The Department for Promotion of Industry and Internal Trade (DPIIT), responsible for promotion of industry in India, coordinates with various ministries for production-linked incentive (PLI) schemes, facilitates investment and promotes new technologies. Rajesh Kumar Singh, secretary, DPIIT, met with Fortune India to discuss expansion of the department’s role with PLI and steering India’s industrial growth at a time FDI is on a decline and global trade is sluggish. Interview by Joe C. Mathew.
INVESTMENT
After a record high of $84.8 billion in FY22, FDI inflow declined to $71.4 billion in FY23 and $33 billion in April-September this year. How do you assess the situation?
The slowdown is primarily driven by global factors, including geopolitical instability. Developed countries from where a lot of FDI(1) used to come are facing their own issues, including inflation and monetary tightening. Outflow from those countries has come down. India is better off if you compare it with China as their dip is much larger. Net FDI inflow is looking small because of increased outflow. A lot of people are repatriating earnings. But the outflow is much higher for China. Their outflow went up by about 90%, ours by about 30%. So, we are reasonably confident that India remains one of the top investment destinations.
Government has pinned a lot of hope on its flagship production linked incentive (PLI) scheme. What has been the success rate?
Some are runaway successes. For instance, mobile manufacturing has led to a lot of increase in exports as well as sales within the country. PLI schemes for pharmaceutical and food processing sectors are also doing reasonably well. Then there are those, like scheme for white goods, which are still in gestation period. Investment has come in. The beauty of the scheme is that the company has to invest, start selling and reach a certain threshold to get the money. Incentives are back-ended and investment is front-ended. In terms of subscription, we are reasonably comfortable about most of the sectors. Some are lagging behind, for instance, the textile sector.
Are you planning any tweaks to make PLI schemes more attractive?
We are looking at tweaks in three-four sectors, though I cannot tell you the status at the moment. The consultation process is on. Textile and pharma are two such sectors. It is not because they are not attractive but because there is a need for some flexibility in timelines and product lines.
Will more sectors be covered under PLI?
There is no plan to add any new sector at the moment. The government would prefer to see how these 14 sectors do. The plan is to let them stabilise and consider more sectors thereafter.
INITIATIVES FOR STATES
The government started ranking states on Ease of Doing Business (EoDB) some years ago. What do the latest rankings say? What difference has this brought since launch?
The EoDB ranking for 2023 is ready. It is to be released next month or so. We were waiting for state elections to be over. The ranking has created competition among states because states take it seriously. Chief ministers were concerned about ranking of their states. This created the momentum for each state to carry out what we call the business reforms action plan(2) for that year. They didn’t want to fall in ranking.
Therefore, it improved business environment generally. Reforms like single window clearance and randomised inspection rather than discretionary inspection system came about as a result of competition among states. We have also done a study on cost of regulation for 13 services sectors across states. It will be disseminated within a month and cover regulatory cost of services like electricity, water, property titles, building permission, etc. It is not a ranking exercise. It will show if there are a lot of variations among states, which should see how they can reduce these.
Your department is also monitoring development of industrial corridors in the country. What is the current status?
Four corridors in Dholera (Special Investment Region), Greater Noida (Integrated Industrial Township Project), Aurangabad (Shendra-Bidkin Industrial Area) and Ujjain (Integrated Industrial Township Project) are complete(3). Those are at a stage where land allotment is going on. Some have reached mature stages, while in some, only about one-third industrial land has been allotted. But they are going through. Building cities takes time, but land is being allotted, social infrastructure is being built. Four others are approved and EPC contractors are putting up trunk services. Five others are in final stages of approval.
START-UPS/TECH
How do you see India’s start-up ecosystem? How can we strengthen it?
We have received a lot of inputs from our stakeholders, including venture capital funds in the start-up ecosystem. They have concerns over some tax-related issues, and we have offered whatever help we could. We have taken it up with ministry of finance. Some things may get taken care of. Let’s see.
Is a deep-tech start-up policy in the works?
The draft is there in public domain. We are moving a policy note on this in consultation with the office of the Principal Scientific Advisor. It can cover any sector, anything which has a lot of R&D, which has significant innovation, which has long gestation period, which is not going to be a simple process improvement or an e-commerce site. Something that requires R&D and IPR will come under deep-tech start-ups. The discussion was not just about creating a conducive policy but also a slightly curated incentive system. Normal incentives may not work for them as deep-tech start-ups take a long time to go from ideation to commercialisation. But then a real breakthrough can be a game changer, too. They need a different level of handholding and support.
When can we expect the e-commerce policy to be finalised?
You will have to wait for it.
What will drive the next level of growth in India’s e-commerce?
Digital public infrastructure (DPI) has led to huge growth in real-time digital payments. We account for 46% of global digital payment transactions. It has also made India No. 1 in fintech adoption and created all these start-ups which are leveraging DPI. One in five start-ups is fintech. E-commerce also obviously benefits from DPI. Rollout of 5G in 700-plus districts to provide high speed connectivity to entire population will also drive things such as e-commerce, fintech and e-services like utility payments and online connections. A combination of all these will drive growth in e-commerce.
INTERNAL TRADE
What do you consider as key driver of internal trade?
GST (goods and services tax). After all these initial hiccups, we now have a well-functioning GST mechanism and a national market with less entry barriers between states where trucks used to be lined up at one intersection just for passing from one state to the other. That is the integration GST has done.
Government has been trying hard to promote “One District One Product” campaign. What is DPIIT’s role here?
That is beginning to take off. We have been showcasing them at trade fairs, our embassies abroad, and linking them to e-commerce platforms or ONDC. Some of the products are unique and interesting. There was a feeling that packaging may be improved and for that we are supporting them through National Institute of Design.
India’s G20 leadership term saw a lot of activities aimed at branding the country and its products. Which are the sectors that benefited?
Tourism and hospitality sector should see a good impact. It is visible. Maybe after the pandemic, people also want to move but a lot of our Tier-II, Tier-III tourism destinations are benefiting (because of G20 events).
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