India must lower cost of doing business to boost manufacturing: Kant

Amitabh Kant, the former chief executive of NITI Aayog, has argued that India needs to address the fundamental economics of manufacturing by cutting the statutory liquidity ratio (SLR) to boost credit availability and reduce borrowing costs for businesses.

Kant said production-linked incentive schemes, while useful in the near term, are insufficient as a standalone strategy for the manufacturing sector. Instead, the retired bureaucrat emphasized that policymakers must focus on structural measures to lower the cost of credit, which he identified as critical to sustained industrial growth.

"Statutory liquidity ratio at 18 percent is too high for India," Kant told PTI, noting that reducing this mandatory requirement would improve the flow of credit to manufacturing sectors. The SLR requires banks to maintain a minimum share of their deposits in government securities, effectively constraining capital available for lending to businesses.

The SLR has remained fixed at 18 percent for several years after being reduced to that level from higher levels over the preceding decade. Kant did not specify an exact target for the ratio but stressed that managing credit costs and ensuring adequate resource availability would be essential for the manufacturing sector to compete and create jobs.

Access to affordable credit remains a persistent challenge for Indian manufacturers, particularly small and medium enterprises seeking to scale production or invest in new capacity.