“To become a developed nation, India must undergo four major transfo mations a shift from rural to urban living, a clean and large-scale energy transition, a complete overhaul of our education system to empower individuals, and a manufacturing revolution that creates quality jobs and drives economic growth” - Shri BVR Subrahmanyam, CEO, NITI Aayog, Annual Business Summit of Confederation of Indian Industry (CII), 30 May 25.

Background 

Viksit Bharat 2047 agenda is a comprehensive vision plan by the Government of India to transform India to a developed nation by 2047: the 100th Anniversary of India’s Independence. To achieve this vision, multiple lines of effort in various domains need to be progressed concurrently in mission mode. Many such efforts spanning Governance & Bureaucracy, Industry & Manufacturing, Economics, Health, Agriculture & Rural, Education, Social Equity etc have already been initiated and are under progress through well-defined roadmaps and milestones.

Broad Aim & Scope

Ibid paper attempts to examine the status of reform initiatives for 10 shortlisted areas in the Industry & Manufacturing Sector and suggest course corrections within ongoing reforms or recommend alternate areas for effort. The critical aspect of availability of a short timeframe of around two decades for 2047 have been given due consideration in these specific sub sectoral assessments. Further certain parallels in other countries have been examined to evolve possible focus areas within the broad reform.

Context 2047: Industry & Manufacturing

3. While India remains a services and agriculture dominant economy, the Industry & Manufacturing Sector contributes to approx. 27.13% of GDP (2024-25) . Looking ahead to the ambitious target of $30 trillion GDP by 2047, manufacturing GDP of $7.5 trillion accounting for 25% of overall GDP will have to be achieved . Positive developments in the Industry & Manufacturing Sector would have multiplier effects in many other sectors/ domains especially in stimulating employment, impetus to Make in India & Atmanirbhar Bharat initiatives, MSMEs etc.

10 x Reform Areas in Industry & Manufacturing Sector

The 10 shortlisted areas of reform examined under the umbrella of Industry & Manufacturing Sector are as under: -

Suggested Reform (One/10): Increase Defence Spending to 3% of GDP

Suggestion: If recent border conflicts are anything to go by, turning Atmanirbhar in defence is a must. Increasing the share of defence expenditure to 3% of the GDP and supporting it with an earmarked non-lapsable fund for defence expenditure will go a long way to ensure this. There can be major benefits from expanding the role of the private sector so that defence expenditure multipliers can be higher than one.

Status: Stockholm International Peace Research Institute (SIPRI) estimates India as the third largest military spender in 2023. Currently defence expenditure in India is at 2.27% of GDP. This translates to approximately an allotment of ₹ 6,81,210 Cr. Ministry of Defence signed 193 contracts worth ₹2,09,050 crore in 2024–25 of which 177 contracts were awarded to the domestic industry, amounting to ₹1,68,922 cr. For FY 2025-26, MoD has earmarked 75% of modernisation budget amounting to ₹1,11,544 cr for procurement through domestic industries as well as approximately 3.94% to be reserved for R&D.

Relevance: An increase of defence expenditure allocation to 3% of GDP will have multiplier effects to industrial growth especially for defence manufacturing. With cascading effects in employment, heavy industry, defence exports etc every ₹1 spent has the potential to generate two to 2.5 times  in macro-economic output. 

Environment Scan

(a) NATO planned to increase their defence spending to 2% of GDP in 2014. While the geopolitical threat spectrum may be different viz India, it was only by 2024 that 32 countries managed to support this target with 2.02% of their GDP. Thus, conflicting demands will exist for increase in defence expenditure allocation.

(b) Investment in defence technology and high end equipment enabled USA and USSR (Russia) to capitalise on defence exports and gain on both multiplier economic effects and strategic influence. Today China is also adopting this strategy. Pakistan on the other hand spends 2.7% of its GDP in defence equipment but the expenditure is predominantly for imports. Hence, any planned allocation increment must enable stimulus in own defence industry and not be import oriented.

Challenges.However certain challenges exist: - 

(a) While defence production in India in FY 2023-24, marked a 174% rise since 2014-15, the overall defence manufacturing industry is still nascent in terms of technology. To amplify this aspect, contracts for 156 x Light Combat Helicopter (LCH) has been concluded with HAL . However, there is only 65% of indigenous content and critical components are still being made available from outside sources. 

(b) Private sector contributes only 21%6 of total defence production. Reluctance driven primarily in terms of need for assured supply orders, heavy initial investment as well as monopoly of DPSUs.

(c) Any increment to defence budget, like the proposed hike to 3% of GDP, will translate into additional capital availability. However, the industrial capacity to absorb this additional capital is questionable. Coupled with the proposed non lapsable clause there is a high threat probability of idle funds remaining in the budget.

(d) MSMEs are constrained in their technological bandwidth and skilling for niche products. While certain significant successes have been achieved for low cost, large volume items, inputs during the defence capsule at IIPA indicated that only 28 of planned 83 schemes could be taken up by MSMEs. 

Recommendations. While the concept of defence manufacturing as a key facet of GDP growth merits attention, the proposed increase of percentage share to 3% needs review in implementation. Some suggestions are: -

(a) With the changing character of warfare, operations in emerging domains of cyber, space etc have gained significance. India’s defensive and offensive military capabilities in these domains need massive investments and proposed increment of percentage of GDP can be specifically directed towards these arenas. These arenas have an inherent dual utility (civilian and military) and hence such an investment may have added advantages.

(b) R&D in niche technology (aircraft engines, heavy engines for tanks, composite materials etc) are areas which are mandated to evolve high technology conventional war equipment. Additional capital to support R&D will facilitate improvement in own defence equipment as well as enabling competitive products for exports. Reportedly US expended 7% of defence budget towards R & D and this led to a technological advanced military force. 

(c) While non lapsable funds remains a lucrative proposal, the conflicting demands from multiple lines of effort for Viksit Bharat is unlikely to enable this luxury. Any planned allocation must be optimally expended within FY timelines. However, an option of minimum assured allocation projections for five years could be considered to facilitate long term planning of defence equipment acquisition.

Suggested Reform (Two/10): Abolish FDI Roadblocks

Suggestion. To boost job creation, technology adoption, and capital inflows, the government can further liberalise foreign direct investment (FDI) in sectors such as legal services, banking, and retail trade. Increasing FDI limits, adding more sectors under the automatic route, and reducing bureaucratic hurdles will make India a more attractive investment destination. In addition to this, policy consistency and streamlined approval processes at central and state levels are important to boost investor confidence.

Status 

(a) FDI inflows have seen a steady rise from $ 36.05 billion in FY 2013-14 to $ 81.04 billion (provisional) in FY 2024–25, marking a 14% increase from $ 71.28 billion in FY 2023-24. Services sector was the top recipient of equity in FY 2024–25 (19%), followed by computer software/ hardware (16%) and trading (8%). Manufacturing FDI, grew by 18% in FY 2024–25 and reached    $ 19.04 billion from $ 16.12 billion in FY 2023–24. However, India’s net FDI8 was a low of $353 million in FY25, down 96.5% from last year, driven by high repatriation, outbound investments ($29 billion from $17 billion), and IPO exits. 

(b) The number of source countries for FDI increased from 89 in FY 2013–14 to 112 in FY 2024–25. But max inflows remain from financial centres like Mauritius and Singapore . Further a trend of short term investments for profit in financial and hospitality sectors over manufacturing was also evident .

(c) The Government has also undertaken reforms across multiple sectors to liberalize FDI norms. Significant reforms included increased FDI caps in Defence, Insurance, and Pension sectors, and liberalized policies for Construction, Civil Aviation, and Single Brand Retail Trading. Notable measures also included allowing 100% FDI under the automatic route in coal mining, contract manufacturing, and insurance intermediaries. In 2025, the Union Budget proposed increasing the FDI limit from 74% to 100% for companies investing their entire premium within India. Yet India held 62nd Rank in FDI Regulatory Restrictiveness Index (OECD, 2023).

Relevance.FDI plays a pivotal role in accelerating industrial growth, enhancing technological capabilities, and integrating domestic firms into global value chains. In the context of Indian manufacturing, FDI can help bridge infrastructure gaps, improve productivity, and foster innovation. Further technology transfers and supply chain integration can improve export competitiveness. Cascading effects on employment generation and internal outsourcing to MSMEs are appreciated.

Environment Scan. While Japan, South Korea, and Taiwan focused on building their national capacities in manufacturing and technology; Malaysia, Thailand and Vietnam relied on foreign MNCs and FDI to establish plants and technology transfers . Vietnam emerged as an example of a short time gainer of attracting FDI in select sectors. A targeted FDI strategy  in electronics attracted companies like Samsung, Intel etc led to a boost in exports to $114 billion in 2023 (from $45B in 2015).

Challenges.Despite potential, several challenges hinder FDI inflows: -

(a) Regulatory Complexity and bureaucratic hurdles deter investors.

(b) Inadequate logistics, power supply, and industrial zones reduce the attractiveness of investment.

(c) Complex labour laws and compliance burdens discourage large-scale manufacturing investments.

(d) Difficulty in acquiring land for industrial use.

Recommendations. India should continue to pursue a balanced approach for FDI; build its integral capacities but also harness the potential of FDI and MNCs to integrate their value chains especially due to short timeline of two decades. Certain areas for increased focus are: -

(a) Identify additional sectors for opening for FDI. Trends in investment destinations like Dubai, Singapore etc indicate an impetus to real estate and green technology. While AI/ IT, medicals and Fin Tech can also be explored appropriate regulations may have to be evolved for strategic security.

(b) While PM Gati Shakti and National Logistics Policy has improved India’s logistics performance index (38/139 Countries), customs and border procedures as well as multi modal connectivity remain challenges.

(c) India has collated 29 labour laws into four labour codes . While all four have legislative approval, federalism challenges have hindered implementation.

(d) Land pooling model adopted in certain states like Gujrat, Tamil Nadu, Andhra Pradesh could be considered for modification for logistics infrastructure development and address land acquisition challenges for FDI projects.

Suggested Reform (Three/10): Revive MSME Growth

Suggestion. Micro, small, and medium enterprises (MSMEs) contribute nearly 30% to India’s GDP and employ more than 110 million people. But they face a massive credit gap of over ₹ 30 lakh crore. To unlock their full potential, the government should simplify the Goods and Services Tax, reduce the frequency and complexity of filings, and eliminate unnecessary regulations. Improving access to formal finance through fintech firms and expanding credit guarantee schemes may help the sector scale up sustainably.

Status

(a) In 2023-24, MSME related products accounted for 45.73% of India’s total exports  and 45.79% in 2024-25 (May 2024). The number of exporting MSMEs surged from 52,849 in 2020-21 to 1,73,350 in 2024-25. Government initiatives like Districts as Export Hubs (DEH) and E-Commerce Export Hubs (ECEHs) help MSMEs access global markets. The Sector was reported to contribute approx. 30% in Gross Value Added to GDP in 2021-22 .

(b) Large number of schemes exist for the Sector like PM Vishwakarma, Udyam Registration, PM Employment Generation Programme, Emergency Credit Line Guarantee (ECCLGS), ODOP, Trade Receivable Discount System (TReDS) etc with varied degree of success. Recent revisions in Goods & Services Tax are also a positive initiative for MSMEs.

(c) Budget 2025-26 has undertaken some important steps to stimulate the sector like the investment and turnover limits for classification have been increased by 2.5 times and 2 times, respectively. Furthermore, initiatives to ensure greater credit availability through increased guarantee covers, credit cards, startups and women led schemes have been initiated. A focus product scheme for the footwear & leather, toys and food processing (Bihar) sectors have been planned for. 

Relevance. As a vital contributor to India’s industrial landscape, the MSME sector plays a crucial role in manufacturing, exports, and employment. 5.93 crore registered MSMEs employ more than 25 cr people. They offer decentralized employment, reducing regional disparities and urban migration, and support transformation by absorbing agriculture labour. MSMEs are inherently more agile and innovative, pioneering niche products and services. Their adaptability makes them ideal for experimenting with new technologies and business models.

Environment Scan. Germany’s Mittelstand refers to small and medium-sized enterprises (SMEs) and family-owned businesses that make up 99% of all German companies, employ over 60% of the workforce and contribute significantly to GDP, and exports. These firms are often owner-managed, which enables long-term strategic thinking, deeply rooted in local communities, and focused on niche markets, through high-quality engineering, and craftsmanship. Features include decentralised presence in both rural and urban hubs, skilled workforce through a vocational training system, with stress on innovation. Mittelstand provide insights into management of MSMEs: -

(a) Strengthening vocational training with industry-academia partnerships.

(b) Encouraging family owned MSMEs to scale sustainably.

(c) Promoting rural industrialization via cluster development.

(d) Supporting niche exporters with tailored financing and market access.

Challenges.Despite potential, challenges  remain as under: -

(a) The sector remains dominated by micro enterprises (97%) of registered MSMEs, followed by Small (2.7%) and medium enterprises (0.3%). 

(b) Access to working capital. Only 19% of credit demand was met in FY 21 with approx ₹ 80 Cr remaining unfulfilled.  

(c) 82% of Medium Enterprises do not have advanced technologies integrated into their business operations (Industry 4.0 – AI, IoT, etc.) also only 33% of MSMEs achieve growth and efficiency gains driven by strong digital readiness .

(d) Poor availability of a conducive R&D innovation ecosystem, skilled manpower, and poor awareness of available schemes also remain.

Recommendations Certain suggestions are: -

(a) There is a perceptible gap between the skills required by MSMEs and the workforce skill available. This challenge has also been highlighted by World Bank Reports of 65% lacking skills needed in general in India . This needs to be addressed through improving Entrepreneurship Skill Development Programme (ESDP) and Assistance to Training Institutions (ATI). Also promote women and SC/ST entrepreneurship through targeted schemes like the National SC-ST Hub.

(b) Impetus to One District One Product (ODOP) to promote local specialties and strengthen e-commerce linkages and digital marketing capabilities.

(c) Expand the Micro & Small Enterprises Cluster Development Programme (MSE-CDP) including investment in common facility centres for increased awareness for MSMEs, logistics hubs, and digital infrastructure.

(d) Focus on Medium enterprises which contribute to 40% of MSME export income and are more innovation driven than small and micro enterprises.

(e) Examine the recommendations of Niti Aayog Report15 on MSMEs of May 25 for existing policy adjustments.

Suggested Reform (Four/10): Dedicated Zones for Rare Earths

Suggestion. To boost rare earth production and strengthen the supply chain, the government should fast-track mining projects by simplifying clearances and environmental approvals, offering financial incentives, and setting up dedicated industrial zones for rare earths. Encouraging research in new extraction methods and e-waste recycling is also crucial. Collaborating with global partners for tech access, alternative supply sources, and developing skilled manpower will support long-term growth.

Status

(a) India holds the third-largest Rare Earth Element (REE) reserves globally (approx 6.9 million metric tons), mainly in monazite sands across Andhra Pradesh, Odisha, Kerala, Tamil Nadu, and West Bengal . New hotspots have been identified in Arunachal Pradesh (Papum Pare), Assam (Karbi Anglong), Meghalaya (Sung Valley), Madhya Pradesh (Singrauli coalfields) and Rajasthan (Bhilwara) .

(b) However, India currently imports over 90% of its rare earth needs. Hence there is a clear issue of untapped potential. To address this Government of India launched the National Critical Mineral Mission (NCMM)  in 2025. Under this mission, the Geological Survey of India (GSI) has been tasked with conducting 1,200 exploration projects from 2024-25 to 2030-31. NCMM also aims at training and upskilling workforce to support activities in mining, processing, and R&D (10,000 by 2031) and creation of dedicated zones for processing with modern infrastructure and facilities .

(c) Ministry of Mines identified 30 critical minerals in November 2022 . 24 of these have been included in Mines and Minerals Regulation Act, 1957. The Central Government now has the exclusive authority to auction mining leases and composite licenses for these specific minerals. 

Relevance. The importance of strategic autonomy through a resilient and self-reliant ecosystem in this critical sector merits no amplification. This sector will also enable India’s aim to reduce the emissions intensity of its GDP by 45% by 2030 (from 2005 levels), achieve 50% of its electric power capacity from non-fossil sources by 2030, and reach net-zero emissions by 2070 . Furthermore, Global rare earth market is projected to reach $20B by 2030 (McKinsey, 2023).

Environment Scan. China controls 60% of mining, 85–95% of global refining and approx. 90 % of magnet production and is leveraging this advantage even in trade talks with US. This has been achieved by large state investment in R&D (Program 863 & 973) and infrastructure as well as export support and domestic procurement mandates like merger of firms into China Rare Earth Group to centralize control as well as regulatory checks like monthly quota reporting, traceability platforms, and oversight. Environmental lapses were reported like in-situ leaching and toxic tailings (e.g. Baotou lake). 

Challenges.The following challenges remain22: -

(a) Late start in a strategic sector. IS sit and Red areas now stabilised.

(b) Technological capabilities in extraction, processing, and recycling.

(c) Ethical (Unrestricted labour) and environmental concerns.

Recommendations.It is appreciated that the NCMM has identified the lacunas in this Sector. However, the envisaged timeline of 2031 to meet the designated targets merits review especially in the current geopolitical context. The planned skilled workforce of only 10,000 also seems to be inadequate. Further a concurrent alignment of procedures/ regulations for clearances (Atomic Energy Commission (AEC), Environmental etc) needs to be undertaken to facilitate implementation of NCMM. 

Suggested Reform (Five/10): Align Grading with Global Standards

Suggestion.India must stamp its products with quality benchmarks such as ISO and BIS to become a global manufacturing and export hub. This is specifically important in high-value sectors such as medical devices, electronics, pharmaceuticals, and automotive, where global buyers look for traceability, safety, and certification. This will not only improve India’s export acceptance but also enhance consumer confidence. The government must promote industry training and incentivise certification.

Status

(a) India has made significant strides in aligning its domestic standards with global benchmarks across key export-oriented sectors - medicines, electronics, pharmaceuticals, and automobiles. QCI & NABL labs have also been increased in India to facilitate access to testing facilities.

(b) Since introduction of the BIS Act in October 2017, over 140 QCOs have been issued for more than 550 products, compared to just 14 QCOs covering 106 products till 2014 . As of Jan 25, new Indian Standards have been posted in power & energy, mining, climate & environment, batteries, medicines etc taking the total count to nearly 23,000 . Such updates ensure parity and competitiveness of Indian products in international markets.

(c) Annual Programme for Standardisation (APS) for the year 2025-26 witnessed participation from representatives of 40 ministries and 84 industry associations . The APS is an initiative which will include new standards to be developed and existing standards to be revised in the coming year. BIS has also introduced a digital interface that allows stakeholders to upload proposals and track their progress.

(d) There are six crore MSMEs in India out of which only around 35000 enterprises have achieved BIS (lSI) certification. Zero Defect Zero Effect manufacturing (ZED) has been launched. ZED is a simple, transparent , and affordable certification with three levels, Bronze, Silver & Gold, and is based on well-defined parameters of quality, safety, production, cleanliness, energy, environment and more. Subsidies and benefits have been also planned. 

Relevance

Adoption of international standards will help further improve quality of goods manufactured and exported from India25. Adherence to quality criteria, enables mitigation of risks associated with substandard products and enhances consumer trust. Alignment of intellectual property laws with global standards is mandated to attract high-tech investments. Furthermore, aligning domestic standards with global benchmarks (ISO, IEC, WTO-TBT) reduces compliance friction and enhances export readiness.

Environment Scan

China again emerges in this aspect as a leader in leveraging standards. However, the journey has been long and can be viewed in three specific timelines: -

(a) 1978- 2000. Aligning with International Standards. Support to reforms and opening of market. 

(b) 2001- 2015. Alignment with ISO and IEC including catching up with required standards. Currently, India is appreciated to be at this stage.

(c) 2015 onwards. Setting unique standards especially in emerging Sectors/ technologies. 

Challenges. The following challenges are appreciated: -

(a) Currently, many regulations under the BIS Act are based on ISO/IEC standards, but BIS certification25 is generally not accepted internationally due to a lack of accreditation. 

(b) Micro and small units find it difficult to meet the strict QCO requirements.

(c) Factory inspections are an integral part of the regulatory framework for implementing CROs. BIS conducts factory inspections, but the timelines and processes vary based on priority and available resources and hence get delayed. 

Recommendations

(a) Support for SMEs should include a phased implementation of QCOs and CROs. This could be encouraged through financial assistance and technical guidance to help SMEs comply with these orders. Such a support will help upgrading processes and acquiring new equipment also.

(b) Mutual Recognition Agreements (MRAs) with important trading partners (FTA Countries) as these agreements will help make domestic laws acceptable to countries with different regulations, facilitating smoother international trade .

(c) BIS should seek accreditation to ensure that its certifications are internationally accepted and will help manufacturers avoid the additional costs of seeking certification from other agencies.

Suggested Reform (Six/10): Single Window Factory Approval

Suggestion.Setting up a factory in India still involves too much paperwork. What’s needed is a single- window system that actually works bringing together state and central approvals in one place, fully online, and with strict timelines. Smaller towns should be allowed to define their own industrial zones. With simpler zoning laws and fewer roadblocks, these towns could become the next manufacturing hubs.

Status

(a) National Single Window System (NSWS) was launched on 22 September 2021. It was envisioned as a one-stop digital platform integrating various central and state-level clearance systems to improve the ease of doing business. 32 x Central Departments and 29 x States have onboarded by 2024 and portal can now facilitate more than 659 approvals. However, India ranked 63rd in the World Bank’s Ease of Doing Business (2020)  before its discontinuation by the World Bank and a factory setup still requires 20+ approvals across departments. Also, only 40% of applications on NSWS  are processed within stipulated timelines.

(b) Department for Promotion of Industry and Internal Trade (DPIIT) is the Nodal Department for coordinating the initiatives under Ease of Doing Business which are aimed at creating a conducive business environment. Business Reforms Action Plan (BRAP)20 covers reform areas such as Information Wizard, Single Window Systems, Online Building Permission System, Inspection Reforms, Labour Reforms, etc.

(c) The Jan Vishwas (Amendment of Provisions) Act, 2023  has helped in rationalizing criminal provisions and ensuring that citizens, businesses, and government departments operate without fear of imprisonment for minor, technical or procedural defaults. The Act has paved the way for rationalizing laws, eliminating barriers, and bolstering growth of businesses.

Relevance

Mandatory use of the National Single Window System (NSWS) for all regulatory approvals at central, state, and local levels, would ensure greater efficiency and predictability in the approval process . The regulatory and approval hurdles deter manufacturing giants from establishing factories and infrastructure in India. 

Environment Scan

As of 2018 almost 117 countries have implemented single window of which only 41 are fully operational . Vietnam is a possible model for understanding establishment of Special Economic Zones (SEZs) with tax holidays and simplified approvals. 18 x Coastal area and 325 State Supported SEZs were planned in 2018 with targeted sectors for FDI and special incentives for factory establishments. However, land acquisition challenges remain, and targets have slipped. 

Challenges

Though challenges in adopting the single window system stems generally from lack of technical infrastructure in most countries, India has an advantage in this aspect. Yet the following challenges are appreciated : -

(a) Federal structure between Centre and State systems lead to a fragmented integration in single window models. Many departments and state agencies— like electricity boards or environmental committees operate outside the system, requiring manual intervention.

(b) Industrial zoning, factory layout approvals, and labour compliances vary widely by state, making uniform digital processing difficult.

(c) Critical sectors like fintech and infrastructure often require approvals from bodies (e.g., RBI, UIDAI) which are not yet onboarded.

(d) The current portal acts more as a navigation tool than a compliance gateway. Users are directed to additional paperwork than final approvals.

Recommendations

(a) Establishing a dedicated inter-agency working group that includes representatives from all relevant stakeholders involved in the process. This can foster better communication and coordination .

(b) Each government agency involved has its own set of rules, procedures, and data requirements, making standardization a daunting challenge. Developing a comprehensive legal framework that sets out clear guidelines and processes including technical integration can be considered .

(c) Secure high-level political support for implementation by highlighting potential to drive economic growth, attract foreign investment, and improve government efficiency. Conduct feasibility studies and impact assessments to demonstrate the benefits of the system to decision-makers.

Suggested Reform (Seven/ 10): Global Financial Hub

Suggestion.India needs to step up if it wants to be the go-to spot for global holding firms and innovation centres. The GIFT City IFSC is a decent start—tax-friendly, with fewer hoops to jump through. But here’s the catch: capital gains, angel tax, GAAR, and double taxation still spook investors. No surprise then that firms still prefer Singapore or Dubai. If the government provides clarity, India could have a real shot at keeping that capital at home.

Status

Gujarat International Finance Tec (GIFT) was established in 2015 with the vision to “onshore the offshore” by creating a globally competitive platform for cross-border financial services. Further the IFSC Act of 2019 provides the statutory authority to regulate financial services in GIFT/ IFSCs. However, the status of GIFT is comparatively below global hubs as shown and merits impetus. GIFT City has become a hub for various key sectors , including Aircraft and ship leasing, Banking services, Capital markets, Finance companies, Business, Accounting, Taxation, and Financial (BATF) services, Bullion exchange, Financial technology (FinTech) and Foreign universities.

Relevance

GIFT City and International Financial Services Centres Authority (IFSCA) are pivotal in positioning India as a front-runner and the destination of choice for setting up Global or Regional Treasury and Commodity Trading Centres (GRCTCs). This in turn have played a pivotal role in the development of regional and international trade. The development of a robust commodity trading ecosystem is also intrinsically linked to India’s broader economic aspirations, particularly the vision of ‘Viksit Bharat’.

Environment Scan.Global benchmarks such as Singapore, Hong Kong, Dubai and European hubs have long offered attractive environments for GRCTC setups. However, emerging locations like Shanghai, Kuala Lumpur, Bangkok and notably, GIFT City are increasingly gaining traction due to their lower costs and incentives. Jebal Ali Free Zone in Dubai offers tax exemptions, 100% foreign ownership, and a conducive regulatory framework to encourage functioning.

Challenges.Despite progress, GIFT City faces challenges in talent retention, infrastructure development, connectivity, cost competitiveness and global visibility . Some key aspects are: -

(a) Competition from cities like Singapore and Dubai especially in terms of support infrastructure and connectivity.

(b) Dual regulatory clearances/ approvals from both the Special Economic Zone (SEZ) authority and IFSCA in GIFT. Hence though efforts have been made to create favourable regulatory environment, challenges exist in attracting international businesses due to regulatory uncertainties or differences compared to other global financial centres.

(c) The stability of the Indian economy and political landscape deals with businesses considering establishing operations in GIFT City especially regarding regulatory changes and economic uncertainties .

Recommendations

Recommendations are based on Report of the Expert Committee  on ‘Positioning GIFT IFSC as Global Commodity Trading Hub’ submitted to IFSCA on 02 Aug 25. The brief aspects highlighted in the report are: -

(a) Regulatory Enablement.

(b) Policy Alignment.

(c) Banking & Tax Incentives.

(d) Infrastructure & Logistics development.

(e) Financial Innovation.

(f) Ecosystem Development.

Suggested Reform (Eight/ 10): Unlock Global Listing

Suggestion.Back in 2023, India changed Section 23 of the Companies Act so that public companies could list directly on foreign exchanges via GIFT IFSC. This sounds great on paper, but not much has happened since. The rules are still unclear, and there’s no roadmap for how companies can actually go about it. Many start-ups still turn to exchanges like the NASDAQ and the LSE for better funding, higher valuations, and visibility. If the government really wants this to work, it needs to finalise the framework fast.

Status. The suggestion needs to be viewed in conjunction with GIFT IFSC / stimulus to a financial hub concept:-

(a) As part of the Aatmanirbhar Bharat initiative, the Indian government has approved direct overseas listings for domestic companies. This includes foreign exchanges and the International Financial Services Centre (IFSC) in GIFT City. Around 70 Indian companies are listed globally  and more than a third of them are from the financial services sector spanning banks, insurance companies and consumer lenders. These 70 companies from India account for $1.3 trillion in sales, $126 billion in profits, $5.5 trillion in assets and $2.3 trillion in market value. 

(b) The Department of Economic Affairs (DEA), Ministry of Finance, has amended Foreign Exchange Management (Non-debt Instruments) Rules, 2019, in Jan 24 and notified the ‘Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme’. Simultaneously, the Ministry of Corporate Affairs (MCA) has issued Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024. These, together, provide an overarching regulatory framework to enable public Indian companies to issue and list their shares in permitted international exchanges. As of now, the framework allows unlisted public Indian companies to list their shares on an international exchange .

Relevance

Listing of Indian companies will reshape the Indian capital market landscape and offers Indian companies, especially start-ups and companies in the sunrise and technology sectors, an alternative avenue to access global capital beyond the domestic exchanges. This is expected to lead to better valuation of Indian companies in line with global standards of scale and performance, boost foreign investment flows, unlock growth opportunities, and broaden the investor base. The public Indian companies  will have the flexibility to access both markets i.e. domestic market for raising capital in INR and the international market for raising capital in foreign currency from the global investors.

Environment Scan

the case of Brazil (Aerospace (Embraer (established in 1969)) provides insights to the advantage of listing. The company was privatised in 1994 and subsequently Dual Listed in NSE and in Brazil in 2008. This led to increased investor base and export stimulus. 

Challenges

(a) The framework for direct overseas listing is still evolving. Guidelines from SEBI, RBI, and MCA are not fully harmonized, creating ambiguity .

(b) Companies must adhere to foreign jurisdiction regulations (e.g., SEC in the U.S.), which are often more stringent than Indian norms. Dual compliance with Indian and foreign laws increases legal and operational complexity .

(c) High costs  associated with legal, accounting, and advisory services. Ongoing expenses for investor relations, disclosures, and audits in foreign markets. Wide variations between countries exist in terms of conditions to allow listing. For example, companies must prepare their financial statements according to the accepted accounting principles of the exchange’s country.

(d) Limited Institutional Readiness. Many Indian companies lack the internal systems and talent to manage global investor expectations. Also global exchanges demand robust governance, transparency, and board independence. Many Indian firms may need to overhaul internal practices to meet these standards.

Recommendations.Some suggestions  are: -

(a) The internal readiness of companies for listing in a global market needs to be incentivised. The government may encourage Indian companies to adopt voluntary corporate governance codes such as the National Voluntary Guidelines on Responsible Business Conduct.

(b) Part funding/ facilitate the funding of listing / compliance costs of MSMEs. This could help to offset the potential diversion of capital away from Indian markets.

(c) Operational guidelines on legal and regulatory aspects merit clarification from regulatory bodies like SEBI (example of jurisdictions where Overseas Direct Listing can be allowed) and FEMA regulations .

(d) The government could consider establishing a dedicated regulatory body to oversee direct listings. This body could be responsible for developing and enforcing regulations, as well as providing guidance to companies and investors.

Suggested Reform (Nine/ 10): Build a Smart Export System

Suggestion.Indian exporters deal with too many systems. For every shipment, they’re juggling Customs forms, DGFT filings, bank paperwork, port clearances, and shipping line instructions all separately. A single digital window could save a lot of time. Just one portal to handle documents, get approvals, track invoices, and send shipping info. MSMEs would benefit the most as they can’t afford to hire teams for so much paperwork. This is urgent to meet the goal of $2 trillion exports by 2030.

Status

(a) As part of “Ease of doing business” initiative, with the objective of reducing physical interface customs and regulatory agencies and the trade (importers/exporters), e- SANCHIT  was launched on 01 Apr 2017 by the Central Board of Excise & Customs (CBEC). 

(b) Union Ministry of Commerce and Industry launched the Trade Infrastructure for Export Scheme (TIES) in 2017 aimed at assisting government agencies in the creation of appropriate infrastructure for the growth of exports. Financial assistance (gen grant in aid schemes) for 40 export infrastructure projects  have been approved during FY 2019-20 to 2022-23. These are also linked with Gati Shakti projects.

(c) A New Foreign Trade Policy was launched on March 31, 2023. The policy’s is built on four key pillars of Incentives for remission, export promotion through collaboration with exporters, states, districts, and Indian missions, enhancing ease of doing business by reducing transaction costs and implementing e-initiatives, and focus on emerging areas such as e-commerce, developing districts as export hubs, and streamlining the SCOMET (Special Chemicals Organisms Materials Equipment and Technologies) policy.

(d) The Ministry of Finance ICEGATE  e-Payment Platform for voluntary or self-initiated payments on 23rd December 2024. The new feature replaces the old manual TR-6 Challan payment system, making the payment process easier for importers, exporters, and others. In addition, DG Foreign Trade is also a key stakeholder / facilitator in the stimulation of exports in India. 

(e) E-Commerce Export Hub (ECEH) initiative aims to revolutionize India’s cross-border e-commerce, potentially reaching USD 100 billion in exports by 2030.

Relevance

India is emerging as a future export manufacturing powerhouse, according to Boston Consulting Group , due to the nation’s competitive cost structures, deep pools of labour, and growing scale and capabilities across diverse industries. Roadmap for 2047 emphasizes global competitiveness, innovation, and integration into global supply chains and export achievements would be a testament to India’s evolving capabilities, strategic policies, and commitment to innovation.

Environment Scan

Two examples are evident: -

(a) State support to develop Taiwan as a Semiconductor manufacturing hub indicates the identification and capability development in one niche sector which is now giving strategic advantages.

(b) Mexico stands out as an example of regional trade integration model with one in four automobiles being manufactured there for USA. The country is the world’s fourth largest manufacturer.

Challenges.The following challenges are pertinent: -

(a) Infrastructure. Inadequate port capacity, slow customs clearance, and poor last-mile connectivity. Logistics costs in India are significantly higher than global averages, reducing competitiveness.

(b) Limited Value Addition. Many Indian exports are low on the value chain (e.g., raw materials, basic textiles). Lack of innovation and R&D investment limits this ability.

(c) Regulatory Complexity. Fragmented and overlapping regulations across ministries and agencies.

Recommendations.The following are suggested : -

(a) Single window clearance model integrating all stakeholders.

(b) Encourage sector specific value addition model. Apple (65% export) mobile phones manufacturing in India is an example.

(c) Expedite export oriented logistics support infrastructure.

(d) Explore additional markets like S America ($19.5 Billion) and Africa ($45 Billion). 

(e) Foster opportunities for green industrialization including leadership in areas where technology frontier is still evolving (EV batteries), through sustainable corporate practices and retrofitting of conventional industries.

Suggested Reform (10/ 10): Predictable Power Tariff

Suggestion.For India to keep its industrial engine running, it needs stable and predictable power tariffs -whether it’s coal, gas, nuclear, or renewables. Long-term contracts would give companies some certainty. Reforms in coal supply have helped, but that’s just one piece. There’s still a lack of clarity on renewable access. Sudden tariff hikes and cross subsidies only make things harder for manufacturers, data centres, and global firms planning long- term.

Status

Almost every citizen has access to grid electricity, power deficiency has decreased sharply, and the installed renewable energy capacity has improved in India. The present share of fossil-based installed capacity is ~60% (235 GW) and the remaining 40% (158 GW) is non-fossil . Key facets are: -

(a) Revenue from power emerges in state list but electricity emerges at serial 38 of concurrent list. Hence, States play a major role in implementation (distribution, tariff-setting, and local infrastructure) while the Centre handles inter-state transmission, grid management, and regulatory harmonization. So, the issue suggested has inherent federal challenges. 

(b) A series of schemes were launched, by central and state governments, to upgrade the distribution infrastructure and help the power distribution companies (DISCOMS) in improving their finances. Initiatives include Ujjwal DISCOM Assurance Yojana (UDAY), Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and Integrated Power Development Scheme (IPDS). Coupled with coal reforms under SHAKTI policies the power sector has been enabled over time. 

(c) However, most DISCOMs incur losses every year with the estimated total loss at ₹ 90,000 crores in FY 2021 . DISCOMs’ shortfalls are frequently compensated through borrowings and subsidies, which invariably affects the state finances.

(d) On a per capita basis, India’s electricity consumption is significantly lower than the global average. According to the Central Electricity Authority, in 2021-22, India’s per capita electricity consumption was 1,255 kWh . While this figure has improved over time, India’s performance remains poor when compared to global per capita consumption, which was estimated to be 3,128 kWh in 2014 (The World Bank, 2014).

Relevance

India’s power sector offers vast opportunities for innovation and investment, driven by the shift to renewable energy, grid modernisation, and emerging technologies like green hydrogen. It has the potential to create new opportunities for investment, job creation, and technological advancement and concurrently provide stimulus to the manufacturing Sector.

Environment Scan

Infrastructure led industrial zones can catalyze job creation and exports even in low-income settings as has been witnessed in Ethiopia. Low-cost and priority access electricity in 20 (+) industrial parks have been a success in the country.

Challenges: The challenges in the Sector  are compounded by a possible rise in demand if there is a major stimulus in manufacturing Sector and will include: -

(a) Supporting infrastructure (including transmission and distribution networks) upgrades. This will also include mitigating transmission losses.

(b) Transition to renewable sources as per laid down targets of non-fossil fuel energy capacity of 500 GW by 2030.

(c) High Aggregate Technical & Commercial Losses (AT&C)- 20.93%55. Global average is approx. 08% .

(d) Poor capacity within the sector to utilise latest technologies and the inherent commercial nature.

Recommendations

(a) Need to have cost-reflective tariffs determined in a fair and transparent manner without considering any subsidy57. Current Cross-Subsidization Policy for agriculture and domestic consumers, shifts the financial burden to commercial and industrial consumers. This policy has significant implications for the financial viability and merits review.

(b) Separation of agriculture and domestic feeders in rural areas to reduce AT &C losses.

(c) Focus on demand-side management through differential tariffs based on intraday demand and energy efficiency practice (including transition to smart meters).

(d) Examine incorporating AI for predicting power demands.

(e) Capacity building of the power sector including transformation from DISCOMs to NETCOMs58 .

Summary

The above exam of 10 suggested reform areas indicates the following: -

(a) All proposals are relevant to the strategic target of Viksit Bharat.

(b) Initiatives have already been taken in these areas to address the identified shortfalls and challenges.

(c) Suggested scope of the reform merits certain reviews/ modifications and those are amplified in the recommendations. They also have collateral impact on each other reform areas.

(d) There are inherent challenges in each suggested area of reform, and which are appreciated to be systemic as well as incurring time penalties.

(e) There are relevant examples from the global environment from which implementation challenges can be understood and addressed.

(f) A tabulated summary is as under: - 

The Viksit Bharat programme in whatever form envisaged, is dependent on enhanced economic activity, at most competitive cost, of world class products which can be either exported to other nations or consumed within the country. The world has seen a fundamental shift from globalised economy and diversity in supply chains to increased focus on indigenisation and vertical integration of the supply chains. This has forced us to focus on the industrial capacities which we had overlooked in last few decades and moved on to service economy. However, developing industrial capacities are capital, labour, land and knowhow intensive. Mere policy formulation and nudges from government is not enough. It requires a whole of nation approach. Certain collateral aspects which merit consideration in addition to the 10 above are: -

(a) There is a need to shift focus from higher education to primary education with special focus on mathematics and sciences. Without a sound base in basic sciences at primary level cracking IIT through rote coaching institutes has given mediocre results, with none of the IITs in top 50 or 100 colleges in the world and limited quality research outputs. Whatever good students we have, are studying abroad and aiming to work abroad. We need to increase the intake capacities of students and faculties in these IITs.  In addition, their focus should be on basic engineering like electrical, mechanical, metallurgy etc. And finally, the quality of education should be industry driven so that the output can be gainfully utilised.

(b) We must also look at the countries nearby and see how in a similar timeframe with lesser resources in terms of infrastructure, education etc have executed the reforms which have catapulted them to nations with advanced economies, i.e. Korea, Dubai, Vietnam etc. While India will have unique solutions, some common threads emerging from these Nations are: -

(i) Regulatory, Legal and Institutional Changes. Laws supporting private enterprise, foreign investment, and trade liberalization were introduced progressively. Mechanisms for contract enforcement and property rights were strengthened to improve business confidence.  

(ii) Economic Decentralization: The central government delegated more fiscal and administrative authority to provincial and local levels to encourage responsiveness and efficiency. This was coupled with improved local governance and public administration.

(iii) Focus on Infrastructure and Human Capital: Investments in infrastructure and education supported productivity improvements needed for market oriented growth. These countries focused on training their labour force and increasing skill levels as per industry requirement.

All in all, the outcomes of policy initiatives will be dependant in less of publicity, more quality execution, minimal government, zero bureaucracy, private capital than government loans/ subsidies, free hand to entrepreneurs, state of the art infrastructure, seamless logistics and skilled manpower.

Endnotes

• MyGovIndia.com

• Press Note on Provisional Estimates Of Annual Gross Domestic Product For 2024-25 by MoSPI on 30 May 25

• Niti Aayog CEO statement of 30 May 25 at CII, New Delhi obtained on a Press Release of the event. 

• PIB Report on India’s Defence Leap From Indigenous Production to Global Exports, Redefining National Security: 10 Jun 25.

• Manohar Parikkar Institute Policy Brief: Make in India’ for Defence: A Roadmap February 05, 2015. No quantified multiplier effect indicated; however, it gives a foundation for multi sectoral impact and links. 

• PIB Report on Make in India Powers Defence Growth: Mar 25 for scale and depth of domestic sourcing.

• Min of Commerce & Industry PIB Release on FDI Inflow in FY 2024–25 on 27 May 25

• www.Indiabriefing.com of 10 Sep 25 and www.financialexpress.com Business News of 23 May 25

• The Hindu: Complex Turn in FDI Story 08 Sep 25.

• India Industrial Development Report 2024-25 by Institute for Studies in Industrial Development 

• https://vietnam.incorp.asia/vietnams-march-2025-economic-transformation of 28 March 2025 and Vietnam’s FDI Strategy 2025–2030: Key Priority Sectors 

• Understanding India’s New Labour Codes: Challenges In Implementation (Dec 24) accessed at www.jetir.org/papers/JETIR2412577.pdf.

• Ministry of MSME PIB Report Budget 2025-26: Fuelling MSME Expansion, 04 Feb 25

• PIB Release by Min of Statistics & Programme Implementation on Contribution of MSME to GDP on 11 Dec 23 

•  www.niti.gov.in/sites/default/files/2025-05/Designing-a-Policy-for-Medium-Enterprises.pdf

• Niti Aayog PIB Release of 02 May 25 on Enhancing Competitiveness of MSMEs in India 

• www. cmrindia.com. Study by Cyber Media Research (CMR), Jun 25.

• Helping India Build a Skilled Work Force (Nov 23 Report of World Bank)

• rareearthexchanges.com/news/indias-rare-earth-paradox-rich-in-reserves-missing-in-production

• www.polyeyes.com/Article/india-rare-earth-metals-discovery-2025-top-3-states

• PIB Release on Parliament Question: National Rare Earths Policy of 03 Apr 25

• Powering India’s Clean Energy Future: PIB Research Unit Apr 25 

• ibef.org/research/case-study/critical-mineral-imports-and-india-s-green-energy-transition Oct 24

• mines.gov.in/admin/storage/ckeditor/DAY_1_PPT_4_1737542656.pdf

• www.business-standard.com/economy/news/adopting-global-standards-to-help-india-improve-quality-of-goods-GTRI 

• Discussions during talk by representatives of BIS at IIPA for APPPA

• Bureau of Indian Standards launch Annual Programme for Standardisation 2025-26, PIB report 21 Mar 25.

• www.indiasmeforum.org/zed/ & PDF document on operational guidelines for ZED certification

• India’s Crucial GVC participation Opportunity: GTRI Report Sep 23

• Ministry of Commerce & Industry Press Release of 07 Feb 2024

• Invest India, 2024

• Ministry of Commerce & Industry Press Release of 27 Jul 23 

• www.thehindubusinessline.com/economy/budget/cii-seeks-10-point-ease-of-doing-business-reforms-from-budget-2025

• ijcrt.org/papers/IJCRT2303145.pdf on A Project Report on “Single Window System: Benefits & Challenges.”

• https://economictimes.indiatimes.com/small-biz/sme-sector/one-india-many-regulations-challenges-of-multi-state-compliance-for-indian-enterprises/articleshow/121375568.cms of 24 May 25

• Prospects-and-Problems-of-Single-Window-System-implementation-in-India.pdf

• Overcoming Challenges in Implementing the Single Window System: Lessons Learned at Overcoming Challenges in Implementing the Single Window System: Lessons Learned

•https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/services/consulting/documents/ey-global-regional-corporate-treasury-centres-and-the-india-advantage-v1.pdf

• www.newindianexpress.com/business/2024/May/25/the-journey-of-gift-city-and-challenges-ahead

• ijrar.org/paper on Impact of GIFT City on the Financial Markets and Services Landscape in Indian Economy

• Positioning GIFT IFSC as Global Commodity Trading Hub’ Report of 02 Aug 25

• Forbes’ 2025 Global 2000 List: India - The World’s Largest Companies Ranked

• Ministry of Finance Press Release on 24 Jan 24

• www.business-standard.com/economy/news/mca-enforces-provision-for-foreign-listing-of-indian-public-companies-123103100931_1.html accessed on 20 Sep 25

• cbcl.nliu.ac.in/company-law/decoding-mcas-move-allowing-direct-listing-of-indian-securities-on-foreign-exchange/

• fastercapital.com/content/Choosing-the-Right-Stock-Exchange-Listing-for-Global-Impact.html

•  NASDAQ listing fees accessed at NASDAQ Rules 

•  Explained: Direct listing of Ind Show Less