India must prepare for greater responsibilities: NITI Aayog's Suman Bery

Echoing a growing sentiment from the top echelons of the government, Bery expressed disappointment over India Inc's reluctance to invest substantially in the economy

India must be prepared to shoulder greater responsibilities as it has become a rising global economy, Niti Aayog Vice-Chairperson Suman Bery said on Thursday, amid the Trump administration pushing New Delhi to substantially reduce tariff and non-tariff barriers.  “We are seeing this in our interactions with the US administration—more will be asked of us, and we should be ready for that. We have been thinking of ourselves as a small, open economy, which economists see as distinct from a systemically important economy, which we have now gradually become. The behaviour and leadership expected from a systemically important economy are different from those of a small, open economy,” Bery said on Thursday while addressing an event organised by the Confederation of Indian Industry.

 

Echoing a growing sentiment from the top echelons of the government, he expressed disappointment over India Inc.’s reluctance to invest substantially in the economy, asserting that the country cannot grow at 7-8 per cent without the corporate sector’s full partnership.

 

“Going back to the reduction in corporate tax, the idea was to give resources back to the sector, and they would deploy them in investment and R&D. Unfortunately, we have not seen the proof of that till now. As the finance minister said, we can't force private enterprises as they have responsibilities to stakeholders, but there is disappointment that in the fastest-growing economy in the world, members of CII (industry bodies) are still sitting on their hands, citing the threat from China and now the US,” Bery said.

 

He also said that there needed to be a consistent effort in building an ecosystem that can attract MSMEs from other countries along with strengthening its own MSMEs if India is to create its own Mittelstand – an economic phenomenon that shaped industrial growth in Europe by strengthening SMEs.

 

“On creating a Mittelstand, we have miles to go to keep up with China. The big boys can negotiate our complicated rules and tax codes, which are also a barrier to entry. We will not be fully competitive unless we attract MSMEs from other countries,” he said.

 

The Niti Aayog, according to officials, is working on a policy to provide special incentives for medium enterprises to shed their inhibitions about becoming large companies and be integrated into global value chains more meaningfully.

 

“In the US, as represented by DOGE and also in Europe, regulations have become a barrier to entry, particularly for MSMEs. Getting granular about what inhibits MSMEs from investment and expanding employment is a large research and policy agenda,” Bery said.

  The Aayog is working on a state-level investment friendliness index, and the exercise will shed light on the reforms required. Bery also said that India should “bide its time” when it comes to the EU’s Carbon Border Adjust Mechanism (CBAM), given the new urgency that European Commission President Ursula von der Leyen’s visit to India has brought to concluding the longstanding negotiations on a trade deal.

 

“The interesting issue will be whether Europe determines that the US, which doesn’t have a carbon pricing mechanism, is also subject to CBAM, and then you can see the spark fly… given the political commitment (to wrap up the India-EU free trade agreement) by the end of the year, there will be a big desire to find solutions to bilateral investment treaties and CBAM,” he said, adding that negotiations on these issues are likely to be contentious till the end.

 

The new tariff mechanism, under which the EU seeks to reduce its carbon footprint from imported goods, is expected to substantially impact Indian enterprises – particularly MSMEs – and has been a major talking point at the India- EU Trade and Technology Council deliberations.