India must cut the statutory liquidity ratio (SLR) to boost job-intensive manufacturing, former NITI Aayog chief executive Amitabh Kant said.
Kant said the production-linked incentive (PLI) is a short-term solution for the manufacturing sector, but in the long term, “we need to reduce the cost of doing business through measures like cutting the SLR, which can reduce the cost of credit”.
“Statutory liquidity ratio at 18% is too high for India … I am a great believer in bringing it down because flow of credit to manufacturing sectors will be the key in the long run,” Kant told PTI.
Without sharing the ideal level of SLR, the mandatory share of net demand and time liabilities or deposits banks invest in government securities, the retired bureaucrat maintained that the cost of credit and availability of resources will be essential to help the manufacturing sector.
SLR was cut to 18 per cent over a few years, but it has remained at that level since then. While it helps the government’s borrowing programme, it is also criticised for crowding out capital that private enterprises across sectors could use.
Kant said that without adequate credit availability, startups in new-age sectors like geospatial will not be able to grow into large companies that can disrupt.
Underlining that manufacturing creates employment opportunities, which is important for a country like India, Kant also flagged land acquisition as important.
“We need to look at how China and its ‘proxies’ like Vietnam and Mexico are supporting the manufacturing sector in their countries through easy land acquisition or long-term land leasing as well,” he said.
Similarly, the cost and availability of power also needs to be looked at, he said, reminding that this is a state subject and the states must look into it.
He rued that India is the only country where an enterprise pays more for power usage than a residential consumer. “So, you treat manufacturing as a second-grade subject,” he added.
India is blessed with a huge opportunity in upping its manufacturing game, and the world has the trust in us, he said, reiterating a relook at the domestic aspects to help the sector.
Amid concerns on the employment intensity in new age sectors like data centres, he said allied activities like servers, racks, electric equipment occupy for 45 per cent of the costs and the jobs will come from there.
