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Economic Times
29-06-2025
- Business
- Economic Times
Need a machete, not a memo: NITI Aayog's Arvind Virmani on why MSME reform needs more than new laws
Arvind Virmani says that one of the roles of NITI Aayog is to get information that the ecosystem is completely unaware of and therefore not searching for. Arvind Virmani, Senior Economist and NITI Aayog Member, uses the analogy of a jungle to explain that the 'jungle of control' cannot beeliminated just by changing the laws for the MSME (micro, small and medium enterprise) sector. Although the governments have made efforts to reduce the time and cost of compliance, there is still a long journey ahead, he notes. In an exclusive interaction with ET Digital, Virmani talks about the crucial role of states, the advancement made by Southeast Asian countries, the future path for Indian MSMEs to become global champions, and more. Edited excerpts: Economic Times Digital (ET): The MSME sector in India plays a crucial role in the country's economic growth. Despite various government schemes, why do Indian MSMEs continue to face challenges in scaling their operations? Arvind Virmani (AV): There are two sub-segments in the SME segment. There are SMEs, which are basically 10 or more workers, and there are household and micro enterprises. We call them micro, but within them, the household part is much larger at 80-90%, which are just one-person terms of the issues that they face, one is basic infrastructure, which applies to both these two categories. The general point is that just the basic infrastructure in industrial areas is not up to the we think of urban development and cleanliness, we think of residential areas, but to get enterprises of high quality and functioning at the levels we expect, the basic infrastructure has to exist. They cannot be worrying about overflowing sewage pipes every other day if they are getting people from outside to buy things or getting an export order. The second is land use laws. For example, the conversion of agricultural land into industrial land: how will you get entrepreneurs in rural areas if that process is very difficult? The third is demand risk; a lot of small enterprises are single products, single buyer profiles. So, the risk is higher. So, when we say—why can't they get credit easily it is because they are riskier; due to their small scale, they are restricted. And finally, the critical one which is overlooked is the level of skills. The skill part has been neglected for decades, but I think it's getting more attention now, and one of my efforts has been to make sure the quality of that is improved. ET: A large portion of small businesses in India operate informally. Do you see the informality as a symptom of over-regulation, or is it more due to a lack of incentives to formalise?AV: So, this links us back to those two sub-segments: 10 or more workers versus 10 or less; so less than 10 is informal. So again, if laws, rules, and regulations are more complicated, procedures also reflect that. But efforts have been made to simplify the laws and rules, digitise the forms, and comply. But as I have asserted many times in the last several decades, the jungle of control, which was built up, just doesn't go away by changing the have to dig into every little thing. There's a whole structure that was built over 30 years of wrong policies, which is very hard to reverse. It's not just a matter of laws and rules; it's also how the whole system operates. So, with the analogy of a jungle, one has to go through every area and cut the jungle. And that's companies are more effective, and that is where the below 10 and more than 10 divide actually works; the compliances are lower for less than 10. That has the perverse effect of not wanting to grow. So, in that threshold, they just divide into two units. If they are going to go eleven, they will just divide up. In the longer term, this prevents you from attaining second type of cost primarily involves owner-managers, including SMEs, except for the highest, which we call the medium. They are owner-managers. So, their time is limited. If they spend more time on compliance, they will have less time for other things, including innovation, etc. So, there is a challenge, and the only way, and perhaps the best way, to do it is to reduce that time and other costs of has been the effort of the government, but it's a long road. And it also has to stretch it down to the states. Every state has to do its bit because much of this appliance actually happens at the ground level, at the local level, actually. That is the state's purview. ET: What steps is NITI Aayog considering to facilitate the transition from informal to formal structures for micro and small enterprises? AV: It is one of the roles of NITI Aayog to get information that the ecosystem is completely unaware of and therefore not searching for. So that is one, but also that applies to information to states and officials. One state may be doing better, but the other state is not aware of how it is done. Obviously, it depends on their own willingness and motivation as have independent states. So, supporting states and providing them with information is crucial. The other thing that we are doing is to build an index for investment. One of the initiatives that NITI is doing is to see how we can define the strengths and weaknesses of different states in attracting investment, infrastructure, and manufacturing. So that index is now in phase two and will be completed in the coming months. Once that index is ready, a state that is not doing well will have a roadmap to follow. They have a chance then to improve and, therefore, attract more investment and role of states is 100% integral. The ease of doing business, or what used to be called 'Inspector Raj', occurs at the local level, with those inspectors being responsible to the state government, not to the central government. So, clearly the role of the states is critical in attracting FDI in producing and exporting quality goods. To be in the international market, you must produce international-quality goods. ET: NITI Aayog's latest report on medium-sized enterprises highlights their vital contribution to India's GDP, particularly within the manufacturing sector. How can their potential be fully harnessed? AV: This is important because medium-sized enterprises are capable of advancing to the next level. That means the materials, equipment, tools, skill levels of those who run these things, knowledge and information of the owner manager—all that is of a certain quality. The medium-sized enterprises are the ones who are operating at a much higher quality and, in principle, have the potential to compete globally. For example, recently, we did a report at the NITI Aayog on hand tools. There were a whole bunch of hand tool manufacturers. They are in a whole different category. And those are the ones which will be this new medium sector. They have the capability to upgrade the quality chain because the gap is not so one would look at this medium sector in that context, that they are both labour-intensive and have the potential quality and competitiveness to compete are the ones who are capable of scaling. And then, of course, there is the 10 barrier, as well as the 100/300 worker barrier, among others. All these need to be simplified and made less onerous. ET: India's spending on R&D is among the lowest compared to its international counterparts. This is also applicable to medium enterprises. How can we bridge these gaps to foster the growth of MSMEs in general and medium units in particular? AV: The competitive system and export competitiveness are critical for R&D to happen. So, if there is too much protection in an industry, I would not expect anybody to do R&D. So, the first thing is, what is the incentive from their side to do R&D? Why do you do R&D? If you feel that a competitor is going to get something better, a product or a process, which will reduce the cost, and he'll be able to wipe you out. Or he'll produce a new product and get all the market away from you. So that is the basic driver of private sector R& issue is, what can the government do to facilitate it? This is indeed a controversial issue. I believe that we should bring back the R&D subsidy and give a focused subsidy to encourage it. I think it is still very important. Many countries across the world give incentives for R&D. We withdrew it because of a bad experience. I think we need to re-evaluate. ET: Many Asian countries have successfully scaled their SME sectors. What lessons can India learn from countries like Vietnam, Indonesia, or China? AV: This is a very important question. If you look at Southeast Asia in general, the big lesson is they went all out there to attract FDI. They laid out the red carpet for them to set up the supply chain. They didn't do this in one or two years; first they attracted the FDI, and when a large company with US supply chains came in, they rolled out the red carpet to help them build that supply is what has transformed them. That is what enabled them to surpass our per capita income. So, all the Southeast Asian countries who did that and did it successfully now exhibit a much higher gap in per capita income than us. So the big lesson is—FDI and supply chains; if you can get them even now, when things are so bad, it's a different world. That will be a huge driver for the medium and small there are 100 companies engaged in this activity nationwide, that means we have representation in 28 states. If every state brings in one anchor investor, it will transform manufacturing in every state in the next 10 years. We are progressing towards Atmanirbhar Manufacturing. So that is the lesson, a very clear lesson. ET: India was unable to capitalise as much as it had hoped in the China-Plus-One strategy. How can there be a turnaround for India, especially with some inherent strengths, such as a large market and demographic dividend on its side? AV: It is not true that we have not benefited. India is in the top three or five gainers, as per some studies. Some studies show we are third; others show we are fifth. In simple terms, the US imports from China have gone down; they have gone up from other countries, including Taiwan and Vietnam, which is always mentioned. Clearly all these studies indicate that we are the third-largest the question is, how can we gain more?Given our size, we should be gaining 10 times what we are now. So, that is the real issue, and that is connected to what I said about FDI and supply chains. But what is the policy we are pursuing? The policy is having FTAs with countries that are the source of FDI and demand for manufacturers. That is what the supply chain is all about. So, the FTA with the UK is done; the UK is one of the largest importers of manufactured goods in the world. The US and the EU are the top two if you treat the EU as a single the FTAs are part of our strategy to achieve this comprehensive and much bigger shift in the next 5-10 years; [we should] not just be satisfied with being number three or five; we should be number one by a big stretch. India's 64 million MSMEs are vital to India's goals as an economic powerhouse. However they are often constrained by issues relating to scale, diversification and digital infrastructure. Elevating their stature and empowering such businesses is crucial, especially in the context of unpredictable global trade dynamics at play. In this interaction, Niti Aayog member and senior economist Arvind Virmani tells ET Digital how MSMEs can learn from international peers, the role of medium enterprises in unlocking growth and what needs to change for small businesses to become global champions of the future. Watch this video for more. ET: What should the MSME sector's strategy be in the backdrop of recent tariff and trade developments, and how can they safeguard themselves in light of such an unpredictable economic landscape?AV: So, as we know, the tariff was suspended. And based on all the information that came in the next couple of weeks—a month or so after that—a lot of US companies were desperately looking for Indian suppliers of the same products. So, I think the opportunity is much greater than the threat. So, in engineering goods, in household items, and in many others, there were reports, textiles, and many other things; they were looking for suppliers in India. So, I think the advice is very clear. MSMEs should be out there. This is the time. Look for buyers. They are looking. Find them. The MSMEs who feel they want to expand—this is an opportunity. ET: What is your vision for Indian MSMEs over the next decade, and what must change for them to become global champions? AV: The spirit of the MSME sector is very clear. One is that we must not think only of the current situation that there is x demand and we will meet that demand; we must think of the future where we want to be and build for the future. Second is that the future means we are going to be Viksit. So, you must build for a Viksit quality. We cannot be satisfied with where we are today. If I am producing something which is 30% inferior to, say, a German or Japanese product in machinery, a machinery manufacturer must think that in five years, we must be at that quality, and they have to start doing that now. That applies to MSMEs. That applies to start-ups. The vision is that start-ups will drive this push for higher quality, the frontier of the MSME sector. They are going to be the new MSMEs. And they are the ones who will transform productivity and growth. And which is why so much emphasis has been placed on start-up infrastructure, funding, the fund of funds, etc. It's just a matter of connecting them to the that is the vision, actually. That is the future.
Time of India
20-06-2025
- Business
- Time of India
USL to buy Greater Than gin maker
BENGALURU: United Spirits (USL), the Indian arm of global liquor major Diageo, will acquire a 100% stake in Nao Spirits & Beverages, the maker of popular Indian craft gin brands Greater Than and Hapusa, in a two-step transaction valued at about Rs 110 crore. Tired of too many ads? go ad free now The deal marks Diageo's push into India's fast-growing premium craft spirits segment. USL currently owns 30% of Nao Spirits. Founded in 2017 by Anand Virmani, Nao Spirits emerged as a leader in the craft gin firm reported a gross turnover of Rs 77.7 crore and net sales of Rs 34.8 crore in 2023-24. Virmani will continue to lead the business under Diageo's ownership.
Time of India
19-06-2025
- Automotive
- Time of India
Shubhranshu Singh and Sumit Virmani in Global Most Influential CMOs list: Cannes Lions 2025
India's marketers made a significant mark on the global stage at Cannes Lions 2025 . Two prominent Indian marketing leaders, Shubhranshu Singh , global CMO of Tata Motors Commercial Vehicles and Sumit Virmani of Infosys, are named in a prestigious Forbes compilation that records the 2025 list of the World's Most Influential CMOs . The announcement, made at the ongoing Cannes Lions International Festival of Creativity, underscores the rising impact of Indian marketing leaders in redefining the modern CMO role through innovation, data-led strategies, and cultural resonance. Singh's inclusion on this esteemed annual list highlights his significant contributions to building brand equity for Tata Motors Commercial Vehicles. He is particularly recognised for his deep cultural insights, category leadership, and an unwavering focus on national and business purpose. "Under his guidance, Tata Motors has executed transformative campaigns that have successfully positioned the company as a forward-looking and trusted name in commercial mobility," the report said. Further solidifying his influence, earlier this week, Singh also joined the inaugural board of the Effie LIONS foundation. This global marketing apex organization, incorporated as a not-for-profit in New York, aims to educate and empower the next generation of marketing talent globally, with a particular emphasis on underrepresented communities. Sumit Virmani, global chief marketing officer at Infosys, also features prominently on the Forbes list, a testament to his transformative leadership in the technology sector. Virmani is credited with significantly enhancing Infosys' global brand ambitions and helping it navigate into the league of the world's top 100 brands, evolving into one of the fastest-growing IT services brands globally. "His approach emphasises a creatively-driven, human-first strategy in B2B marketing, placing strategic priority on customer experience. Under his leadership, Infosys has made significant investments in global partnerships, notably in tennis, providing in-match analytics and insights to enhance personalized fan experiences, and more recently, expanding into Formula E Racing to illustrate mission-critical solutions to B2B customers. Virmani is also a staunch proponent of business's role in driving positive social impact, even amidst pushback on ESG and DEI efforts in some international markets," the report said. The Forbes World's Most Influential CMOs List, now in its 13th year, is a rigorous evaluation of marketing leaders based on criteria such as digital engagement, campaign effectiveness, brand and community engagement, media visibility, and overall business impact. The presence of both Singh and Virmani on this global roster places them alongside some of the most impactful marketing voices from around the world.
NDTV
27-05-2025
- Business
- NDTV
"If India Maintains 6 Per Cent Growth...": NITI Aayog Member Predicts Outcome
New Delhi: India is all set to become the third largest economy in the world by 2027-28, Dr Arvind Virmani, member of government think tank NITI Aayog has told NDTV in an exclusive interview. "My assessment is that India will become the third-largest economy in the world by the end of 2027 or by 2028," he said. India's economy will even surpass Germany - currently the third largest -- in size. If the Indian economy continues to grow at a rate of 6 per cent to 6.5 per cent annually for the next 25 years, then by 2050, India could reach the level of China's economy, he said. On a related note, he said the proposed Bilateral Trade Agreement between India and the United States is extremely crucial for India's economic expansion. India, he said, is expected to reach the spot of the fourth largest economy by the end of this financial year - the spot now occupied by Japan. Underscoring the roadmap for the next few years, Dr Virmani also said ending the uncertainty over tariffs is essential, as it is negatively impacting international trade and commerce. Over the next few years special attention is also needed to "diversify sources of manufacturing" -- which could even be the most important step. NITI Aayog had announced last week that the country has reached the fourth largest economy slot. Citing IMF data, NITI Aayog CEO BVR Subrahmanyam said on Saturday, "We are the fourth largest economy as I speak. We are a USD 4 trillion economy as I speak". "It is only the US, China and Germany which are larger than India, and if we stick to what is being planned and what is being thought through, in 2.5-3 years, we will be the third largest economy," Mr Subrahmanyam had said. Dr Virmany, however, said today that the data confirming this would come next year.
India Today
26-05-2025
- Business
- India Today
India to become 4th largest economy by end of 2025: NITI Aayog member
NITI Aayog member Arvind Virmani on Monday said India is set to become the fourth-largest economy in the world by the end of 2025, an assertion which came days after NITI CEO BVR Subrahmanyam claimed India has already overtaken Japan to reach that International Monetary Fund (IMF), in its World Economic Outlook (WEO) report released in April, had said that India is expected to be the fourth-largest economy in the world with a GDP of USD 4.19 trillion in 2025, ahead of is in the process of becoming the fourth-largest economy, and I am personally confident that will happen by the end of 2025 because we need (data) of all 12 months GDP to say that, you know, to assert that. So to say till then, it remains a forecast," Virmani told PTI. Asked to comment on NITI Aayog CEO BVR Subrahmanyam's remark that India has become the fourth-largest economy in the world, the eminent economist said: "So this is a complicated question, and I really do not know what the words anybody has used. Perhaps there was some word which was missed or something".Citing IMF data, Subrahmanyam, last week, said that the size of the Indian economy today is larger than Japan's."We are the fourth-largest economy as I speak. We are a USD 4 trillion economy as I speak," the NITI Aayog CEO had is only the US, China and Germany which are larger than India, and if we stick to what is being planned and what is being thought through, in 2.5-3 years, we will be the third-largest economy," Subrahmanyam had further, Virmani said, "When we discuss the size of economies publicly, we generally use US dollar current prices".Virmani further pointed out that 'when we compare economy, we generally do it in terms of annual GDP'.Virmani said IMF in its WEO report released in April gave a precise number, which showed that India's GDP for the full year 2025, would become higher than that of Japan." I would say that I am pretty confident that that will happen, but the exact data will probably not be available till January or February, because we are talking about the whole year," he nominal GDP for 2025 (FY26) is expected to be USD 4.187 trillion marginally more than the likely GDP of Japan which is estimated at USD 4.186 trillion, the IMF had to IMF data, India's per capita income has doubled from USD 1,438 in 2013-14 to USD 2,880 in IMF in its WEO report also said the Indian economy is projected to grow at 6.2 per cent in 2025-26, slower than earlier estimated rate of 6.5 per cent, due to escalated trade tensions and global India, the growth outlook is relatively more stable at 6.2 per cent in 2025, supported by private consumption, particularly in rural areas," the IMF had to the report, the global growth is projected at 2.8 per cent in 2025, lower by 0.5 percentage points estimated earlier. In 2026, the global economy is estimated to grow at 3 per Watch
