India’s economy, 40 per cent of whose GDP comes from the service sector, is all set to witness a new wave of growth. WCRC Leaders Asia speaks to industry players, from manufacturing and service sectors, and gets their reactions on the newly launched and much-talked about ‘Make in India’ programme, its benefits and if it is going to help the economy grow exponentially over the years By Tista Sengupta
Make In India – Concept and Key Features
With an aim to turn India into a global manufacturing destination, Indian Prime Minister Narendra Modi has launched a new national programme – ‘Make in India’ – that not only promises to provide a much-needed boost to the manufacturing sector but also endeavours to bring in new investments and innovative technology to the country. The programme focusses on skill enhancement and scaling up employment opportunities in 25 sectors such as automobiles, aviation, chemicals, IT & BPM, pharmaceuticals, construction, defence manufacturing, electrical machinery, food processing, textiles and garments, ports, leather, media and entertainment, wellness, mining, tourism and hospitality, railways, automobile components, renewable energy, bio-technology, space, thermal power, roads and highways and electronics.
Expected to spur development, this programme, in turn, seeks to boost demand and increase the purchasing power of the common man. According to Narendra Modi, the project will not only help India yo compete globally but also will help in pulling people out from poverty as employment will be in abundance. ‘Make in India’ has been touted as one of the key strategies to revive the Indian economy. And this isn’t it. ‘Make in India’ has more to offer. Here’s a list of features that the newly-launched initiative boasts of.
Invest India cell:An investor facilitation cell has been set up by the government to help in guiding foreign investors on all aspects of policy and regulatory issues. It will also assist investors in attaining regulatory clearances easily. Information and facts from each sector have also been compiled in brochure formats to make the task of potential investors further easy.
A portal for business inquiries:
A web portal (www.makeinindia. com) has been created to receive specific queries from prospective business entities. A back-end support team has been appointed to make sure that the queries are responded to within a period of 72 hours.
Prompt services and security clearances:
In order to hasten security clearances, the central government services are being linked with an e-Biz single window online portal, whereas states have been asked to introduce self-certification. Adding to this, the Ministry of Home Affairs has also been requested to provide all security clearances to investment proposals within three months.
Simplifying policies and laws:
Shram Suvidha Portal to allot Labour Identification Number (LIN) to
The biggest issue faced by most investors and businessmen in India are the strict labour laws and policies. In order to increase the ease of business in India, the government has implemented major labour reforms. The measures include easy portability for provident fund users; a labour-law compliance web portal, ‘Shram Suvidha Portal’, to allot Labour Identification Number (LIN) to around 6,00,000 units and allow them to file online compliance for 16 out of 44 labour laws; a random inspection scheme to purge human discretion in selection of units for inspection and mandatory uploading of inspection reports within 72 hours of inspection; a revamped ‘Rashtriya Swasthya Bima Yojana’ that introduces a smart card for the workers in the unorganised sector, seeded with information of two more social security schemes; and a scheme ‘Apprentice Protsahan Yojana’ for training apprentices, providing
flexibility in working hours and increasing intake of apprentices.
Manufacturers vs Services
While shifting the gear from services to manufacturing cannot happen overnight, India Inc. strongly believes that the manufacturing sector that has been contributing only 16 per cent to India’s GDP is sure to increase its contribution. “We are expecting the manufacturing industries to contribute around 20 to 23 per cent within 10 years. ‘Make in India’ initiates easy flow of foreign capital into the country. With such an environment being created for the manufacturers, the market is certainly going to be more competitive and the economy will develop,” said Shishir Joshipura, Managing Director and Country Head at SKF India, an organisation that provides automotive and industrial engineered solutions. He further added that the service industry shouldn’t be threatened with manufacturing sector receiving more importance as the former will still continue to contribute a considerable share to the economy.
In India, where duty on imported components has been higher, finished goods have always lost out on its selling price. Addressing this issue, Anil Kumar Pillai, Director and CEO at JSW Cement, a subsidiary of JSW Group, said, “The inverted duty structure will now make it simpler for manufacturers to trade in essential electronic components in India. The deduction in corporate tax by 5 per cent over four years, starting in April 2016, as mentioned in the Union Budget 2015-2016, is also one of the key announcements that will contribute to the betterment of the manufacturing sector and the Indian economy.”
Manufacturing industry to account for
20 to 23
percent of GDP
within 10 years
Talking about how China metamorphosed into a leading world economy, Dinesh Pillai, CEO at Mahindra Special Services Group (SSG), a corporate security risk consulting firm and a strategic business unit under the Mahindra Group umbrella, stated, “China has grown as a leader among Asian countries by concentrating on their manufacturing sector for decades. But, now there is a massive slowdown in its growth and the sector has become saturated. They are now working towards establishing their service sector.
With respect to our country, if the concept of ‘Make in India’ is executed efficiently, India will gradually become a developed country. In India, the service industry is already flourishing, and now, it’s time for the manufacturing sector to grow in order to provide that necessary boost to the Indian economy.” A lot of thrust has been laid upon technology, as manufacturers affirmed that modern and innovative technology will amplify the growth of the sector.
The rate of Income Tax on royalty and fees for technical services have been reduced from
25 to 10
“Technology is, indeed, very essential for manufacturers. Every manufacturer should make certain that they use the correct machinery in their factories. In the Union Budget 2015 -2016, the rate of Income Tax on royalty and fees for technical services has been reduced from 25 to 10 per cent to facilitate technology inflow and to avoid problems faced by small entities,” said Joshipura.
He further added that it is even more important for manufacturers to know if any machine or component is faulty or will break down during production. “To avoid loss in business, we provide special services to many manufacturing companies, wherein we keep a check on machinery from time-totime and predict if any machine is going to go kaput. This helps the manufacturer to replace any faulty equipment at the earliest, and not cause any hindrance in the production process,” he said.
Now, does this call for a major setback in the growth of the service sector? Diwakar Aggarwal of BLS International Services Ltd, a subsidiary of BLS Group and a Visa and passport services company, said, “For the service sector, the marginal increase in service tax may not be a huge swinging factor, yet its impact may dampen the otherwise buoyant growth and consumption of services which have, for so long, been a salient feature of India’s economy. On the contrary, services sector should also benefit from the focus on manufacturing. The services sector has inherently been a strong point for India’s economy over the years and there is no reason it should cease to be so now.” He, further stated that the growth in infrastructure, a must to achieve the kind of growth in the manufacturing sector that the government hopes to achieve, will further fuel the demand for certain services. IT and ITeS services which so far relied heavily on exports will now start seeing more orders from the domestic market. The service industry is expected to continue to perform well and contribute up to 45 per cent to the country’s GDP in this current financial year, as mentioned by GS Sundararajan, Whole Time Director of Shriram Capital Limited.
In spite of the ‘Make in India’ initiative receiving positive response from India Inc, they still feel that it’s important to see how well the programme will be executed. According to Anil Kumar Pillai, “Even though the programme will open up a market for the export business, it is important for manufacturers to understand that ‘Make in India’ is not only about setting up a production unit. Along with expanding business, it is important for infrastructure to develop too. If the ports, roads, railways, highways and waterways aren’t maintained well, we cannot think of exporting manufactured products to other countries. With Rs 70, 000 crore being allotted for improving infrastructure, the government needs to ensure that the capital is spent in the most effective way.”
The service industry is expected to continue to perform well and account for
of the country’s GDP in the current financial year
The issues of land laws being rigid and strict processes involved for any foreign investors to start a business have always been two crucial issues that manufacturers have been facing for years. Even though amendments have been made in the Land Acquisition Bill by the government, yet manufacturers believe that the processes behind setting up a manufacturing unit such as acquiring land and getting permissions need to be more liberalised. “Operating a business in the country needs to be made easy. Basic policies should be revamped to build a hygienic environment to work in India,” stated Dinesh Pillai of Mahindra SSG. Addressing this issue, Aggarwal said, “Without creating an atmosphere of business certainty, stable policy regime, lesser government controls and restrictions and single-window licensing system, the interest shown by top corporates and international investors may not translate into any tangible benefits. The ease of doing business global ranking system still ranks India at a poor 142th position. The shadows of the past must be shed at this time and new light must emerge to translate into long term, lasting goodness.”
The initiative that aims at creating maximum employment opportunities also needs to guarantee that labour available is skilled. On this Joshipura added, “Manufacturing is very labour-intensive. Trained labour should be made available. We, at SKF, have a programme named Kushal that trains employees. It is mandatory for employees to undergo this training as it aligns them with business goals.
Proficient labour will enable us to produce high-performance and best quality products.” He later said that if a manufacturer wants to make products in India, he needs to operate the system well and deliver high-quality finished goods on time.
If India’s GDP grows at 7-8 percent for the next few years, the economy can reach the
mark and inflation may also come down
Indian companies seem to be confident and optimistic about witnessing a booming economy. Many believe that within a decade, if measures like ‘Minimum Government, Maximum Governance’ and ‘Make in India’ are put to effect properly, India will undoubtedly emerge as a manufacturing powerhouse and one of the leading economies in the world. “If India’s GDP grows at 7 to 8 per cent for the next few years, deficit will come down and India can possibly be a $10 trillion economy,” affirmed Anil Pillai. Adding to this, G S Sundararajan told WCRC Leaders Asia that if India wishes to grow exponentially, there is a need to sustain development and growth for the next 10 years.
Aggarwal is hopeful of India turning into a global force. He is of the opinion that India will experience lesser income inequality and that facilities of higher education and better healthcare will become available for the vast majority of the population.