Make India Competitive Again (Private)

AU Small Finance Bank received in-principle approval in August from the Reserve Bank of India (RBI) to become a universal bank. It was the first institution of its kind to reach this milestone. This also marked the first time in a decade for the RBI to issue a full-fledged banking licence.

This has a couple major consequences. For AU, the transition means it will be able to offer a much broader range of services to its customers—and significantly expand its business. For the RBI, it was a development that demonstrated how small finance banks, which were introduced in 2014, are now mature enough to do much more.

Meanwhile, another innovation that the RBI introduced that same year, payments banks, aren’t doing nearly as well. Some have shut down, and those that are still around often have negative bottom lines.

Both small finance banks and payments banks were meant to give underserved and underbanked Indians options to be part of the formal banking system. But the outcomes more than a decade after their emergence are vastly different. The Ken contributor Sarthak Gupta explores the issue in this edition of Make India Competitive Again, as read by Snigdha Sharma.

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India’s MSMEs operate in informal frameworks that have barely evolved over the past two decades. The result is that small businesses have largely the same struggles as they did before, whether it’s the absence of adequate credit, difficulties in entering new markets, or payment delays.

Since MSMEs are the second-largest employer in India, solving these problems represents a significant opportunity.

After all, opportunity has already come knocking. Take for example the shift of manufacturing out of China. India should be a natural destination, but the smaller manufacturers in the country simply were not prepared or equipped with the competencies that major clients demand from their vendors.

There are startups in India taking steps to help small manufacturing businesses develop “full-stack factory solutions”.
The Ken reporter Pranathi DVLS explores this space in this edition of Make India Competitive Again, as read by Rahel Philipose.

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Let’s think back to what happened a little more than a week ago: On 30 August, Indian Prime Minister Narendra Modi and his Japanese counterpart, Shigeru Ishiba, boarded Japan’s fastest bullet train, the Hayabusa, and cruised toward Miyagi prefecture at 320 km/h. They were heading to a facility of semiconductor equipment giant Tokyo Electron Limited, or TEL, in Sendai, to spotlight India and Japan’s collaboration in the semiconductor sector.

Japan is a major player in chipmaking, and it’s a model for the way disruption-free operations are crucial for any nation that is a meaningful part of the semiconductor space. This is a particularly important takeaway for India, especially given how PM Modi said last week that he expects to eventually see a “full stack” semiconductor ecosystem in the country.

There are plenty of risks to mitigate—the dependence on Taiwan, erratic diplomatic moves by US President Donald Trump, and China’s weaponisation of its dominance in supply chains, to name a few. 

All of this means India needs rock-solid supply chain links for critical equipment and materials if it wants to become a reliable chip producer. 

The Ken contributor Ankit Tiwari dives into the details in this week’s edition of Make India Competitive Again, as read by Brady Ng.

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It’s been a month since India’s nationwide shift to E20 petrol—20% ethanol-blended petrol. Vehicle owners have come forward to complain about falling mileage, damage to their vehicles, voided warranties, and the absence of insurance coverage.

The change has sparked outrage, and nothing is being done to placate the country’s many millions of angry drivers.

India’s move to E20 fuel took place much faster than originally planned. This pace may have been inspired by a previous success, when the government had to address worsening air pollution in the 2010s. 

At the time, regulators were able to skip a step to implement more stringent vehicle emissions standards. Even though there was some opposition from automakers, the change was largely unchallenged, and the public was onboard.

The context is different this time around, and the confidence exuded by the government is misplaced. 

The Ken’s Suprita Anupam explains in this edition of Make India Competitive Again, as read by Brady Ng.

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Dialysis is a tough business, and not because of any serious lack of demand. Over 280,000 patients were undergoing regular dialysis in 2024, a number that’s projected to go up to 520,000 by 2029. Add in less frequent or one-time treatments, and the number of patients who need the procedure every year breaches one million. 

It is the economics that is the tricky bit. High procurement costs, tricky consumable-stock management, and very low margins—in fact, nowhere on the planet can one run a small dialysis business sustainably. 

And India, with the lowest dialysis price point in the world, is the toughest market to crack. 

Which perhaps explains why IPO-bound kidneycare chain Nephroplus’ founder Vikram Vuppala built the kidneycare chain the way he did. It is already India’s—and Asia’s—largest dialysis service provider. And it is expanding, both inside and outside the country’s borders, for which it wants to put the Rs 353 crore it plans to raise from its IPO to good use. 

In this edition of Make India Competitive Again, The Ken’s Sudeshna Ray explains how testing itself in a market like India, and building expertise in a “full-stack” model, has been key to its success overseas. 

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India’s stock market seldom tends to influence the workings of its federal bureaucracy. But for the country’s telecom mandarins, who have just floated a new draft national policy for the sector, the investor response to one listed company could be the canary in the coal mine. 

At Rs 9,800 crore, the market value of Tejas Networks, a Tata-owned maker of telecom equipment, is now half the peak it reached 10 months ago. What’s odd is that Tejas Networks is now worth only a little more than its revenue. At the heart of investor frustration, and perhaps even fear, is the big pile of payments the company is yet to receive from its customers, including the government (the owner of telco BSNL).

It’s striking, then, that the draft telecom policy includes a plan to handhold 500 startups and MSMEs working on emerging telecom technologies. But what’s truly conspicuous in the policy is what’s not in it.

The Ken’s Seema Singh explains in this edition of Make India Competitive Again, as narrated by Seetharaman G.

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Software needs to be free to access, modify, and redistribute to be called open source. Anything less can’t carry the label.

This matters right now because generative-AI company Sarvam will open-source its models built for the IndiaAI Mission, the government’s initiative to foster artificial intelligence development within the country. That means it will release its weights, or parameters that make AI models “smart”.

By referencing Chinese releases like Deepseek and Alibaba Group’s Qwen, open-source software isn’t just a nice thing to have, there are elements of soft power as well. AI models that are available for anyone to tinker with can win developer mindshare and become more prominent in tech stacks around the world. This makes it harder for closed systems to defend their territory.

But the people behind IndiaAI have little to say about software licensing even though there’s a need to define those norms, especially given the vast capital that’s being poured into the national programme.

The Ken’s Sumit Chakraborty explains in this edition of Make India Competitive Again, as narrated by Brady Ng.

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Let’s face it: opportunities are scarce for most graduates in India, particularly those who don’t have financial support to fall back on. A job at a major enterprise is the dream—and a path to better economic and social standing. Yet there’s a widening mismatch between what most graduates can offer and the skills required by corporations. 

The Prime Minister’s Internship Scheme (PMIS) was meant to close this chasm. The goal was to help 10 million people find internships over five years and place them in 500 of India’s top companies. These interns would then acquire new skills and learn the ways of corporate life. 

So far, the internship hasn’t lived up to expectations. In phase 1 of PMIS, 600,000 applications were received for 127,000 posts. In all, 82,000 offers were made, with only 8,700 interns becoming full-time hires at the companies they spent time at. PMIS is in its second phase now, and the current figures don’t look that different.

The main problem is money—PMIS’s participants don’t get paid enough. Its stated goal of helping graduates who need the most assistance doesn’t align with how the programme’s incentives are defined.

The Ken staff writer Debanjali Biswas explains in this edition of Make India Competitive Again, as narrated by Brady Ng.

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India’s official figure for its unemployment rate in June was 5.6%. But that may well be lower than reality—out of 50 economists polled by Reuters, 37 believed that to be inaccurate. Seventeen of them estimated it falls somewhere between 7% and 35%.

That’s all to say Indians want gainful employment—no matter what the job is.

One type of coveted position is public service. For many, being a bureaucrat is an upward path for social and economic mobility.

In the 10 years leading up to FY23, the number of people who applied to take the civil service preliminary exam more than doubled to 1.1 million. Each vacancy had 3X the number of applicants. Meanwhile, there has only been a 40% increase in the number of new college graduates in the same period.

Narendra Modi’s administration has tried to encourage employment in the private sector, but the public’s infatuation for civil service isn’t about to dissipate.

Seetharaman covers the details in this edition of Make India Competitive Again, as narrated by Rahel Philipose.

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Two of India’s most prominent family business groups are in a fight. They’re both after a majority share of Chinese electronics company Haier’s India arm.

In one corner of the ring is Reliance, which recently launched its own electronics brand, Wyzr. In the other is the Bharti group, which has never sold consumer electronics. But this is a space where fortunes are being made, so it makes sense to have a hand in it.

Bharti appears to be in the lead, given it has teamed up with private-equity firm Warburg Pincus. They’re after a 49% stake and could pay $720 million for it. 

The Bharti group already operates in a range of sectors—telecom and infrastructure, insurance, real estate, hospitality, agriculture, food, and space communication. Its planned addition of electronics to the mix is just the latest episode in the increasing business concentration in India. 

For the last quarter of a century, 25 family business groups have accounted for 15–20% of India’s GDP. This has largely remained unchanged, and likely won’t change anytime soon.

Seema Singh explores why in this edition of Make India Competitive Again, as read by Brady Ng.

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