India must seek long-term predictability and not rush in this moment. Wait and watch on the US.
Photograph: Amit Dave/Reuters
Key Points
- America has become very unpredictable and inconsistent in its policies
- China’s rapid rise between 1990 and 2020 was anchored in large-scale manufacturing integration
- Trust, resilience, and predictability will increasingly shape trade relationships.
- For India, the opportunity lies squarely in manufacturing.
- The cost of doing business is high because the rate of credit is high in India
- Ultimately, growth will depend on private enterprise.
- Power tariffs, land acquisition processes, and logistics costs must also coalesce with export competitiveness.
India should resist knee-jerk responses to tariff volatility in the US and instead use the current geopolitical churn to build manufacturing scale at home, former G20 Sherpa and former chief executive officer of NITI Aayog Amitabh Kant said on Wednesday.
Speaking at Business Standard Manthan, Kant said Washington’s policy environment had become fluid and unpredictable.
US policymaking is increasingly volatile
In conversation with Nivedita Mookerji of Business Standard, the former bureaucrat described US policymaking as increasingly volatile.
“America has become very unpredictable and inconsistent in its policies.
“What policy they allow today is subject to variation tomorrow,” he said, observing that decisions are “subject to constant negotiation” and can change quickly.
His advice was unequivocal: “Therefore, my view is that we should stay the course.”
India must seek long-term predictability, he said, and “not rush in this moment. Wait and watch on the US”.
But while patience is required externally, urgency is essential at home.
Trade, today, signal a structural shift
Kant said the global order that emerged after World War II — and underpinned decades of expanding trade — is now fraying.
Conflicts in Europe and West Asia, along with the fragmentation of global value chains, signal a structural shift.
For four decades, deep integration into supply chains lifted millions out of poverty across Asia.
Japan expanded through exports. South Korea broke into global markets.
China’s rapid rise between 1990 and 2020 was anchored in large-scale manufacturing integration.
That system, he said, is now being reconfigured.
“When there is disruption, when there is a breakdown in global value chains, it provides India a once-in-a-generation opportunity.”
“What is unfolding is not deglobalisation but “reglobalisation”. “From just-in-time inventories, we’ve moved to friendshoring,” he said.
Three things that will shape trade relations
Trust, resilience, and predictability will increasingly shape trade relationships.
For India, the opportunity lies squarely in manufacturing.
“You need scale; you need competitiveness,” Kant said.
Without size and scale, India cannot meaningfully penetrate global markets.
Benchmarking China without copying it Kant argued that India must benchmark itself against China’s manufacturing ascent — not to replicate its model, but to understand the economics of scale.
“Benchmark yourself against why China became a manufacturing nation,” he said.
China’s success, he said, rested on coordinated action at scale: long-term, low-cost land leases, reliable and affordable power, access to credit, and rapid labour mobilisation.
Large ecosystems were built around anchor firms, millions moved into factory jobs, and export capacity surged.
India, he said, is a vibrant democracy and will pursue its own path. But the lesson is unambiguous: cost competitiveness determines global market share.
“It’s not just ease of doing business — it’s the cost of doing business, which is high in India,” Kant said.
High credit costs remain a central constraint.
“The cost of doing business is high because the rate of credit is high in India,” he said.
Global standards elevate statutory liquidity requirements and “need to be calibrated and brought down”.
“Therefore, the rate of credit must come down in India. It is very important.”
Power tariffs, land acquisition processes, and logistics costs must also coalesce with export competitiveness.
“Cost competitiveness means credit rates coming down. It means power rates must be lower,” he said.
Kant said that while goods trade has been most disrupted in the current global environment, services and capital flows have been more resilient — making manufacturing the decisive battleground.
India’s ambition of becoming a $30 trillion economy, he said, hinges on achieving size and scale in manufacturing, alongside sustainable urbanisation and improvements in human development.
States must emerge as growth engines, and credit penetration must deepen to support industrial expansion.
“Without deeper credit penetration, India cannot grow,” he said.
AI at scale, but for everyone
If geopolitics signals fragmentation, technology signals acceleration.
Kant described the present moment as one of extraordinary productivity potential driven by artificial intelligence (AI).
“We are sitting in a room at a point in time when the world is going to see the biggest rise in productivity ever,” he said.
AI, he argued, is a general-purpose technology comparable to electricity.
“This will penetrate every single sector of the country.”
From agriculture and healthcare to education and nutrition monitoring, AI could transform slow-moving development indicators through real-time tracking and analysis.
But he cautioned that AI is resource-intensive. “AI is an energy guzzler,” Kant said, pointing to the electricity and water demands of large data centres.
India’s response, he said, must marry scale with sustainability.
Renewable-backed data centres, grid upgrades, and stronger transmission infrastructure are essential.
Renewable energy generated in western India is often stranded due to transmission bottlenecks — a constraint that must be addressed urgently, he said.
On policy, Kant called for building digital public infrastructure (DPI) for AI, akin to India’s interoperable identity and payments platforms.
“In India’s context, we need to make DPI for AI,” he said.
The objective must be inclusion.
“Whatever we do with AI should not end up creating inequality.”
India’s demographic and digital scale provide an advantage.
“India has data,” he said. With widespread digital identity and financial connectivity, the country has a base to build AI systems trained on domestic data.
Technology races, he said, play out over long horizons. Early movers do not always dominate.
India’s traditional strength in software could allow it to optimise computing power rather than rely solely on hardware scale.
Labour markets
On labour markets, Kant said rigid distinctions between formal and informal employment may blur over time.
“Don’t expect everything to get formalised,” he said, pointing to the rise of gig work and contract professionals.
Ultimately, growth will depend on private enterprise.
India can grow only on the back of the private sector,” Kant said. Government must enable, but investment, innovation, and scale will come from business.
As global supply chains are rewired and trust becomes a defining economic currency, Kant’s message was clear: exercise patience externally, drive down costs internally, build manufacturing scale with urgency, and harness AI in a way that is both inclusive and sustainable.
