How far India needs to go to achieve the tag ‘Manufacturing Hub’
The ‘Make in India’ campaign was initiated by Prime Minister Narendra Modi with a sole intention of making India a manufacturing hub. The campaign is to encourage foreign companies to make in India and to boost the employment rate in India. It’s been two years since the initiative was announced in 2014 and things are changing and it is quite visible. It is now time to see what has changed and how much has changed and what more needs to be changed for India to achieve the tag ‘Manufacturing Hub’.
Global investmentsPrime Minister has been visiting countries all over the world and urging them to invest and make in India since the announcement of ‘Make in India’ as huge opportunities lie in India for foreign investors. His visit to Japan in 2014 brought in investment promise of $ 35 billion in India over a period of five years. Also, Japan promised to contribute towards bullet trains in India. The ‘Make in India’ campaign gained momentum in Japan with Japanese manufacturers interested in investing in India.
Germany is considered as one of the industrial hubs of the world. Prime Minister’s visit to Germany last year for the Hannover Messe event, world’s largest industrial trade fair where India was a partner country for the event only strengthened India’s path in moving a step ahead to achieve the goal of making India a manufacturing hub.
‘Make in India’ fair earlier this year in BKC, Mumbai closed with Rs 15.2 lakh crore ($222 Billion). “We have already opened the economy across sectors to the world. We’re now showcasing, connecting and collaborating for manufacturing in the country,” said Amitabh Kant, Secretary of India’s Department of Industrial Policy and Promotion (DIPP), adding that the summit is not about manufacturing alone, but innovation and nurturing inventors.
Over 2,500 international and 8,000 domestic companies claimed to have participated in the week-long multi-sectoral industrial event ‘Make in India’, apart from foreign government delegations from 68 countries and business teams from 72 nations.
Boost for FDIRecent policy changes have made it easier to invest directly in Indian companies. Foreign Direct Investment (FDI) is perhaps the easiest way to take advantage of the ‘Make in India’ campaign. It is a main source of non-debt financial resource for the economic development of India. Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges such as tax exemptions, etc.
The government has allowed 100 per cent FDI in all the sectors except space (74 per cent), defence (49 per cent) and news media (26 per cent). FDI limit in defence sector has been raised from the earlier 26 per cent to 49 per cent currently.
FDI also means achieving technical know-how and generating employment. To make India a sought after foreign investment destination, the Ministry of Finance is planning to introduce the residency permit policy, which will allow key executives of foreign companies making investments worth $ 2 billion or more in India, to avail various facilities such as special package on upscale housing, residency permits allowing long stay in the country, and cheap rates for utilities. India has emerged as the number one FDI destination in the world during the first half of 2015.
Defence manufacturing got momentumIn defence, the objectives of ‘Make in India’ programme are pursued by according preference to ‘Buy (Indian)’, ‘Buy and Make (Indian)’ and ‘Make’ categories of capital acquisition over ‘Buy & Make (Global)’ or ‘Buy (Global)’ categories and other policy initiatives such as liberalisation of FDI policy and Industrial Licensing policy, simplification of export procedures, creating level playing field for Indian private and public sector companies. In the Financial Year 2015-16, 33 capital acquisition proposals amounting to around Rs 55,800 crore have been accorded ‘Acceptance of Necessity (AoN)’under ‘Buy (Indian)’ and ‘Buy & Make (Indian)’ categories of capital acquisition till Jan 16.
More than 34 FDI proposals or joint ventures have been approved in defence sector for manufacturing of various defence equipment – both with Indian public and private sector companies. FDI amounting to Rs 24.84 crore has been received in the Defence Industry Sector from April 2000 to September 2015. Department of Industrial Policy & Promotion (DIPP) has issued 319 Industrial Licenses (ILs) to 190 Companies for manufacture of various defence equipment till December 2015.New IPR rights to power R&D, national growth
With the aim of empowering R&D and encouraging national growth, the government has announced the National Intellectual Property Rights (IPR) Policy that will lay the future roadmap for intellectual property in India. The new policy is expected to encourage the IPR regime, making it more efficient.
This policy shall weave in the strengths of the government, research and development organisations, educational institutions, corporate entities including MSMEs, start-ups and other stakeholders in the creation of an innovation-conducive environment, which stimulates creativity and innovation across sectors, as also facilitates a stable, transparent and service-oriented IPR administration in the country.
The Policy recognises that India has a well-established TRIPS-compliant legislative, administrative and judicial framework to safeguard IPRs, which meets its international obligations while utilising the flexibilities provided in the international regime to address its developmental concerns. It reiterates India’s commitment to the Doha Development Agenda and the TRIPS agreement.
Improved ‘ease of doing business’When it comes to ‘ease of doing business’, India still has a long way to go. India has improved in the ranking of ‘ease of doing business’ though, post the ‘Make in India’ campaign from 134th rank to 130th out of 189 countries.
The Insolvency and Bankruptcy Code 2016 recently passed by Rajya Sabha is expected to help the country move up from its current rank of ease of doing business index. At present, India is ranked 136 among 189 countries on the parameter of resolving insolvency.
The law new aims to consolidate the laws relating to insolvency of companies and limited liability entities (including limited liability partnerships and other entities with limited liability), unlimited liability partnerships and individuals, presently contained in a number of legislations, into a single legislation. Such consolidation will provide for a greater clarity in law and facilitate the application of consistent and coherent provisions to different stakeholders affected by business failure or inability to pay debt.
“The Insolvency and Bankruptcy Code is thus a comprehensive and systemic reform, which will give a quantum leap to the functioning of the credit market. It would take India from among relatively weak insolvency regimes to becoming one of the world’s best insolvency regimes,” the Finance Ministry said.Finally, India is becoming a manufacturing hub
Till date India is seen as a service industry by the rest of the world. But if India needs to be a manufacturing hub, what will it take and when and how can we see this happening?
‘Make in India’ is a great initiative to make India a global manufacturing hub. It has encouraged multinational as well as national companies to manufacture their products in India. Key thrust of the programme has been to cut down on delays in manufacturing projects clearance, develop adequate infrastructure and make it easier for companies to do business in India.
With the ‘Make in India’ campaign the government wants an image makeover for India, making it an ideal destination for manufacturing which would be a big thrust to Indian economy, increase employment and also add to the GDP. However, it is important to understand that, only the launch of campaign will not guarantee its success. The supportive policy creations and law formations, and constitutional decisions also play a crucial role in making the campaign successful.The manufacturing sector in India is yet to see big gains from ‘Make in India’ campaign. But government is moving slowly but steadily in the right direction to make India a manufacturing hub.
How far India needs to go to achieve the tag ‘Manufacturing Hub’