Prime Minister Narendra Modi’s visit to the US and his meeting with the leaders of the US industry sends a strong message that India is open for business.
In the last one year or so, the government of India has ushered several reforms in the industry—it started the PLI scheme to incentivise the Made in India programme, reduced corporate tax to 25 per cent, and generally made it easier to do business in India. But the message that India is open for business needed to go out to the world.
The Prime Minister has also realized that India is vulnerable in certain areas, especially in the wake of the border skirmish with China. And these are areas of high technology—semiconductors, drone and defence technology among other things.
Today, India has the largest number of chip designers and testers in Bengaluru but it does not have a world-class chip manufacturing facility. The worldwide shortage of semiconductor chips is exposing the weak links in the Indian industrial scene and it is important for India to get this technology as it becomes a Global Digital Power on the back of its innovative startups.
Similarly, the predator drone technology of the US, which has been extremely effective in the bad lands of Afghanistan, has demonstrated clearly that the next level of warfare is going to be electronic and automated, which uses Artificial Intelligence and other tools for remote surveillance. These are technologies that India needs. We do have some of it but it is not advanced enough to meet our needs. Therefore, Prime Minister’s meetings with the titans of US industry are significant.
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Defence Industry Must be Strengthened
India has opened up its markets and liberalised its policies. Among the biggest changes in the last seven years has been India’s defence policy. For several years, defence procurement was run by brokers and middlemen who made commissions and did not allow Indian enterprises to come up. It was a shut shop with the DRDO, ordnance factories and imports making up the entire industry. It was a period marked by lack of innovation and high technology; India was a client of power brokers in the defence industry globally.
Former defence minister Manohar Parrikar and Prime Minister Modi opened up this industry, and today we are witnessing the emergence of many Indian industries in this sector, and they are delivering sophisticated weapons at a much lower cost to the Indian armed forces.
This industry must be strengthened to make sure that at no point India is subjected to any kind of sanction by any country and has the ability to defend itself. Our tough stand on eastern and western borders has sent a clear message to both China and Pakistan that India is no aggressor but will defend its borders.
And the ability to do so has to be strengthened through the use of sophisticated arms that use advanced technology. In the last five years, the import of high-quality arms from the US does send a signal in that direction. But the big issue for India remains the need to have a larger industrial base. We have to promote sophisticated and high-quality manufacturing through ease of doing business—that any global company that is offering us tech can come and work in India.
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Replicate IT Industry Success
We have done it in the past with the software industry. When India opened up to global software business in the early 1990s, it allowed 100 per cent FDI in the IT sector. Multinational companies like IBM and Texas Instruments came to India and trained Indian talent. Those trained by them in sophisticated software skills later left these companies to start their own ventures. This diffusion of intellectual capital ultimately helped in developing human capital too, and India is today the largest provider of software services in the world. On top of that, it has built a very clear advantage in startups using sophisticated technology.
India has opened up and allowed 100 per cent FDI (foreign direct investment) in areas of emerging and sophisticated technology; such companies should be asked to set up shop here. They will hire staff, train them and give them access to cutting-edge technology. Ultimately, the strength of a country depends upon the strength of its intellectual and human capital.
India also needs to foster R&D and training in advanced technology because that is the future. The capital markets’ valuation of Apple, Google and other digital firms clearly demonstrates where value is going to be in the future. And this effort has to be led by the Prime Minister himself as he has the credibility and the gravitas to make commitments to global industry leaders, ask them to come to India and set up facilities here and work with us.
The policies of the government of India in the last seven years have given a huge push to FDI inflow. Today, we have more than $640 billion in forex reserves, we received nearly $82 billion FDI in the last financial year, we have more than 69 unicorns and we will end up with nearly 200 unicorns in the startup industry by 2025. India is marching ahead. What Prime Minister Modi is doing—meeting the leaders of US industry, holding one-on-one conversations with them, assuring them of equal and fair treatment in the country—is the right thing to do.
Every country uses its political leadership to market it well to attract investment and jobs. Prime Minister Modi is doing that repeatedly, and is indeed building optimism in and around India.
The author is Chairman, Aarin Capital Partners. The views expressed in this article are those of the author and do not represent the stand of this publication.
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