praised the pace of GST reform, crediting the Prime Minister and finance minister for building consensus. “The speed at which the FM and PM have pushed through GST reforms and made it simple and easy is really praiseworthy. That inspires me to push for more and more reforms,” he added.

Below is the excerpt of the interview.

Q: It was the 12th of August, and I was in conversation with Mr. Kant on a platform like this, and I asked him, what next as far as reforms are concerned? The number one item on his list on the 12th of August was GST rate rationalisation. Clearly, the government was listening to you.

Kant: I don't know whether they were listening or not, but it's a great thing that they've simplified the GST. I think it will greatly help in pushing the consumption story of India, which in turn will create great demand, which will increase capacity utilisation and lead to further investments in the Indian economy. It will create a virtuous cycle of investments, and that is in the context of all the challenges we are facing globally. This reform was critical.

Q: Well, this reform was critical, and this reform has been done, and the hope is that it will boost consumption, boost demand, and then boost investment. What's the sense that you get on that front, because the government is saying, look, we've done the heavy lifting, we've been front-loading capex, and now we're giving you stimulus as far as the income tax cuts and other GST cuts are concerned. What's the sense you get from industry now that you're on the other side, Mr. Kant, about its willingness and appetite to invest?

Kant: The government has done a lot. I would say this, because bringing in GST simplification at this particular stage, getting all the states on board, is a remarkable thing. All credit to the PM and the FM for that. But I think we should accelerate the pace of many other reforms, simply because of the global challenges: the breakdown of global supply chains, the rise in protectionism, the breakdown of institutions, with wars in both Europe and the Middle East. There are many challenges, and now with this H-1B visa issue, we need to use this crisis as an opportunity to push many other reforms. To my mind, GST should just be the beginning of an accelerated reform process.

Q: If GST is just the beginning, what's the next step? You talked about the H-1B visa issue, which blew up over the weekend. You tweeted saying that this could, in fact, end up being an opportunity for India. I think that tweet has gone viral — you've got about 5 million views on that. But what do you believe we need to do in order to actually ensure that this emerges as a silver lining, Mr. Kant?

Kant: The challenge is that there is no computing power talent in the United States of America. So, it's not that Indian companies utilise the H-1B visa; it's the United States companies that use the H-1B visa for their advantage. If they had put that $100,000 per year condition, then it would have had severe implications. But now that they've clearly backtracked and said that it's only in the initial period and not for students studying in the United States, my analysis is that over a period of six years, this will work out to be a very marginal component, which will then get passed on to the consumer. But it opens up the opportunity for a lot of American companies because there is a lack of predictability and consistency in policies. It gives you an opportunity to open many more GCCs, and it will also lead to a much higher level of outsourcing for these companies, simply because there is no talent available, and you need talent to be able to do this. So, India should be a beneficiary. My view is that India will benefit from this.

Q: Since we are talking about the next steps, Mr. Kant, quality control orders — I think that has been one of the issues that industry has been talking about as a constraint. In your view, is there a need for a big review of, or even a dismantling of, quality control orders in the way they are being implemented at this point in time?

Kant: On quality control orders, we've had an excess dosage. We've had about QCOs imposed on over 760 items. If you're doing it on the end product, I can understand, but you're putting quality control orders on inputs and components, and you're making it difficult for medium and small industries to produce. It is having severe implications on their livelihoods and survival. I think all QCOs need to be reviewed, and at least all QCOs on inputs need to be eliminated, because they will make it very difficult for India to be competitive. It will make it very difficult for India to export. Therefore, my view is that there should be a very strong review of QCOs. It is licensing by the back door, and all QCOs have been brought in under pressure from industry lobby groups, which is doing huge damage to India. So, a quick review and elimination of all input QCOs is needed, because you're making the end product very expensive and basically making the country non-competitive in the global economy.

Q: From that perspective, if we are talking about making India more competitive, as well as integrating India into the global supply chain: GST done, QCOs you believe are work in progress or need urgent work in progress. What else?

Kant: First and foremost, let's look at what the government has already announced for quick implementation. The labour laws, because they're already passed by Parliament, and over 22 states have approved them. So, they should just be implemented. That will enable you to achieve size and scale of manufacturing, which is critical.

Number two, the government had—two budgets back—announced that it would remain in only four strategic areas, and also said it would disinvest two banks and one insurance company. We need to get disinvestment and asset monetisation back at centre stage. That's important because I believe that India can grow over a long period—a three-decade period—at 9 to 10% per annum, which is the Prime Minister’s ambition of creating a Viksit Bharat. It's a very ambitious task. So, you need to bring free enterprise centre stage. That's critical.

Thirdly, in the context of the H-1B visa, you need to create really smart urbanisation in India. The budget this year announced a ₹1 lakh crore urban renewable fund. That needs to be implemented asap, so that you clean up your cities. There should be massive competition among cities, and at least 25 cities in India should be on par with the best in the world. This can be spurred through the ₹1 lakh crore already announced in the budget. Push for implementation.

Fourth, the government has announced in the budget the clean tech mission. Now, India is importing 85% of its solar, 75% of its electric components, and 80% of its batteries. Get that clean tech mission announced and implemented, because then you will start working on batteries, EVs, solar, wind—all of which are critical.

Lastly, the government needs to push in a very big way right now for skill development, because demographics are in India’s favour. The skill sector needs a huge push, because that will create new jobs not only for India but for the rest of the world. If India is going to provide 30% of the manpower for the world by 2047, growth with jobs is critical. Therefore, to my mind, these are four or five key suggestions I have.

And let's start with privatisation of the Ashoka Hotel in the heart of Delhi. The government has no business to run hotels. Why should the government of India run the Ashoka Hotel?

Q: By the way, you've been in government.

Kant: At that point of time, we privatised 18 hotels. Ashoka was also put out, but we could not attract a good bid for it at that point of time. But there's no rationale at all for governments to run hotels. That's a mindset which should move from central government to all state governments—they should keep their hands-off certain areas.

Q: Let's stick with the theme of privatisation. In your current role as an adviser to Fairfax, and since Fairfax is one of the contenders for IDBI Bank—which has been up for privatisation for almost a decade now—do you feel the government is hoping that it will get done this financial year? Are you confident it will get done this financial year?

Kant: I'm optimistic about it, and I hope it happens early, because we should not allow fatigue to set in. These things happen at a particular moment of time, and the earlier you do it, the better it is for the government and for India. That is why I'm saying not merely IDBI, but the government has said it will privatise two other banks and one more insurance company. Those recommendations were made, and we should go back and push that. Because the challenge India is facing now—the headwinds in the context of the global crisis—requires us to be bold, gutsy, and courageous, like this government has been in the case of GST. The speed at which the FM and PM have pushed through GST reforms and made it simple and easy is really praiseworthy. I really admire the tenacity of the government in being able to do that, and that inspires me to push for more and more reforms.

Watch accompanying video for entire conversation.