Make in India #MakeinIndia (@makeinindia_ )

Make in India

At this moment, the Prime Minister’s “Make in India” campaign appears to be exactly this an imaginative marketing campaign. But there is much thought and even more work that is required to convert this to reality.

The theory behind “Make in India” is as simple as it is compelling. India must become a manufacturing powerhouse in order to gainfully employ its demographic dividend; there is no choice here. Fortunately, we have many natural advantages including a big labour pool and a large domestic market. In addition, with China’s competitive advantage in manufacturing eroding, India has the opportunity to take some share of global manufacturing away from China. 

All we have to do to improve the ease of doing business in India are these stop tax terrorism, improve infrastructure, reform labour laws, invest in skills development, make it easier to acquire land, implement Goods and Services Tax (GST) and fast track approvals. Voila, we will take our rightful place as the world’s factory alongside China.

Energy factor

This is an attractive thesis that has a lot of merit. A simple step of making it easier to do business will make a huge difference to India’s manufacturing competitiveness. It is one plank of a manufacturing strategy. India ranks 142 on the World Bank Index; China is ranked 90. If we were to improve by just 50 places, it would be a huge perceptual breakthrough. However, this is not a manufacturing strategy in itself. As Reserve Bank of India (RBI) Governor Raghuram Rajan correctly and controversially pointed out, much has changed in the world since China elbowed itself into becoming the world’s factory two decades ago. 

The nature of manufacturing is changing. Low-cost automation and robotics are making pure labour cost arbitrage less important. Lead times and a flexibility of supply chains are far more important, leading many companies to move manufacturing back closer to the big markets, the United States and Europe. 

Energy is the new labour in the sense that the cost of energy will significantly drive where things are made. Here, the U.S. with its huge new shale gas reserves has a big advantage. Developed countries are also realising how crucial local manufacturing is to jobs and to having stable, prosperous societies and so there is an attempt to reverse outsourcing and revive local manufacturing by embracing new technologies and innovations such as 3-D printing and the “Internet of things”.

For an industrial policy

To become a manufacturing powerhouse, India needs a manufacturing strategy, otherwise known as industrial policy. The idea of an industrial policy is out of vogue these days. It is seen as ineffective at best and even retrograde, running contrary to the idea of free trade. This is patent nonsense. Japan, Korea, China, Germany have all prospered by having a clear industrial policy and vigorously implementing it. The U.S., the United Kingdom, France and Italy have seen themselves deindustrialise by not having a clear industrial policy and are trying hard to course-correct this mistake.

Soft power, hard choices

There is a successful precedent even in India; our success in IT services was not an accident. It was the result of clear-eyed policies driven by the Department of Electronics, which included reducing import tariffs on hardware and software to zero, setting up software technology parks with tax incentives, and improving connectivity. Policy has always mattered and when it comes to manufacturing competitiveness, India must have a clear industrial policy that spells out priority sectors and how we will build competitive advantage in a way that is consistent with our obligations to the World Trade Organization (WTO).

Building on advantages

India’s industrial policy must recognise where we have important competitive advantages. India is quite uncompetitive at low skill manufacturing. On the other hand, it is good at making complex things which require skilled labour and frugal engineering. Despite all its shortcomings, India remains a very competitive manufacturing location for sophisticated things such as construction machinery, cars and automotive components and diesel engines. It is no accident that companies such as JCB, Cummins, Deere, Volvo, Hyundai and Ford are using India as a major export hub.

We must focus on building competitive advantage and global scale in sectors where we have a large domestic market and certain inherent capabilities. Strategy is all about making choices. Here, five priority industries come to mind. Defence, because we are the world’s leading arms importer. Localising what we buy as a condition for all defence deals along with a willingness to allow majority foreign ownership can turbocharge our local defence industry. 

The second critical industry is electronics hardware. India imports $45 billion of mobile phones, computers and communications hardware; by 2020, this is projected to grow to $300 billion and exceed our oil import bill. This is unsustainable. We have to create policy incentives to create a local electronic hardware manufacturing ecosystem. Since most component suppliers, Original Equipment Manufacturers and Original Design Manufacturers are Chinese, this will necessarily imply incentivising Chinese companies to establish factories in India. 

The size of our domestic market should make this possible. Concerns about security are misplaced; all our personal computers, cellphones and a lot of switches and routers are already made in China, so we are conceding nothing. The third industry is construction. India will invest a trillion dollars over the coming years in improving infrastructure. We need to create incentives that not only spur investment in manufacturing materials such as cement and steel but also construction equipment, locomotives, power generation equipment and so on. Everything we install should be made in India. 

The fourth is health care. India’s generic pharmaceutical industry is world class. We must not concede on intellectual property rights that neutralise our advantage. India is also exceedingly good at frugal innovation in medical devices such as low cost X-ray and ECG machines. We have a real shot at being a world leader in innovation and manufacturing in this space. Finally, agro-industries. We are one of the largest agricultural nations. 

A third of what we grow just rots and spoils. Investing in agro-industries such as food processing and establishing a reliable cold chain would make a huge difference in terms of rural employment and food security. If we had to pick just five industries where we want to bootstrap a strong competitive advantage it would be these. In other industries, whether it be textiles, toys, or automotive, we need to ensure that we do not disadvantage local manufacturing.

Creating ecosystems

Another critical strategic question is this: where do we want to make things? It is difficult to make a country the size of India into a uniformly attractive manufacturing location. Even China started its manufacturing odyssey by creating a few oases in the form of four special economic zones which were remarkably easy places to manufacture in. Where is India going to start its global odyssey? Manufacturing is all about hubs that are ecosystems for innovation, specialised skills and supply chains. 

Where will India’s hubs be for pharma, for defence, for electronics, for machinery and construction equipment? How do we catalyse these hubs by creating world-class academic institutions and skills training institutes? What incentives will attract the world’s leading companies to establish global innovation and manufacturing centres in these hubs? Pune, Chennai, Bengaluru and Delhi are already emergent hubs but what will enable them to scale up to compete with Shenzen and Tianjin?

To become a manufacturing nation, India has to quickly move beyond rhetoric to create a clear strategy and favourable policy environment for manufacturing to take off. The government has chosen to quietly dismantle the sclerotic National Manufacturing Competitiveness Council (NMCC) but it needs to foster a more vibrant think tank in its place. 

A close dialogue and partnership between government and the private sector, both domestic and foreign, is critical. Indian companies along with Chinese, Japanese, German, American and Swedish companies are all vital partners and we must create an environment that is open and welcoming. For this, the right leadership of this vital mission is critical. There is a clear and short-lived window of opportunity to become a manufacturing nation. We must not squander it.

#ShramevJayate: 10 key points @PMOIndia @narendramodi emphasised

Prime Minister Narendra Modi on Thursday launched the Pandit Deendayal Upadhyay Shramev Jayate scheme, under which he dedicated a Shram Suvidha portal, Labour Inspection scheme and Portability through Universal Account Number (UAN) for Employees Provident Fund (EPF) to the nation.

Here are 10 key points from his address at Vigyan Bhawan:

1. Shramev Jayate should have the same power for the development of our nation as that of Satyamev Jayate

2. We have to see labour issues from the eyes of a Shramik. We cannot see it from the eyes of the industrialists.

3. When you use various products, think about the people who worked hard in getting it to you. I am sure the person who labours or the Shram Yogi will become a Rashtra Yogi and a Rashtra Nirmata (Maker of the Nation).

4. If we want to Make in India a success, the most important part is to provide ease of business. For the same, we have to redefine e-governance as easy governance, effective governance and transparent governance.

5. Shramev Jayate will enable portability through Universal Account Number for EPF subscribers from the organised sector.

6. We have heard about Inspector Raj since our childhood and we thought it was for policemen only, till we realised its meaning, which is a lot more than that. We need to encourage self attestation, which will reflect how our country trusts its citizens.

7. We have enough manpower, but it doesn't mean anything if they are not skilled manpower. India must be a key player in providing skilled workforce to the world.

8. These initiatives taken for enhancing ease of compliance, increasing productivity and employability in the country are commendable and I congratulate the (Labour) Ministry and the team for this.

9. We need to change the way we look at the job market. We should not look down upon those who do not have white collar jobs. White collar jobs are considered good. But if a person wearing a coat and pant rings a bell we welcome that person, but what happens when that person is a poor person?

10. We have looked down upon ITIs and its students. We have taken a steps today to change this as they have great potential, and should not be ashamed to declare that they have been trained to work hard.

Why @PMOIndia @narendramodi’s @makeinindia_ is indeed a step of a #Lion

Let’s resolve to steer the country to one destination. We have it in us to move in that direction.

Come, make in India”, “Come, manufacture in India”. Sell in any country of the world but manufacture here. We have got skill, talent, discipline, and determination to do something. We want to give the world a favourable opportunity that come here, “Come, Make in India” and we will say to the world, from electrical to electronics, “Come, Make in India”, from automobiles to agro value addition “Come, Make in India”, paper or plastic, “Come, Make in India”, satellite or submarine “Come, Make in India”. Our country is powerful. Come, I am giving you an invitation.

And bang! Forty-one days later at Vigyan Bhawan, New Delhi, Modi announced the launch of India’s most ambitious plan to boost manufacturing in the country in the presence of business stalwarts like Mukesh Ambani, Cyrus Mistry, Kumar Mangalam Birla and Azim Premji.

Through Make In India initiative, government will focus on building physical infrastructure as well as creating a digital network to make India a global hub for manufacturing of goods ranging from cars to softwares, satellites to submarines, pharmaceuticals to ports and paper to power.

This initiative is nothing less but a giant leap or the step of a lion. As we write this, the official Facebook page of Make In India has crossed 120K likes and its twitter handle has more than 13K followers, all this, in a day’s time.

Here’s everything about MakeInIndia and why it is a stepping stone towards making India an investment hub.

What is MakeInIndia

Make In India is a new national program designed to transform India into a global manufacturing hub. It contains a raft of proposals designed to urge companies — local and foreign — to invest in India and make the country a manufacturing powerhouse.

Sectors covered

The focus of Make In India programme is on creating jobs and skill enhancement in 25 sectors. These include:automobiles, aviation, chemicals, IT & BPM, pharmaceuticals, construction, defense manufacturing, electrical machinery, food processing, textiles and garments, ports, leather, media and entertainment, wellness, mining, tourism and hospitality, railways, automobile components, renewable energy, mining, bio-technology, space, thermal power, roads and highways and electronics systems.

The logo

The Make In India logo is derived from India’s national emblem. The wheel denotes the peaceful progress and dynamism – a sign from India’s enlightened past, pointing the way to a vibrant future. The prowling lion stands for strength, courage, tenacity and wisdom – values that are every bit as Indian today as they have ever been.

What comes in the package

Global investors have been unsparing in their criticism about complex rules and bureaucratic red tape that delay investment decisions. India ranks 134 out of 189 countries in the World Bank’s ease of doing business index in 2014. As part of Make In India initiative, foreign investment caps in construction will be eased to enable greater participation in the NDA government’s 100 smart cities project and affordable housing. The initiative will also target top companies across sectors in identified countries.

The Prime Minister said

 “FDI” should be understood as “First Develop India” along with “Foreign Direct Investment.”

He urged investors not to look at India merely as a market, but instead see it as an opportunity.

Major highlights of the Make In India plans are as follows:

1. Invest India cell: An investor facilitation cell set up by the government  will act as the first reference point for guiding foreign investors on all aspects of regulatory and policy issues and to assist them in obtaining regulatory clearances. The cell will also provide assistance to foreign investors from the time of their arrival in the country to the time of their departure. The information & facts that potential investors need for each sector have been compiled in brochures.

2. Consolidated services and faster security clearances: All central government services are being integrated with an e-Biz single window online portal while states have been advised to introduce self-certification. The ministry of home affairs have been asked to give all security clearances to investment proposals within 3 months.

3. Dedicated portal for business queries: A dedicated cell has been created to answer queries from business entities through a newly created web portal ([http://www.makeinindia.com). The back-end support team of the cell would answer specific queries within 72 hours. The portal also boasts of an exhaustive list of FAQs answers.

4. Interactions with the users/visitors: A pro-active approach will be deployed to track visitors for their geographical location, interest and real time user behaviour. Subsequent visits will be customised for the visitor based on the information collected. Visitors registered on the website or raising queries will be followed up with relevant information and newsletter.

5. Easing policies and laws: A vast number of defence items have been de-licensed and  the validity of industrial license has been extended to three years.

With a view to providing flexibility in working hours and increased intake of apprentices for on the job training, the government plans to introduce a single labour law for small industries by December. An advisory has been sent to all departments/state governments to simplify and rationalise regulatory environment (which includes online filing of all returns in a unified form).

Why the need to Make In India

Narendra Modi stated the reason and motive to launch Make In India very clearly,

It is important for the purchasing power of the common man to increase, as this would further boost demand, and hence spur development, in addition to benefiting investors. The faster people are pulled out of poverty and brought into the middle class, the more opportunity will there be for global business. Therefore, investors from abroad need to create jobs. Cost effective manufacturing and a handsome buyer – one who has purchasing power – are both required. More employment means more purchasing power.

Modi had felt a mood of gloom among India’s business community in the last few years, due to lack of clarity on policy issues. He said,

“Trust is essential for investors to feel secure. Let us begin with trust; if there is an issue, Government can intervene. Trust too can be a transformative force. Development and growth-oriented employment is the government`s responsibility.”

What does future look like

To the expression “Look East,” Modi added “Link West”, emphasizing on the necessity of a global vision. Referring to his vision of waste water management and solid waste management in 500 towns across India through public private partnership, he said that Mission Swachh Bharat and “waste to wealth” could lead to good revenue models for business as well.

The Prime Minister believes in the infrastructure of the future – including i-ways besides highways – and mentioned port led development, optical fibre networks, gas grids and water grids. Digital India mission would ensure that Government processes remained in tune with corporate processes.

He said,

Make in India…this is the step of a Lion.

Nobody can question the talent of our people, especially after the Mangalyaan”

Make In India’s success relies a lot on the fate of the newer companies and statups. A mission which can go either way at this stage, was envisioned by Narendra Modi as follows,

If each one of our millions of youngsters resolves to manufacture at least one such item, India can become a net exporter of goods. I, therefore, urge upon the youth, in particular our small entrepreneurs that they would never compromise, at least on two counts. First, zero defect and, second again zero effect. We should manufacture goods in such a way that they carry zero defect, that our exported goods are never returned to us. We should manufacture goods with zero effect that they should not have a negative impact on the environment.