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Tough decisions ahead

Prime Minister Narendra Modi’s ‘Make in India’ campaign is drawing adherents. The idea is to generate the synergy that made China the world’s manufacturer. However, reviving India’s manufacturing sector and making it competitive is a challenging task and captains of industry are of the view that a lot has to be done in areas like taxation, ease of doing business, logistics, power and cost of production, writes MICHAEL FISHER

In his recent talk in Delhi ‘The New Manufacturing Revamp’, former GCCI chief Nitin Kunkolienkar said, “Here is an opportunity staring at us to draw international manufacturers to India who are encouraged by Prime Minister Narendra Modi’s campaign ‘Make in India’.”

On the flipside, it is not an easy walk in the park for global manufacturers to enter India which has built a slew of hurdles manifested by corrupt bureaucrats. Within three months in office, the Prime Minister announced ‘Make in India’ and the second slogan ‘Digital India’, making manufacturing and digital the prime focus.

Challenges

There is a need to change moods from being emotional to rational and to take into consideration the size of India’s economy which is at low ebb. There is a need to produce for global markets by creating because big time manufacturers will not sustain in domestic markets. Godrej and Tatas have branched oversees, and these are living examples.

There is also a need to create a manufacturing sector to be globally competitive. Cost of doing business should come down drastically. A regime of simple and effective taxation should be worked out which is presently litigation-friendly and is chasing away topnotch manufacturers.

To add to the miseries, many CEO and business owners are entangled with litigation after litigations. Many manufacturers have converted to assembling and trading, which have less or no hassles at all.

There is a declining trend in agriculture production estimated at 40 million tonnes to 56 million tones. The only sector that can lift the economy is the manufacturing sector. The government is on the right track giving preferential market access, and enabling demand it has created.

Creating strong incubators and incubates would be a fillip to start up entrepreneurs. What is needed is a strong research and development base plus lots of IPRs.

The economy we must work for is a multiplier effect on the manufacturing sector (1) for creating jobs as every job creates four jobs in the value chain. The jobs created by other sectors are 1:7.

The huge digital divide

There is no balance, and therefore there is a need to create a system to lift the weaker class.

Tax reforms

A revolutionary approach is needed to drastically change the tax system to GST. Build a complete economic system in compliance with the value chain with integrated cluster approach.

Logistics

Today India’s logistics is among the costliest. So even accessing domestic markets is every expensive.

The last revolution to free this country in 1947 gave rise to a breed of dirty and crooked politicians which has caused the country to lag behind.

Former Tata Steel managing director H M Neerukar said India is placed at 142 among 189 countries in ease of doing business and 100 million jobs are added every year. India’s manufacturing is 13 per cent to its GDP, the lowest compared to developing countries which are 30 per cent and above. Thus, India’s manufacturing scope is huge. Investment in manufacturing is Rs 45 lakh crore to Rs 55 lakh crore and land deals have come to standstill. H M Nerurkar was the key speaker at the ‘Make in India’ conference organised by Goa Management Association.

The manufacturing sector in the rest of the world is slowing down due to high cost and here lies the opportunity for India to draw manufacturers. But India’s gap of unemployed skilled workers has widened to 3.9 million and is increasing. What is required is following the German pattern of manufacturing which is centered on 400 SMEs. A manufacturing shift is taking place from China to developing countries and India should take advantage. There is no need of SEZ, he says.

By 2030, India will be the most populous country with 1.46 billion people, surpassing China’s projected population of 1.39 billion. More importantly, the median age of Indian will be 32 years, while in UK it will be 42, Japan 52, China 43, and Brazil 35. This means that India will have the largest youth work force in 2 decades, points out D Kumar Pillai, chairman of Goa Management Association.

 

‘A sustainable platform can turn `Make in India’ into reality’

The Indian Home and Personal Care Industry Association (IHPCIA) jointly with American Oil Chemists Society (AOCS) recently concluded its 4th international conference in Goa. They discussed several issues. Following is a Q&A with IHPCIA’s member Dr B R Gaikwad

 

Q: What are the new marketing guidelines for SEZ and OEM. If it is unfavourable then what solutions do you suggest?

In order to make domestic manufacturing sustainable and competitive, and to attract overseas companies to set up their global chemicals manufacturing hub in India, a special category – EOUs and SEZs – for chemical sectors needs to be established by giving such units a status equivalent to countries covered under FTA. Their eligible domestic sales as per the Foreign Trade Policy should be allowed at the lowest applicable duty rates for its import from FTA countries, which will ensure that they will have a level playing field with their competitors from such FTA country and also at all the time they remains competitive in the domestic market. This way, these EOUs and SEZs would continue to do exports earning foreign exchange and would also help in reducing imports of their product, resulting reduced foreign exchange outflow.

 

Q: How important is a single window and single environment clearance?

Single window clearance is extremely important as the chemical industry set up requires several permissions and manufacturers have to run from pillar to post. There is a lack of coordination amongst different ministries and this would very much benefit the industry. Environmental clearance is the most critical and difficult step which takes very long time. If Ministry of Chemicals, Environment and Commerce works out a common window comprising officers from their departments to clear new or expansion projects, this will bring a rapid growth in the chemical manufacturing industry.

 

Q: What is IHPCIA’s recommendation to the government?

IHPCIA’s recommendation to the government would be to align all regulatory requirements of cosmetics and personal care products to the global standards, promote water conserving cleaning products and impose standards of water consumption for washing machines, in line with star ratings for electrical appliances.

 

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