Luxury sector depends on India’s ability to grow at 9-10%: Niti Aayog CEO
Department of Industrial Policy and Promotion secretary Amitabh Kant believes that the luxury sector has the potential to grow nine-fold to $180 billion (`12 lakh crore) by 2025. Kant how India’s reform measures can make that happen. Excerpts from an interview:business Updated: Mar 26, 2016 08:55 IST
Department of Industrial Policy and Promotion secretary Amitabh Kant believes that the luxury sector has the potential to grow nine-fold to $180 billion ( rS 12 lakh crore) by 2025. Kant how India’s reform measures can make that happen. Excerpts from an interview:
How critical is the luxury market for India? How doe it cut across all these segments?
Luxury can be very big. In my view, luxury is an about $20 billion about (Rs 1.3 lakh crore) market right now and by 2020, this could be $50 billion (Rs 3.3 lakh crore) market and by 2025, it could go as big as $180 billion market. But luxury is a function of India’s ability to grow at rapid rates of 9-10%. Right now, India is growing at 7.5% and we are in an oasis of growth. The compounded power of this growth will enable the Indian middle class to become upper middle class, the upper middle class will get into the millionaire category and the millionaires will become billionaires. We will have more high net-worth individuals and they will consume these products. Luxury is about aspirations and we are at the tipping point.
Is there a conscious decision by the government to grow?
The conscious zeal of this government is to reform. I have been with the government for the past 38 years and this is the most reformist government in terms of pushing growth across sectors –from power to FDI to petroleum to coal to agriculture to infrastructure. That will push growth and consequently that will push the luxury segment.
Now, we have told the world that we are ready with make in India. What are the next steps to keep the manufacturing drive going?
When the government came to power, manufacturing was growing at 1.6% and now it is growing at 12.6%. Manufacturing has grown, but the challenge is that there is a lack of demand. The new budget has put resources into MNREGA and agriculture, and that will create demand. There is a global slowdown in exports and hence India has to grow on the back of domestic demand.
In which sector has manufacturing grown?
My view is that if you look at the entire manufacturing sector, electronics, particularly mobiles, has seen tremendous growth. We have seen 50 mobile manufacturers coming into India in the last one year. We have seen a lot of top companies from China coming into India. We have seen growth in the automobile sector, auto components and now defence.
Are we looking at China-styled manufacturing or high-end manufacturing base in India?
We are a big country, bigger than the 24 countries of Europe. You have different models of manufacturing in different states. States such as Gujarat and Maharashtra must get into intelligent manufacturing or smart manufacturing. They must have the convergence of digital manufacturing. But there are states such as AP and Karnataka that have labour intensive sectors also. So we have different layers depending on the state’s core competencies. There must be one area where each state is a global player. If we have 15 states as number one in fifteen areas, we can grow.
There is an argument that we have missed the manufacturing bus and are looking at services sector.
Firstly, manufacturing must account for 25% of GDP, while today it is at 17-18%. There are huge perils of growing without a manufacturing base. Secondly, we must shift people from agriculture to manufacturing. You need to enhance productivity and production in agriculture. You cannot do that because there is too much of disguised unemployment in agriculture, you need a second green revolution in agriculture with better seeds, irrigation and crops. Services must continue to grow. Agriculture must continue to grow at 5% and manufacturing must grow. Its not that manufacturing can substitute agriculture but manufacturing and services must also grow, share of exports must grow, all of this is intricately linked.
It has been said nothing has changed at the ground level. How do you take that criticism?
When people say this, they do not go on the ground to check. Everyone from the Tatas to Mahindras to Birlas to Boeings are investing in India and we will see changes soon.
What about the private sector’s hesitancy to invest?
Overcapacities have been created and banks’ lending has been impacted. All this is being corrected by a slew of measures and in the next 6-7 months private investment will come back big-time in India. Government investment is happening in the road, power and coal sector already and we will see results in the form of increased demand. Many of you, especially journalists, don’t realise that India is growing at 7.4% when the whole world is slowing.
How encouraging is FDI? Which sectors have you seen the investments in?
Very. We have to keep pushing the envelope and keep the vigour going. We will see investments coming into defence, electronics, textiles, food processing etc. Almost 55% has been into manufacturing.