India must cut import dependence, make goods competitively at home: Mishra | Economy & Policy News

  

“Supply chains are being used as weapons. Capital can be switched on and off. Trade barriers, both tariff and non-tariff, are rising again. We cannot count on a friendly trade agreement,” he said.

 

Mishra said India needed to improve its manufacturing performance and skill its young workforce. He also flagged pressure on the country’s external accounts and called for greater focus on foreign direct investment (FDI).

 

“That calls for stability of tax policy, contracts that states enter into, logistics that can be relied on and clearances that actually clear,” he said.

 

Artificial intelligence (AI) was another emerging challenge, Mishra said.

 

“Artificial intelligence is developing at a fast pace. We do not yet know its full shape. We need to prepare for it,” he said.

 

“These and other challenges are realities. The Government of India is fully aware of these challenges. I am sure financial institutions are also conscious of the urgency to meet these and other emerging challenges,” he said.

 

Mishra said the financial system needed to move beyond financial deepening and increasingly focus on enabling growth.

 

“For three decades, much of the discussion around Indian finance has been about financial deepening — more accounts, more branches, more credit and greater financial inclusion. The financial system has achieved these, but they are no longer sufficient,” he said.

 

“The financial system must now increasingly move from accommodating growth to enabling growth.”

 

India will need to mobilise large volumes of capital over the next two decades for infrastructure, manufacturing, modernisation, energy transition, enterprise and innovation, he said.

 

Banks would remain central, but a larger and more sophisticated economy could not be financed by banks alone, Mishra said. India would need deeper bond and equity markets, larger institutional investors, infrastructure funds and more efficient channels to convert domestic savings into productive investment.

 

Mishra also called for greater use of cash-flow-based lending, particularly for small businesses.

 

For small enterprises, the cost of capital can include documentation, repeated visits, valuation of securities and the weeks taken to reach a lending decision, he said.

 

GST returns, bank statements, payment flows, the account aggregator framework and digital lending infrastructure can allow lenders to assess businesses more closely and quickly, Mishra said.

 

“Can we increasingly appraise a business on the basis of what it earns and what it can put out, rather than primarily on the assets that it has promoted or already purchased?” he said.

 

He said this was not an argument for lower credit standards but for better information and credit appraisal. This would be particularly relevant for first-generation entrepreneurs, asset-light exporters and small enterprises whose creditworthiness lies in the business rather than the family balance sheet.

 

Mishra said the restructuring of global supply chains and opening of markets through trade agreements presented an opportunity for India to move from being primarily a large market to an important production and innovation hub.

 

Production-linked incentives have helped catalyse investment across 14 sectors, he said, but manufacturing could not be the end of India’s ambition.

 

India needs to move towards greater domestic value addition, stronger component ecosystems, design capabilities, intellectual property and globally competitive Indian brands.

 

“The journey must move from ‘Make in India’ to ‘Design in India’, ‘Innovate in India’ and ultimately ‘Lead from India’,” Mishra said.