Make in India

Make in India – A Boost to India’s Manufacturing Sector

According to Global Manufacturing Comparative Index, history of manufacturing sector of India has been low in comparison to other countries like China, USA, Germany, Japan etc. Currently India is at 11th position while back in 2013 India held 4th position. In 2013-2014 India’s GDP growth had increased to 4.9% from 4.5% in 2012-2013 while manufacturing output declined by 0.2% in comparison to 1.1% increase in 2012-2013 wearing down the overall economy. According to the advanced estimates released by the Central statistics 2013-2014 was the worst year of manufacturing after 1999-2000. Data by Ministry of Statistics and Programme Implementation confirmed ‘Slower manufacturing’ as the main cause of downfall of manufacturing sector from -0.8% in December 2012 to -1.6% in 2013. Following the downfall of manufacturing sector prompted an immediate action and therefore, ‘Make in India’ campaign was officially launched on 25th September 2014 by the Humble Prime Minister Narendra Modi at Vigyan Bhawan in New Delhi. Motive behind launching the campaign was to provide boost to the domestic manufacturing industry, generate jobs and attract foreign investors to create manufacturing hub in India. Manufacturing industry embraces 15% of the National GDP and is expected to contribute at least 25% with the implementation of various laws. 25 priority sectors have been identified by the government of India which are likely to attract FDI under effective administration of the government.

Various advantages that the campaign holds would boost the strength of the manufacturing industry. The Department of Industrial Policy and Promotion has associated an eight-member expert panel to redress grievances and handle queries of global and domestic investors like Tax issues and infrastructure push within 24 hours. Team Invest India in the commerce department would be available to work 24/7 with Central and State departments to resolve policy issues to accomplish de-bureaucratization and deregulation. The approval processes would become simpler and regulatory clearances would be granted within 48-72 hours. Individuals within the age group of 15-35 would get high quality training in major areas such as welding, masonries, nursing to assist elders and painting.Companies situated abroad have willingly agreed to invest in Indian manufacturing industry proving the success of the campaign. Campaign is also expected to create job market for the population of 10 million people. This would add up in increasing economic growth and boosting GDP up to 25% and provide us with trade benefits.

Investors residing in India find the idea implausible due to stringent labor laws, infrastructure and transport problems. Janice Bellace a professor of legal studies and business ethics at Wharton named poor infrastructure, friendly capitalism and corruption as more daunting than labor laws. Obsolete labor laws must be replaced and Indian government should pledge to the ‘decent work’, a phrase in International Labor Organization that asserts equal opportunity, security, adequate remuneration and freedom of association. Indian government has amended some of the labor laws like previously ‘Inspector Raj’ had prevailed under which inspectors visited their choice of the companies and stayed as long as they desired but now this system has been altered and a computerized database system would decide their inspection visits. To some extent this might be a step towards hitting upon corruption. An online Shram Suvidha portal has been uncovered for employers/investors to submit a compliance report for 16 labor laws. The other measures included portability of provident funds under which government has decided to link Aadhaar or PAN numbers of the employees with the Universal Account Number (UAN) assigned to their PF (Provident Fund) account thereby, improving mobility of labor so that they can easily switch jobs without closing their previous accounts. Other discouraging factors that prevent investing in India are transport and infrastructure facilities that disagree with contemporary technologies. Globalization is transforming Nations from outdated to upgraded technological advancements and infrastructure facilities where as India is lagging behind with the exception of city like Jamshedpur build by Tata’s over the years creating their own infrastructure facilities. International companies would further hesitate to invest due to Legal regimes in India. Laws are made to suit the political and utilitarian society, completely waiving its purpose. The Vodafone case is an instance Supreme Court had ruled that the company did not owe taxes in spite that Parliament passed a retroactive law to claim the money from Vodafone which must have surely seemed burglary to foreign investors. Walmart, Amazon and Nokia are all faced with unpredictable tax and business laws implemented by corrupt bureaucracy. It is not a surprise that Microsoft excluded Nokia’s manufacturing facility in Chennai. Modi government is working on resolving past disputes on taxes.

Commencing a business at presents requires an entrepreneur to follow 12 procedures, which on average takes 27 days where as enforcing contracts takes years. This inefficient and sluggish pace causes waste of money and time. India is put on 130th position out of 189 economies on ‘ease of doing business’ due to various parameters relating to business and regulatory environment. Department of Industrial Policy and Promotion, Invest India and online Shram Suvidha portal are some of the introductions by the ministry to reduce time and cease waste of money in implementing contracts and eliminating corruption if we sincerely want to attract investments from outside. Foxconn, an electronics manufacturing company has announced to create 10-12 facilities including factories and data centers in India. Its arrival would trigger the arrival of companies along with their supply chains creating indirect jobs. Mercedes Benz, a global automobile manufacturer would make its components and luxury buses in India to be exported by 2016 thus increasing the localization up to 60%. BMW, a competitor to Mercedes has decided to increase its localization by 50%. Ford has also agreed to invest Rs.4,000 crore to Rs.5,000 crore for R&D, in its Chennai Facility. In aviation industry investment up to approximately 4 billion dollars is expected in defense and aerospace sector whereas Indian railways have invited bids for 15 train sets by international suppliers and the estimated worth of the project is Rs.2,500 crore. Defense manufacturing comprises a major art of manufacturing sector and steps have been taken to improve its condition. 60% of the defense items have been de-licensed and 137 defense licenses have been cleared. All these successful business deals are indications that India’s position in Global Supply Chain is improving.

In spite of new developments for de- regulation and de-bureaucratization, some of the Indian investors residing in India are opposing the idea of investing but according to Amitabh Kant, secretary for the Department of Industrial Policy and Promotion, the value of stalled and abandoned projects has improved from 4.02 lakh crore in 2015 to 1.95 lakh crore in 2016. Total number of investment proposals is higher by 27%. PMI (Purchasing Managers’ Index) output has climbed to 53.3% whereas Monster Employment Index is up by 52% in 2016. It indicates Indian Job Market is significantly improving. Three months back was released FICCI-PwC & India Manufacturing Barometer: Winds of change report confirmed that 85% of the CxOs unraveled that the campaign is encouraging production in India either by Indian companies or Multi-National Companies. Government is expected to target from 16% to 35% in the next 5 years to celebrate the success of actual contribution of manufacturing Industry. China due to its 1st position as a major hub of manufacturing sector is considered to be a threat in spite of India’s latest developments but back in 2014 China’s cost advantage was under pressure due to which companies like Havells, Godrej, Micromax moved back from China to India owing to currency, labor and other cost advantages. Moreover, China would move towards hi-tech manufacturing presenting another opportunity for Indian entrepreneurs.

Modi government has faced strong resistance in bringing down 44 national labor laws of the country to just five. In 2015, 150 million workers influenced by Indian National Congress began nationwide strike regarding their job security putting up another challenge in front of the government. Government has failed to supersede a fraction of legislation and therefore difficulty in buying lands for business purposes continues to hinder the growth of the campaign. Majority of the rural population would be suffering because of land use and acquisition laws. To adhere to campaign goals, manufacturing sector would have to grow at the rate of 14% by 2022. Political influence of the opposition parties would always reduce the potential if Modi government is not successful in gaining their support. Reforms on land and labor are basic steps to attract more FDI or the potential of the campaign would go unrealized.

By: Gargi Singh

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