Amit Shah, Union minister of home affairs and cooperation, spoke to Shyamal Majumdar and Rishi Raj at the FE Best Banks Awards event in Mumbai last Thursday. Edited excerpts:
What would be your broad message to the financial sector?
I want to tell our banks that they should not only plan for growth, but try to change the scale. Our banks should be in the top ten. If you think small, you will achieve it easily. If the thought is big, you will also become big with it. Second, they must step up lending to MSMEs. If banks don’t value MSMEs, it amounts to stopping their growth which is unfortunate. MSMEs have huge potential. Look at Ambani, Adani, Torrent, etc… all of them started as MSMEs. The government stands guarantee for MSMEs.
Can we expect more reforms in India’s banking sector?
Reforms are a continuous process. But if we want to analyse the banking sector, we have to do it comparatively before and after 2014. During the UPA regime, phone banking was the norm. It did not mean banking through phone but loans being granted due to phone calls. And we had taken it for granted. From 2008 to 2014, Rs 52 lakh crore were sanctioned, and you all know what happens when you take too many loans. Due to this, the banks of this country experienced a very big problem of bad loans. There was negligence in keeping records, lack of transparency and corruption.
All three destroyed the banking sector. At that time, we started reforming the banking sector. You will be surprised to know that 600 million people in the country did not have a single bank account in their entire family. The core of this government’s policy is financial inclusion. In 10 years, 530 million people opened their bank accounts. MSMEs had stopped getting loans. Due to provisioning, there was continuous erosion in bank capital, and, in a way, there was a big crisis of non-performing assets (NPA).
In 1999, during the Congress regime, the gross NPA of the banking sector was at 16%. When the Atal Bihari Vajpayee government left in 2004, the NPA stood at 7.8%. After 10 years of Congress government, the NPA again increased from 7.8% to 19%. Now it is at 2.5%. We had to bring in a lot of changes.
What changes did you make?
Transparency. While phone banking was completely stopped, we let the systems work in their own way and did not interfere politically. We made four guidelines: recognise, recovery, recapitalise and reform. With these four Rs, we made significant progress. We made balance sheets very transparent and ensured money flows into private banks. We brought in the Insolvency and Bankruptcy Code for recovery. We brought in Rs 3.10 lakh crore capital, through Mission Indradhanush, besides making changes in bank boards and supervision. Please understand reforming something is not a 3-page circular; there’s a lot of thought behind it. We made 86 big changes in the banking sector. Today, everyone is benefiting from this.
People were worried about how people would maintain their balance in Jan Dhan accounts. Today, there is Rs 2.64 lakh crore in these accounts; Rs 44 lakh crore is deposited directly into their accounts. Due to this and linkage with digital, 370 million Rupay cards have been issued. The digital push has allowed even a vegetable seller to adopt UPI. The digital transformation is no longer confined to cities but has moved into villages.
I suggest that all banks should do research on the banking system from 2002 to 2025 so that they can see trends and give suggestions to the government. It will help in two ways: one, we have set up a committee for more reforms so such feedback would be useful; two, you will also know the areas you should focus on. A study of policy reforms is important for the economy.
What does Swadeshi truly mean in today’s globalised economy? How do Indian companies fit into this evolving narrative?
Swadeshi is not just a slogan. Jo cheez banane main Bharat ke logon ka pasina baha hain, uska upayog karna chahiye (People should buy things produced in the country with Indian sweat and labour). It’s about empowerment. We envision India as a global leader, not just in terms of output, but in innovation, sustainability, and employment. Economic growth alone is not our goal. We must ensure that our citizens have meaningful employment. GDP numbers can rise, but if joblessness rises alongside, then we must rethink our model. That’s why we launched the Make in India initiative, not just as a concept, but as a movement.
It was followed by targeted schemes for MSMEs, PLIs, and strategic investments. We invited world-class companies to manufacture in India, not just sell here. We want global companies to become Indian in spirit, rooted in our economy, contributing to our workforce. Swadeshi means using what we have, valuing what we make, and uplifting those who make it. This Diwali, I urge every citizen to choose 100% Swadeshi. Let your purchases reflect your pride in India. Let your celebrations fuel our economy, not just our homes.
On the Next-Gen GST reforms, opposition parties have said that the government made an error eight years back by keeping the rates abnormally high in many cases. They also said that the Prime Minister made the GST Council irrelevant by announcing the decision on August 15.
The Prime Minister, like any citizen, has the right to express his vision for the reform. His statement was not a unilateral declaration, it was a call for next-generation GST reform, which the council later deliberated on. To say Prime Minister’s announcement was inappropriate is not only incorrect; it reflects a refusal to engage constructively.
The GST reform could have happened earlier. But why didn’t it? When the previous government tried, many states opposed it. They feared revenue loss due to the shift from their own taxation systems to a unified GST. States demanded a 10% reimbursement if collections fell short, but the Centre didn’t offer a guarantee. That lack of trust stalled progress.
When Prime Minister Modi took office, he addressed these concerns head-on. Under his leadership when Arun Jaitley was the finance minister, the Centre guaranteed 14% annual revenue growth to the states. That assurance led to consensus, and GST was finally implemented. Since then, revenue collections have surged from Rs 60,000 crore to Rs 2 lakh crore. That’s a testament to the reform’s success. Now that the revenue collection is over `2 lakh crore we decided to pass on the benefits to the citizens of the country.
Absolutely, GST cut is a positive move. Taxation is essential for national development, but it must be fair and transparent. This GST cut, along with earlier reforms like raising the income tax exemption to Rs 12 lakh and reducing corporate tax to 15%, has boosted taxpayer confidence. For the first time, citizens feel their taxes are being used wisely and that relief is possible. That trust is crucial for a healthy economy. From Nehru ji till today, no one has implemented such a major tax cut as PM Modi has done through the Next-Gen GST reforms.
What is your outlook on economic growth?
We have consistently maintained a 14% increase in foreign direct investment. This reflects global faith in India’s economy. The world is divided into two extremes — developed and developing countries. While developed countries face stagnation, developing countries struggle to keep pace. India, however, stands out as a success story, driven by structural reforms, process improvements, digital governance, welfare schemes, and effective implementation. So, even many economic experts across the world are, even grudgingly, acknowledging our growth story, based on data. The environment of trust and development extends beyond Dalal Street in Mumbai. Today, Dalal Street has expanded to smaller villages and people from there are opening demat accounts to gain from markets.
Trade negotiations often require reciprocity, and India can’t ignore the US, which is the largest consumer market in the world. Would you be open to even limited entry into our agriculture markets?
It’s a bit premature at this stage, please wait for some time. Our conversation is at the final level, so it will be inappropriate for me to say anything at this stage. Whatever be the outcome, it will be in national interest and we should trust and leave it to the wisdom of our Prime Minister and commerce minister Piyush Goyal.
On the other contentious issue, what is the logic of sticking to Russian oil when even the price differential with other oil producing nations has been coming down?
It’s simple, we are purchasing oil from Russia as its cheaper. We will continue buying oil from wherever we get the best rates.
India still faces a significant gap in skill development. What is the government doing to bridge the gap and ensure that skilling matches the pace of industrial growth?
You are referring to a situation that existed 10 years back. In 2015, we recognised the urgency and established a dedicated ministry for skill development. Since then, we’ve taken a structured, multi-pronged approach. The New Education Policy 2020 was a major milestone. It not only elevated the standards of science and engineering education but also embedded skill development across disciplines. We have built systems within every department to ensure that skilling is not an afterthought, it’s an integral part to our growth strategy.
You mentioned that our grassroots skill levels are inadequate. I disagree. This is a classic case of the chicken-and-egg situation. The ecosystem is evolving. As industries invest, the demand for skilled manpower rises and so does the supply. India has no shortage of talent or determination. The skilling gap will narrow because investors themselves need a capable workforce, and they are partnering with us to build it. The government has made substantial investments in skilling. But we are not doing this alone. We have brought industries on board, collaborated with organisations like FICCI, and created platforms for innovation and R&D.
But India’s investment in R&D remains quite low at 0.7% of GDP. If India truly wants to lead in innovation, this must change. Can we expect the government to significantly increase its commitment to R&D?
Innovation demands investment, and we have already begun laying the foundation for a robust R&D ecosystem. Let me share a few key steps taken by us. We have increased school-level investment by Rs 10,500 crore to spark early interest in science and research. Through the Anusandhan National Research Foundation, Rs 50,000 crore has been allocated to colleges and universities. We are building shared lab facilities so students don’t need to shoulder the cost of R&D alone. Over 5,000 higher education institutions, knowledge & technology parks, and R&D hubs have been developed.
We are also driving innovation in green hydrogen and strategic hydrogen partnerships. But this isn’t just about government spending. These are not just buildings, they are engines of innovation. Government has invested Rs 1 lakh crore in RDI (Research, Development, Innovation) across emerging industries, invested Rs 6,000 crore for the National Quantum Mission, Rs 15,000 crore for the National Supercomputing Mission, Rs 25,000 crore for the Semiconductor Mission, Rs 50,000 crore for defence innovation and a 3.5 time increase in nuclear R&D investment.
We are building a co-investment model at 50:50, 60:40, or even 80:20 with industry. On average, 72% of R&D investment is now expected to come from private players and the rest from the Government of India. You can imagine the level of scale of investment in R&D.
I want to emphasise that the New Education Policy (NEP) is our blueprint for the future. It embeds a culture of research in every child. We have created research spaces in 33 locations to foster. This isn’t just about budgets, it’s about environment, mindset, policy making, stakeholder involvement and breaking barriers. When India’s growth story is told in the year 2047, these investments in R&D will be seen as the turning point towards creation of a great India.
Despite government capex capital being robust, private investment remains below expectations. Why is this the case?
That’s an excellent question, and I am glad it’s being asked in front of a room full of bankers and industry leaders. Yes, private investment has lagged behind government capital. But the financial ecosystem is evolving. The momentum in public finance has created an atmosphere where private investment is no longer hesitant, it’s preparing to surge. Through the PLI scheme, industrial corridors, logistics parks and Start-up India, we have created a new ecosystem. A decade ago we had only 26 start-ups, and today we have 192,000. In the last 10 years, India has moved from 26th to 3rd position globally in this sector. Electric vehicles, battery technology, green growth, fintech, space and defence manufacturing will all strengthen India’s growth story in the coming years.
I will again emphasise the need for boosting finance to MSMEs. That’s where India’s growth engine lies. We need coordinated action. The government has laid the foundation. Now it’s time for private capital to step up.
Have doing reforms become more difficult because of the reduced numbers of the BJP in the 2024 Lok Sabha elections?
A coalition government provides strength to the country and is not a sign of weakness. There will be absolutely no let-up in the pace of reforms. The last decade has chalked out robust economic growth along with regaining the lost trust of the citizens in the banking sector. Over the years, we have strongly enforced ease of doing business where 40,000 compliances have been removed. Efforts have been taken to tackle criminalisation and corruption which was rampant in the past through introducing penalty and action. We are shortly moving forward to Jan Vishwas Bill 2 with zero criminal economy.
The Prime Minister has set a target of making India a ‘vishwaguru’ by 2047. The Constitution speaks of three types of inclusiveness, which are political, social and financial inclusion, and these are guiding India’s growth story.
India has emerged as a bright spot. While the world is going through difficulties, with polarisation of societies and people losing faith in leadership, India is offering stability, trustworthy leadership and a robust economy. Many countries are struggling at a 1-2% growth rate, while India has maintained a steady 7-8% growth. This is a huge achievement.