Bhalla: India's 6% growth masks a 'standstill' in ambition
Economist and author Surjit Bhalla has argued that despite India's robust 6 per cent growth rate, the economy is trapped in a 'standstill' of ambition, with government protectionism discouraging corporations from taking the risks needed to compete globally. Speaking exclusively with ANI, Bhalla, a former part-time member of Prime Minister Narendra Modi's Economic Advisory Council, said India's manufacturing sector remains stagnant because the policy environment shields companies from competitive pressures.
Healthy balance sheets, but no drive to invest
Bhalla pointed out a paradox: while Indian firms have healthy balance sheets, they are reluctant to commit to large-scale manufacturing investments. He argued that this hesitation is a rational response to a policy environment that protects them from competition. 'The key element about the Indian system is why it is at a standstill. A standstill with a 6 per cent growth. We are doing well, but we are all very comfortable with what we have achieved. There is no ambition. There is no drive to go forward,' he said.
Tariff protection reduces competitiveness
Questioning existing tariff structures, such as a 25 per cent duty on polyester, Bhalla argued that these measures reduce the urgency for domestic manufacturers to become globally competitive. 'Why are industrialists not taking risks? Look at the protection we provide them. So why should they take risks?' he asked. He contrasted India's approach with the 'East Asian miracle' model, citing South Korea's historical success, which he attributed to a government-industry compact that demanded competitiveness in exchange for support.
South Korea's model versus India's approach
'The government said, 'Go forth and export.' If you are competitive, we will back you with subsidies. If you are not competitive, you are out,' Bhalla explained. By contrast, he felt India failed to demand similar export-oriented performance from its own industrialists. Bhalla noted that while many expected India to emerge as the primary beneficiary of the 'China plus one' strategy, the country was effectively outpaced by its neighbours. 'Vietnam and Bangladesh had our breakfast,' he remarked, citing Vietnam's aggressive pursuit of foreign investment through tax incentives and swift integration into global supply chains.
Manufacturing GDP share stagnant for decades
Reflecting on the manufacturing sector's long-term share of GDP, which has hovered between 13 and 15 per cent for decades, Bhalla warned that complacency is the primary barrier to India's vision of becoming a Viksit Bharat (developed India). While he acknowledged the country's current 6 per cent growth as 'remarkable,' he insisted that hitting higher potential growth targets will require a fundamental shift in policy. For Bhalla, the path forward is clear: move away from protective blanket policies and towards a system that rewards competitive efficiency, encourages exports, and compels industry to embrace the risks inherent in a globalised economy.
