'Over protectionism will create third-class firms'

India has over protected its companies from global competition in the past and if it continues to do so, it will end up creating third-class firms, NITI Aayog CEO Amitabh Kant said on Tuesday.

"India has over protected its companies, including auto companies for too long. Every time you open up India, it does extremely well. All these companies have grown because we opened up to the rest of the world," Kant said.

Kant was speaking at the launch of a the new programme in manufacturing and operations by the ISB here.

He said companies like the Tatas, Mahindras, Heros competed and became world champions because India opened up its economy.

Indian manufacturing has to be competitive, as well as the best in the world, Kant said, adding that if companies are not cost competitive in the globalised world it is not possible to compete.

To create jobs, India must focus on manufacturing, and there is a need to rethink the view that India can surpass manufacturing and become a service driven economy, he said.

"We must understand that manufacturing is important but also innovation and design. India must become an innovative nation. Manufacturing gives returns but not if you don't invest, innovate and design. Therefore, India must become an innovative nation and this must propel growth," he added.

India has a challenge to grow at 9-10 per cent for at least three decades to lift a large section of society from poverty, he said, adding no country has done it without manufacturing.

"There is no way India can grow at those rates by creating jobs without the manufacturing sector. So if India's ambition is to grow at nine per cent then manufacturing actually needs to grow at 13-14 per cent per annum for a long period," Kant said.