Follow Us :
Market Snapshot
INDIAGLOBAL
BSE Sensex 28458.10 -104.72 (-0.37)
NIFTY 8538.30 -26.10 (-0.30)
The Finapolis Poll
Are steps being taken by the government on the black money issue enough?
Please answer this simple math question 4+3 =
Subscribe
The Chartist
[imgleftbottom] Private Equity (PE) investors have been credited with nurturing and scaling Indian companies
Trading Calls
Company Analyst Recommendations
SIEMENS Karvy LONG
WockPha Karvy LONG
TataCom Karvy SHORT
SUNTV Karvy LONG
TVSMOTOR Karvy LONG
Click Here for More Research Calls
Stock Split We all come across financial issues that sound Greek. Here is The Finapolis translating Stock Split for you...
Economy
A Lion Step
‘Make in India’ programme holds enormous promise for the Indian economy
By Kiran Nanda      | Nov 2014
Jump to comments (0)

The ‘Make in India’ campaign is unique as it is not only ambitious but also pragmatic. It is linked to a number of other programmes like the nation-wide creation of industrial corridors, 100 smart cities, digital India and making SMEs globally competitive amongst many others. The manufacturing sector has multiple backward and forward linkages. The programme is backed by a strong political will and is getting a focused attention. All these considerations will lead to an automatic chain of sustainable economic development.

The government is pulling out all the stops for ensuring a smooth sailing for investors, by setting up a dedicated cell to answer queries of business entities within 72 hours. It will also closely monitor all regulatory processes to make them simple and reduce the burden of compliance. The end result is bound to be cost competitive growth with good governance. The RBI Governor Rajan has lauded the ‘Make in India’ campaign — "Now there is the political will for financial reforms which will propel India's economic growth. It's a good time to invest in India."

The new Chief Economic Advisor Arvind Subramanian statement that "For any economy like India, the two big things are macro-economic stability and creating conditions for rapid investment and growth" signifies a positive note for the ‘Make in India’ initiative. What Arvind brings is not only a brilliant analytical mind but an ability to see and articulate the big reform picture.

Thrust Areas

The ‘Make in India’ programme includes making a skilled India, developing smart cities and engaging closely with all interested partners and investors in India and abroad. In short, the ‘Make in India’ will be re-making the Indian economy. Campaign includes plans to cut red tape, develop both hard as well as soft infrastructure and make it easier for companies to do business. A boost to manufacturing will hopefully create jobs, increase purchasing power and create a larger market for manufacturers. In the context of the "Make in India" campaign, the so-called "thrust areas" have been identified for 25 sectors, of which auto, food processing, defense, IT, textiles, pharma and electronics will be the key. These will be equipped with next generation infrastructure facilities to enable greater quality production. These measures have not been detailed yet and the blueprint is likely in some time.

Some measures on the above lines have been taken while on others the work is in progress. The Make in India concept is an evolving long-term policy. It is constantly getting fine-tuned and is inter-linked with many other government policies.

The ‘Make in India’ campaign is closely linked to the 100 Smart Cities that would be made attractive to foreign investors so that they develop interest in these smart cities and start investing and providing technological, management and marketing skills to the manufacturing and its linked sectors. When Modi visited Japan and the US, he got both these countries interested in development of smart cities in the country.

Labour Pain

Many changes in laws, some announced including the Apprentice Act, while others are currently being contemplated, require parliamentary approval. Hence, these laws will take time to come into effect. But certainly the current debate on initiation of various labour reforms will hopefully be able to bring about the change in the mindset, lead to reduced powers of the Inspector Raj and eventually the Inspector Raj will be abolish.

The Contract labour issue is indeed a larger complicated issue and will get resolved only over time. Quick fixes are not likely to happen in the short run. Besides, Labour Laws will have to cover the informal labour segment which is in majority to the extent of over 90% of the labour force.

The success of the ‘Make in India’ initiative rests with the implementation of the GST regime, which will lead to higher GDP growth to the extent of additional 1.5 to 2% of GDP. GST will also result in reduction in fiscal deficit through rationalization of taxation points and avoidance of any double counting. In this context, State policies play an important role by way of avoiding imposing additional local taxes and other regulatory restrictions. Government is setting up a constitutional body to dismantle the taxation barriers among states and create a Common National Market for the entire economy to ensure free market of goods across state borders.

Freeing Economy

It is commendable to note that the Government has taken a holistic approach to the country’s critical problems. This not only leads to effective results but also saves time and costs. It is also taking well studied and timely economic decisions one after another.

The latest which will boost the ‘Make in India’ campaign is to free the economy from the clutches of fuel subsidy by deregulating diesel and formalising the market-based price formula for natural gas.

Henceforth, diesel prices are freed from state control and pegged to international rates. This signals government’s resolve to rein in subsidies and budget deficit, which will benefit the manufacturing sector. Such market based decisions insulate the government from politically-sensitive decisions in the future. In fact, during the last five months of Modi government, such measures like unveiling of key labour reforms to end Inspector Raj and exhorting leading countries like the USA, Japan and China to pro-actively participate in ‘Make in India’ campaign have been taken that would boost the manufacturing sector.

State Push

States have also started working on ‘Make in India’ initiative. ‘Make in Madhya Pradesh’ campaign is along the lines of the "Make in India" initiative. Foreign embassies are also providing push to the ‘Make in India’ programme. The programme has started giving results too as seen by the interest shown and decisions taken to invest and produce in India. Process of collective feedback and/or building consensus with stakeholders on key reforms has also begun.

By implementing programmes like the ‘Make in India’, the low key business confidence has started returning. This presents a great opportunity for the government to position India as a manufacturing powerhouse that will be able to match China’s dominance on the world stage. The chance to create employment for over 10 million people and encourage FDI will be the prime minister’s main concern.

However, India has always been a pivotal part of the world’s manufacturing community and the issues that plague its rise is that of hard economic reforms which remained largely unresolved but now will be taken up. Take for instance, the government's urgent need to reform archaic laws to facilitate economic growth and infrastructure growth. The surge in economic growth in the mid-1990s was only achieved after a radical set of reforms were put in place.

The ‘Make in India’ website offers an attractive buffet of investment opportunities. From automobiles to biotechnology to renewable energy to yoga and wellness, it showcases investment opportunities and highlights the growth prospects in these sectors. Most of them have the potential for attracting large investment in high-technology areas. But how many of these sectors will result in the kind of scaling up of jobs that Modi hopes for, and indeed, the country needs is uncertain at present.

In sum, the ‘Make in India’ idea is fine and has got off to a dream start. This policy, till now, has aroused massive interest both with foreign investors as well as with domestic investors. But now, the Government needs to prioritise, and set the right goals.

TAGS:
Comments
[imgrighttop]
Columnists
Mohamed A. El-Erian
The Return of the Dollar
Alam Srinivas
Curious Case Of School Dropouts
AN Shanbhag and Sandeep Shanbhag
Tips to Make Your Tax Return Error Free
Santhosh Kumar
Modi Effect on Mumbai and Gurgaon
More Columnists [ + ]
Get all your personal finance queries answered by The Personal Finance Advisor
[+ more]
The Finapolis Conversation
Planning To Expand Beyond Borders: GS Sundararajan, Group Director, Shriram Group
[+ more]
Financial planning of a 27 year old executive
[+ more]
Sachin Aur Arjun

Copyright © 2014. All rights reserved. theFinapolis.com Privacy Policy | Careers | Contact Us | Sitemap