Former NITI Aayog chief executive Amitabh Kant has called for a reduction in the statutory liquidity ratio (SLR) to boost job-intensive manufacturing. He described the production-linked incentive (PLI) as a short-term solution for the manufacturing sector. But he said ‘in the long term, we need to reduce the cost of doing business through measures like cutting the SLR, which can reduce the cost of credit.’ He also said ‘statutory liquidity ratio at 18% is too high for India ... I am a great believer in bringing it down because flow of credit to manufacturing sectors will be the key in the long run.’
Without sharing the ideal level of SLR, kant maintained that the cost of credit and availability of resources will be essential to help the manufacturing sector. The SLR, which is the mandatory percentage of net demand and time liabilities or deposits that banks must invest in government securities, was cut to 18 per cent over a few years but has remained at that level since then. While it helps the government's borrowing programme, it is also criticised for crowding out capital that private enterprises across sectors could use.
He further said that without adequate credit availability, startups in new-age sectors like geospatial will not be able to grow into large companies that can disrupt. Underlining that manufacturing creates employment opportunities, which is important for a country like India, he also flagged land acquisition as important. He said ‘we need to look at how China and its 'proxies' like Vietnam and Mexico are supporting the manufacturing sector in their countries through easy land acquisition or long-term land leasing as well.’ Similarly, he said the cost and availability of power also needs to be looked at, and reminding that this is a state subject and the states must look into it.
