At the 7th R K Swamy Memorial Lecture, India’s former NITI Aayog CEO Amitabh Kant discusses structural reforms, digital transformation, and infrastructure development driving India’s economic growth trajectory toward becoming a global economic powerhouse.
Sri Amitabh Kant
Governance Reformer & Public Policy Change Agent
Former India’s Sherpa to the G20
Former CEO, NITI Aayog
I’m truly delighted to be here to deliver the seventh RK Swamy lecture. Mr. RK Swamy was a great thought leader, a great intellectual, an immensely creative person, and he was an institution builder. But more than anything else, he was a nation builder. So this event is unique in many ways. It brings Mr. RK Swamy’s vision of ideas, his perspective of creating great institutions which he did, and his concepts of building a great nation altogether.
Mr. RK Swamy started his career in J Walter Thompson advertising company simply because he knew Gujarati; he knew Tamil; he knew three different languages. He almost started at a very low rung in the ladder as a language interpreter. He rose up the J Walter Thompson creative agency and eventually started a branch of J Walter Thompson in Chennai. At that period of time and at that history, creative work all used to be done out of Kolkata or out of Mumbai. Nobody ever thought of Chennai. Mr. RK Swamy came to Chennai and brought the world of creativity, the world of advertising, the world of doing innovative marketing in Chennai.
Ladies and gentlemen, it was Mark Twain, an American philosopher, traveller and humorist, who had said at one point of time that India is the cradle of human civilization. It is the mother of history. It is the grandmother of tradition and the great-grandmother of legend, and all instructive material of history to be found in India. When he said this, India had been colonized by the British. He said this around the 1860s, and India, when it was colonized by the British in 1700, actually had about close to 30% of the global share of global GDP. That’s 2% more than what the United States holds today. United States’ share of global GDP is 28%. India’s share was about 28-30%.
By the time the British left India in 1947, the share of India in global GDP had dwindled down to about 3.5%. So from being the leading driver of growth, trade, exports, prosperity of the global economy, India had moved to the periphery of the global economy. And then the British Raj was replaced by the License Raj. For a long period of time, we saw socialism in India, and every single industrial license was cleared by the government of India.
It was only in 1991 that we saw the first wave of liberalization when industrial licensing was done away with, but many hard areas of control by the state still remained. Just about a decade back, many of you would recall that India was a “fragile five” country. It was termed as a “fragile five”. From fragile five, India’s moved to the top four countries of the world, and in another two years we’ll overtake Germany to be in the top three.
We are a $4 trillion economy. The Prime Minister’s vision is that India should go on to be a 30-plus trillion dollar economy by the time it becomes 100 in 2047.
Structural Reforms
First and foremost, what has India done to move from fragile five to the top four and become a $4 trillion economy? This will give us the road to the future. India has made very major structural reforms in its economy. The first of which is that we have one tax across the economy which is digital, which is Goods and Services Tax, and that tax has led to higher revenues for the government and for the state governments. GST has been further liberalized, consolidated, improved upon, and a lot of process of digitization has happened.
The second has been that in India we used to say that India was a country which had socialism with very complex entries, and capitalism—when it moved to capitalism—it had no exit points. Therefore, insolvency and bankruptcy code was critical for this country. Bringing in the insolvency and bankruptcy code has actually brought in a huge amount of financial discipline because many large companies used to borrow and not pay back the financial institutions.
The third has been that for many middle-class people like me who used to borrow money to buy houses for their families and never get them through real estate builders—this particular problem was particularly severe in Gurgaon and Noida—the Real Estate Regulation Act was brought in, and the real estate sector has boomed as a consequence.
The fourth has been that India brought down the corporate tax rate level. Three years back, India gave away Rs.145,000 crores to its private sector so that its tax regime could be on par with the world’s best.
And the fifth, which is critical, is that the government focused on removing a lot of rules, regulation, procedures, and paperwork. There was a huge focus on ease of doing business. The government eliminated over 2,000 laws, digitized many things, and made things easier and simple.
Digital Transformation
But the biggest thing in the economy that happened was that India digitized its economy. Every Indian has a digital identity: 1.5 billion people have a digital identity. Between 2015 and 2017, we opened 550 million bank accounts. Every bank account was seeded with Aadhaar and your mobile number. When we started this opening of bank accounts, only 18% of the women in India had a bank account. Today, 90% of the women in India have a bank account.
That led to Indians doing fast payments. We use our mobile to do most of our payments now. We don’t go to physical banks. At least I haven’t been to a physical bank for 4-and-a-half years. I’ve not used my checkbook. But then there were many young Indian startups—Mobikwik, Pine Labs—who started providing credit based on your payment history. There were another set of startups like Zerodha, Groww, Upstox who took the stock market to tier-two, tier-three cities of India. There was another set of startups like Go Digit and Acko who took insurance to tier-two, tier-three cities and rural areas.
India is the only country which from fast payment to credit to insurance to stock market transaction does everything on the back of mobile within 30 seconds to 1 minute. No other country does that. The Bank of International Settlements in its study said that India achieved in 7 years what it would have taken the country 50 years to achieve normally, because the leakages in the Indian economy came to an end. You could put money straight into the bank account of the beneficiary without any leakage.
During the COVID period, we could do 2.2 billion COVID vaccinations and over 800 million people could get benefits without leakages. Whereas in the United States, the American government sent out checks—22% of the checks came back. They could not identify the right people. Same thing happened in Germany. Here, all vaccination was a digital process on the mobile. In America, everything was paperwork.
India technologically leapfrogged and built up an alternative model which is today known as the Digital Public Infrastructure. It created the digital identity layer, but on top of that it allowed the private sector to compete with each other. So India is the only country where PhonePe competes with Google Pay, Paytm competes with Amazon Pay, but on top of the digital infrastructure layer. This is open-source, open API, globally interoperable.
This model is very different from what the Western world has seen. When you go to Amazon, when you go to Google, when you go to Meta, Facebook, your data is owned by them and then they use your data for machine learning and artificial intelligence. Whereas in India’s case, we have a Digital Empowerment Protection Architecture which does not allow memorization of data, and therefore your data is owned by the citizens of India.
Infrastructure Development
The third big thing that’s happened in India is the focus on infrastructure. In the last 7-8 years, India has built over 40 million houses for its citizens—building another 30 million houses. We should try and understand that building 40 million houses, is more than the population of Australia. So actually India has built a whole Australia within India. That’s the size and scale of what India has done.
India has provided toilets for its citizens—130 million toilets with behavioral change. Indians didn’t use toilets. Toilets have been provided. Behavioral change has been done through Swachh Bharat. 130 million toilets means more than the population of Germany.
It provided piped water connection to 253 million Indians. 253 million Indians means more than the population of Brazil. It built 88,000 kilometers of roads, expressways and highways in the last 10 years. No other country has done this. The outlay on infrastructure in India went up from less than 1.8% of its GDP to 4% of its GDP on infrastructure.
Green Transformation
The fourth thing that India has done—and it’s not much talked about but it’s very critical—is that India has done it in a green manner. A lot of this has been through sustainable development because India has built up 256 gigawatts of renewable energy and brought down the price of renewable energy.
If you look at the total greenhouse gas emission in the world, the CO2 emission, India’s contribution is one-tenth that of the United States. But yet we took this responsibility that we will drive green growth. In COP 21 in Paris, we took that responsibility. We did 256 gigawatts of renewable energy. We brought down the price of renewable energy power from 24 rupees to roughly about 2 rupees 20 paise.
We created one grid. We must understand this: Europe doesn’t have one grid. United States doesn’t have one grid. India has one grid across the country. Power produced in Tamil Nadu can go to the western part of India, eastern part of India. Power produced in Gujarat can go to the eastern part of India because of one grid.
When I was CEO, we did a tender for 7,000 electric buses. The cost of electric buses was 12% cheaper than fossil fuel buses. The next tender being done is for 10,000 buses. The Prime Minister said the third tender should be for 30,000 buses, the fourth tender for 100,000 buses. When you do this, you are using the size and scale of India to drive down prices and actually making India the center for manufacturing electric buses across India.
Many commentators like Bill Gates said that when you move from fossil fuel to clean energy, you have to pay a premium—a premium of 30 to 35%. What India demonstrated is that it can use its size and scale to drive down prices and actually do it not at a premium but at a discount.
Technology Missions
It’s important to realize that actually Steve Jobs was not the first inventor of computers. Internet was not driven by Google. The disruption was done by somebody else, but they became the driver of growth. It’s very important that as we go along, the second mover has a big advantage.
India’s driving the AI mission. India is driving the semiconductor mission, which is now leading to about 10 different companies doing chip manufacturing in India. Many design companies are getting into India. We are driving the green hydrogen mission. The green hydrogen mission aims at really using renewable energy because India is climatically blessed. The only other country which is climatically blessed like India is Saudi Arabia, but Saudi Arabia is flushed with carbon, flushed with fossil fuel, so their focus is on fossil fuels.
But India’s climatically blessed. If it can produce 256 gigawatts of renewable energy with a target of 500 by 2030, it will use renewable energy to crack water to produce green hydrogen. Its aim is that today green hydrogen is available at $4.5 per kilogram. It should be able to bring the cost of green hydrogen down to $1 per kilogram by 2030. The size and scale of India should be able to bring it down to $1 per kilogram and make India the biggest exporter of green hydrogen and the cheapest producer of ammonia in its liquid form and export to the rest of the world.
The Challenge Ahead
Now, the Prime Minister’s vision is that from 4 trillion, you move to 30-plus trillion dollar economy in the next 22 years. This implies that India’s GDP has to grow 9x; its per capita income has to grow 8x; its manufacturing has to grow 16x. That’s the challenge: 9x, 8x, 16x.
Only three countries in the world post-World War II have been able to do this: Japan post-World War II, Korea between the ’70s and ’90s, and China from 1990 to 2020—scorching paces of growth at 9.2%, 9.6% and 10.2% per annum, year after year, year after year of growth.
India can do this only if it is able to grow at 9% plus for three decades or more. That’s the challenge for India. Three decades or more growth of 8.5-9%, year after year, year after year, year after year, three decades or more. Only three countries have been able to do it. All other countries of the world got caught in the middle-income trap. Today there are 108 countries of the world which are caught in the middle-income trap.
Global Challenges
India is confronted by global challenges. When these countries were growing, global trade was growing. It was expanding. The world was expanding. There was growth taking place. There was free trade. Japan could sell Toyota cars and Honda cars in United States. China could export to the rest of the world post-Kissinger’s visit to Beijing. All that has come to an end.
First is that the period of relative stability post-World War II from 1945 onwards, which enabled United Nations Security Council, World Trade Organization, all these institutions, multilateral institutions to come up, has come to an end. The period of stability has come to an end. You’re seeing a war in the heart of Europe for the last four years. Over 180,000 people have died there. You’re seeing a war in the Middle East where 350,000 people died.
Institutions like United Nations Security Council, World Trade Organization are irrelevant. They become redundant because they did not keep pace with the changing times. They were frozen in time. They became irrelevant. If India is in the top four countries of the world, India is not a member of Security Council, whereas United Kingdom, which is now seventh or eighth, is still there.
The second is that these countries grew on the back of globalization, global value chains, and the ability to export and penetrate global markets at low cost. That period of global value chains expanding and globalization expanding has come to an end. You’re seeing protectionism in its worst form. You’re seeing tariffs being imposed. You’re seeing President Trump imposing 130% tariff on China, negotiating, bringing it down. China putting tariffs on United States. Mexico putting 50% tariff on India yesterday. Trump putting tariff on India 50%.
The period of globalization, global value chains has come to an end. Therefore, you will have to do a lot of bilateral negotiations. You’ll have to do regional negotiations. Continue to build bilateral trade agreements and regional trade agreements. That’ll be critical.
But in the midst of these two disruptions around the world, there is a third thing happening, and that is that we are living in an age when the world will see the biggest rise in productivity and growth ever seen in the world. That is because of data, machine learning, the rise of artificial intelligence and quantum computing. We are living in an era of the greatest era of prosperity which the world will ever see.
What was not physically possible earlier will be possible because of the use of AI. It was not possible to improve learning outcomes of our children earlier because it is not possible to take tests around 1 crore, 1.5 crore people. You can do this using artificial intelligence. You can monitor the attendance of teachers. You can do tests every day, give them the results. You can check outcomes. You can improve health outcomes. You can improve learning outcomes. You can change stunting, wasting, nutritional standards across the world.
We are living at a time when technology can be used to transform the lives of citizens across the world. If it took India 70 years to transform, we can do this in the next five to six years using technology. Therefore, using technology in the global south to leapfrog will be critical.
Domestic Challenges
India is also confronted by huge domestic challenges, and it’s important to confront them. First and foremost, I would say that it’s not possible for India to grow only on the back of services. India needs to become a manufacturing country, and you have to see that 25% of your GDP comes from manufacturing sector because you can’t have growth without jobs. Manufacturing will be a very big driver of growth.
We’ve moved to registering patents from 20,000 to one lakh patents, but we don’t commercialize them. Our royalty outgo is enormous, but our royalty income is low. Therefore, you need to move into R&D. The government has rightly sanctioned a 1 lakh crore scheme for R&D through the private sector working in partnership with the private sector. Manufacturing has to be the key for growth creation.
The second is urbanization—good, smart urbanization—because India will see 500 million people getting into the process of urbanization. 500 million people means the challenge for India in the next five decades is to create two Americas. We’ll see population of the size of Chicago moving into urban areas every 5 years.
If you do not do this, you will see all this encroachment. You’ll see poor urbanization. You’ll see your cities declining. You’ll see the air quality worsening. Therefore, you need to do active smart urbanization: good planning, good roads, good public networks, good green areas, and good planning for urbanization and create 500 cities of a million population each. India’s challenge is to create 500 cities of 1 million each.
The third challenge is that India has been growing on the back of five or six states. You can’t do this. The southern part of India and the western part of India grows. The eastern part, which is the most populous part of India—the eastern part comprises of 60% of your population; if you do not develop the eastern part of India, you’ll have huge inequality in the country. Therefore, you need the eastern part of India. You actually need 12 states of India to grow at 10% plus. That’s the key challenge.
The fourth is that it’s not possible for India to grow without—many of you are from MSMEs. I’m a great believer in MSMEs because they create jobs. In India, what happens is that in the MSME sector, 99% of microenterprises do not become small. Small doesn’t become medium at all in India, and it doesn’t become small because we have too many large companies. The backward-forward integration between large and small doesn’t take place.
When Maruti came in, it created tier-two, tier-three, tier-four companies. Therefore, you need many more large companies in India. We have very few large companies. You need India to create 10,000 large companies in India—big, large companies which will then do backward integration with other suppliers, tier-two, tier-three suppliers, so that the MSME ecosystem is created.
The fifth point is that it’s important for India that it will not be possible for India to do this without hugely improving its human development index, its physical quality of life index. No country in the world, whether it was Korea, China, Japan, has been able to grow without improving learning outcomes, health outcomes, nutritional standards. Unless you don’t transform, this is the key to long-term sustained growth. You can’t grow on the back of a stunted population, of wasted children, stunted children.
You need to improve learning outcomes because almost 45% of your children studying in class 8th are not able to follow class 2 maths, class 2 physics, or class 2 English. Even in their mother tongues, they are not able to do this. So learning outcomes have to radically improve. Health outcomes have to improve, and the human development index has to improve radically.
Why This Can Be India’s Century
Having said all this—the challenges, the global challenges, the domestic challenges—I strongly believe that this can be India’s decade and this can be India’s century. This can be India’s decade and this can be India’s century because India’s demographics are very good. Our average age is 29. Even when we become 2047, our average age will be 35. Rarely in the history of the world has a country not created wealth when it has low dependency burdens. Therefore, there’s a huge opportunity to use the demographics of India to grow rapidly.
The second key thing is that we must understand that India is the only country in the world which is today doing 30 km of roads and 12 km of railway line every day. No other country in the world is doing 30 km of road and 12 km of railway line. India is the only country in the world which is today actually doing nine metros a year. Nine metros a year. No other country in the world is doing nine metros a year.
India is the only country in the world which has increased its solar energy 31x—31 times—in the last 7 years. India is the only country in the world which does 50% of its payments through fast payments on the mobile. China is next with 20%.
So demographics, infrastructure creation, use of technology to leapfrog—all exist in India. No other country, no other country in the world has this ability to do this.
Geopolitics and the Private Sector
The world of geopolitics—we must understand. United States of America is the only country which controls 28% of the global GDP. It controls 48% of the market cap with just 4% of the population. The United States has maintained its share for the last three decades. It’s a highly innovative society because of a lot of H-1B visas going there—only because of the H-1B visas.
Europe’s share, which used to be 30%, has come down to less than 15%. Europe’s share has come down from 30% to 15%. China’s share is going up. China’s share is close to about 19%. So the quest in geopolitics is America realizes that on cutting-edge technology, China is getting closer and closer to the United States of America, and the United States, to retain its leadership, must control China.
This quest for protectionism, this quest for saying that we’ll not give you technology, or the quest for deep negotiations is all happening. The breakdown of supply chain is happening because of the United States’ realization that the global order in the last three decades has worked to its disadvantage—huge disadvantage. Therefore, the developed world will always work to its own advantage and not to your advantage.
It’s important for India to use its size and scale to do cutting-edge transformation, to use its political will to transform India. In my view, it is the only country in the world which has today, because of its demographics and the large number of reforms that have been introduced—the structural reforms, the digitization, the infrastructure that has been created—it’ll have a huge multiplier effect in the coming years.
I’m a great believer in free enterprise. My belief is that only the private sector can make India grow. Government can only be a catalyst, but the private sector of India must generate wealth. It’s for people like you sitting in this room to really drive India’s growth and prosperity, create jobs, and take India from 4 trillion to a $30 trillion economy.
