'Make in India' in Defence and Indigenous Technologies

Achieving self-reliance and reducing dependence on foreign countries in defence is a necessity today rather than a choice, both for strategic and economic reasons. The

Government in the past has created production capabilities in defence in form of Ordnance Factories and Public Sector Undertakings to cater to the requirements of our Armed Forces.

However, there is a need to enlarge the role of Indian private sector as well to develop capabilities and capacities for production of various defence equipments. Our Prime Minister has taken a very important initiative in form of ‘Make in India’ to promote and encourage domestic manufacturing of various items. The requirement for domestic production of defence equipment is more than for any other sector because it will not only save precious foreign exchange but will also address the national security concerns.

Government being the only consumer, ‘Make in India’ in defence sector will be driven by our procurement policy. The Government policy of promoting domestic defence industry is adequately reflected in the Defence Procurement Policy, wherein preferential treatment is given to ‘Buy (Indian)’ and ‘Buy and Make (Indian)’ categories of acquisition over ‘Buy (Global)’. In the days to come, import is going to be the rarest of the rare option and first opportunity would be given to the Indian Industry to develop and manufacture the required systems. As Indian companies presently may not have adequate capabilities in terms of technology, they are encouraged to partner with foreign companies for joint ventures, technology transfer arrangements and tie-ups. If we look at the profile of Acceptance of Necessity (AONs) granted by Defence Acquisition Council (DAC) in the last couple of months after the new Government has come to power, proposals worth more than Rs.65,000 crores have been categorized under ‘Buy (Indian)’ and ‘Buy and Make (Indian)’.

The process of further orienting the Defence Procurement Procedure towards procurement from domestic industry will continue in future as well. The procurement process would be made more efficient, time bound and predictable so that the industry can plan its investment and R & D well in advance to meet the requirement of our armed forces.

Till now, there were many entry barriers for the domestic industry to enter into defence sector in terms of licensing, FDI policy restrictions etc. In the last six months, the Government has taken several policy initiatives to ease the process of entry into defence

manufacturing. The most important is the liberalization of the FDI policy regime for

Defence sector to encourage foreign investment in the sector. FDI up to 49% is allowed through Government route (with FIPB approval). FDI above 49% is also allowed on a case-to-case basis with the approval of Cabinet Committee on Security wherever the proposal is likely to result in access to modern and state-of-the-art technology in the country. Restrictions in earlier policy related to Foreign Institutional Investment (FII) and majority shareholding to be held by single Indian shareholder have been removed.

Even though private sector industry was allowed to enter in defence manufacturing since

2001, after obtaining industrial licence under IDR Act, the process of obtaining industrial licence was very cumbersome and used to act as a major road block for the industry, particularly small and medium industry, who were in the business of making part, components, sub systems and sub-assemblies. The Government liberalized the licensing policy and now most of the components, parts, raw materials, testing equipments, production machinery, castings, forgings etc. have been taken out from the purview of licensing. The companies desirous of manufacturing such items no longer require industrial licence and will also not be subjected to FDI ceiling of 49%. A comprehensive Security Manual indicating the security architecture to be followed by various class of industries has been put in public domain, so that companies could easily access the same and follow it accordingly.

The initial validity of industrial license has been increased from two to three years. For the first time, a Defence Export Strategy has been formulated and has been put in public domain. The strategy outlines specific initiatives to be taken by the Government for encouraging the export of defence items. It is aimed at making the domestic industry more sustainable in the long run as the industry cannot sustain purely on domestic demand. A Standard Operating Procedure (SOP) for issue of NOC for export of military stores has been finalised and has also been put in public domain. Requirement of End User Certificate (EUC) to be signed and stamped by Government authorities has been dispensed with for most of the defence items, particularly parts, components, sub-systems and sub-assemblies. This will largely ease out the export by the domestic industry. A web-based online system to receive applications for NOC for export of military stores has been developed and has been put in place.

There is a big opportunity in the defence sector for both domestic and foreign investors.

We have the third largest armed force in the world with an annual budget of about US$ 38 billion and 40% of this is used for capital acquisition. In the next 7-8 years, we would be investing more than US$ 130 billion in modernization of our armed forces and with the present policy of MAKE IN INDIA, the onus is now on the industry to make best use of this opportunity for the benefit of both the businessas well as the nation. Besides, under offset more than Rs. 25000 crore obligations are to be

discharged in next 7-8 years.

While on the one hand, Government is making necessary policy changes with regard to

procurement, investment including FDI, licensing, export etc., the industry also needs to come up and accept the challenge of up-gradation in terms of technology and required investments. Defence is the sector which requires huge investments and technology and is driven by innovation. The industry, therefore, has also to change its mindset and think for long term rather than temporary gains. We need to focus more on Research and Development and state of the art manufacturing capabilities. The Government is

fully committed to create an eco-system for the domestic industry to rise and to provide a level- playing field to all sectors of industry, both public and private.

Published in Moneylife.in

Make In India Is Mission Possible

Make In India Is Mission Possible

The key to the success of this latest attempt at promoting industrial development lies in

the success of the DMIC project, says Sanjay Baru

      Nobody Makes In India. Those who make, do so in some part of India. They make in Gujarat or Tamil Nadu, in Andhra Pradesh or Maharashtra, in Haryana or Karnataka. Will they ever make in Bihar? Depends. The Narendra Modi government has launched what may be described as the ‘Fifth Attempt’ at promoting the industrial development of India. The first shot was fired by British imperial rulers who, after having contributed to what historians have called the ‘deindustrialisation’ of India in the 19th century, tried to promote manufacturing activity with a policy of ‘discriminating protection’, in the 1930s, that favoured the sugar, cotton textile and an assortment of local resources-dependent industries.

The second attempt at using policy to promote manufacturing was undertaken, albeit in a much more sustained and systematic manner, during the First and Second Five-Year Plan periods of 1950-60, and continued thereon into the 1960s. Thanks to this era of what economists have dubbed “import-substituting industrialisation” the share of manufacturing in India’s national income increased from less than 10 per cent during the 1930s and 1940s to almost 20 per cent by the end of the 1970s.

After the late 1960s Indian industrialisation decelerated and many volumes have been written explaining why. It took the tentative steps towards economic liberalisation in the 1980s and the major reform effort of 1991-92, when industrial licensing and other controls were done away with, for a third surge of manufacturing activity. After stagnanting for years around 20 per cent, the share of manufacturing in national income went up to almost 25 per cent by the end of the century, thanks to the impact of liberalisation, deregulation and privatisation policies. The fourth phase began tentatively during the first tenure of the United Progressive Alliance government when a National Manufacturing Competitiveness Council was set up and a national manufacturing strategy was devised. However, fundamental differences between policy wonks in government like V. Krishnamurthy and V. Govindarajan, on the one hand, and Montek Singh Ahluwalia on the other prevented any clear cut policies from being adopted. While there was a surge in manufacturing activity during UPA’s first term, as is established by all the data available, there was a pullback during UPA-2 owing to what the media have called “policy paralysis”. Thus the gains of UPA-1 were wasted by the damage inflicted on investor sentiment during UPA-2.

Modi’s Make in India campaign is the latest of many such attempts by successive governments to accelerate the pace of manufacturing activity in India. This time the initiative is far more organised and has a focus. The Make in India website — makeinindia.com — is an impressive window into the government’s thinking and priorities. Twenty-five sectors have been identified as areas where India has an existing or potential competitive advantage and where additional policy support can encourage new investment. Having identified the sectors, the Modi government is pushing through policy changes aimed at improving India’s rank on the global ‘Ease of Doing Business’ index. In the 1990s, when there was considerable criticism of India’s record at educating its people and investing in their health, the governments of the day chose to focus on improving India’s ranking in the UNDP’s Human Development Index (HDI) — a summary index measuring the educational, health and livelihood status of a country’s populace. Every year the media would report whether or not India’s rank had improved, and how it compared with its neighbours. Perhaps a similar regular reporting on where India stands on the Ease of Doing Business Index could spur governments to action. In fact, it is worth constructing a state-wise index that would encourage competition between states. The fact is that some Indian states are far ahead of others when it comes to the ease of doing business and that is why no one really ‘makes in India’ — they make in one state or another. Therefore, what the Make in India campaign really means is getting the laggard states to learn from the more business-friendly states so that there are no policy differences or basic infrastructure differences between states. Even so, manufacturers will end up making in some chosen part of India. And, if location is decided by factors such as ‘ease of doing business’, on the one hand, and access to global connectivity (so that Indian manufacturers can be part of a global supply chain and import and export with ease), then it is more than likely that investors would prefer to make

precisely in those parts of India where they have been making for a long time — namely, peninsular India.

     There is no escaping the fact that when it comes to Make in India, businesses will continue to make in peninsular India — Gujarat, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh and Telangana. The new Delhi-Mumbai Industrial Corridor may incentivise moving manufacturing inland and northwards. However, what the new road and rail links will do is to create the required efficient connectivity. At the end of the day, good infrastructure is a good starting point. Not an end in itself. This has to be combined with good governance and a business-friendly environment. Unless the state governments of Rajasthan, Madhya Pradesh, Haryana and Uttar Pradesh provide a more business-friendly urban environment, it is unlikely that businesses will shift their base away from peninsular India. The key to the success of this latest attempt at promoting industrial development lies in the success of the DMIC project.

     The Make in India (MII) website shows that the government understands this challenge. It has linked MII to the DMIC initiative, which includes building new ‘smart’ cities. After the success of initiatives like Jamshedpur, Kharagpur and Rourkela in the 1950s, never has a programme for India’s industrialisation been so closely linked to a new programme for urbanisation. The combination of the two in the MII-DMIC project suggests that this round is about more than merely improving the competitiveness of Indian  manufacturing. It is a renewed attempt at defining industrial policy in strategic terms. If it succeeds, India could see a surge in the share of manufacturing in national income and an increase in India’s share in world manufacturing. That requires hard work more than just good policy.

The author is Director, Geo-economics & Strategy, International Institute For Strategic Studies

(Published in Businessworld.in)

Skill development and Job Creation: Mantra of Make In India

‘Don’t Have The Luxury Of Time’

The target group for skill development includes 12.8 million people who enter the labour

market annually

Skilled labour is a pre-requisite to making in India. The National Skill Development Policy (NSDP) aims at skilling 500 million people by 2022. The target group for skill development includes 12.8 million people who enter the labour market annually, the 26 million employed in the organised sector and a further 433 million in the unorganised sector. The target is ambitious as the current capacity of skill development programmes is just 3.1 million. Sunil Arora, secretary of the newly created Department of Skill Development and Entrepreneurship, talks to BW’s Joe C. Mathew on the Modi government’s thrust on skilling India. Excerpts:

The take-off of the Make In India mission largely depends on the availability of adequately skilled human resources. How does the government intend to plug the huge demand-supply gap that exists in this area today?

Skilling India is a political vision and also an economic necessity. This vision has been articulated by none other than Prime Minister Narendra Modi himself on several occasions. He has always underscored the need for skilling India. The department (of skill development) was created in July 2014 for this specific purpose. In November, after the reshuffle of the Cabinet, it became a full-fledged ministry (of Skill Development and Entrepreneurship).

Does that mean the government is looking at skilling India in mission mode?

When you use the word mission, there are two different connotations. One is mission as a structure. The other is mission as in the mission of a nation. It is indeed the mission of the nation. At the same time, a formal structure of this mission is also being worked out.

Where do we stand today in terms of skilling India?

There are islands of excellence. In the five months since I took over as secretary (in September 2014), I have interacted with almost 180 stakeholders from across the country. I visited Gujarat and saw the best practices in existence there for more than a decade. I reviewed the Rajasthan mission. I had an interaction with the Tata Institute of Social Sciences. My experiences have been very humbling. But that is not enough when the country aims to give a fillip to manufacturing. The challenge is to scale this skilling to gargantuan proportions. It has to be done with speed while ensuring quality

outcomes. We are dealing with people who possess skills traditionally passed on through generations.

Which sectors are you hinting at?

The biggest will be construction, followed by retail. We also have traditional sectors such as handloom and gems and jewellery.

Under the Make In India mission, the government has identified 25 sectors, which include information technology, pharmaceuticals, automobiles and chemicals. How do you see the skill deficiency in such priority sectors?

These are areas where NSDC (National Skill Development Corporation, which comes under the administrative purview of the ministry) has already formed sector skill councils. The biggest supply-demand problem exists in the construction sector.

What have the skill councils achieved so far?

So far, we have seen more than 14 lakh enrolments across 19 skill councils. Training was imparted under 297 job roles across 35 states and Union territories. It was possible through the involvement of 719 training partners and 2,808 assessors from 29 assessment agencies.

What is the role of the private sector in skill development?

This ministry has two arms — National Skill Development Agency, created in 2013, and NSDC. The equity in NSDC is almost equally shared by the government and the private sector. It is a private company in that sense.

Has there been any progress in terms of this framework?

One of the major developments that have taken place is the notification of the National Skills Qualifications Framework (NSQF) in December 2013. This framework (a quality assurance certification which organises qualifications according to a series of levels of knowledge, skills and aptitude) attempts to align the certification process in terms of learning outcomes, which the learner must possess regardless of whether the skills were acquired through formal, non-formal or informal learning. At the moment, there is no convergence or harmony in various certifications given by various bodies. NSQF provides this platform.

How do you see the targets set under the NSDP?

There are several studies related to the 500-million target. The fact is if you have to grow at 7.5 per cent and higher, which is expected under the current scenario, you have to scale up 15-20 times. Despite the task being huge, we are trying. We are working on all fronts, and we don’t have the luxury of time. On the one hand, we are scaling up the numbers through NSDC, definitely increasing the output by over tenfold from current levels. We are also trying to work through NSQF for certification. In addition, corporate entities are being roped in. Also, infrastructure of various ministries like the Railways are being used for skilling instead of recreating the infrastructure. We are also working with the defence ministry to ensure that highly motivated ex-servicemen are roped in as trainers and entrepreneurs. So it’s a multi-front effort.

 (This story was published in BW | Businessworld Issue Dated 09-03-2015)

One more chimera Make In India

One more chimera Make In India

Narendra Modi’s “Make in India” call is based largely on bluster, bravado and marketing hype and lacks any clear strategy for proactive trade and industrial policies.

THE website is impressive, no doubt about it. Its design is sleek and easy on the eye, and it appears to offer a lot of information on what is supposed to be the Narendra Modi government’s ambitious new initiative to transform India into an industrial hub. Like all of Modi’s plans, it has been launched in a blitzkrieg of publicity in which the medium is seen as the message, in which the very act of announcing a goal seems to be treated as almost equivalent to achieving it.

“Make in India” (www.makeinindia.gov.in) is being presented as a major new programme designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best-in-class manufacturing infrastructure. A tall order,

you might say —especially when some of these goals may well operate at cross purposes, such as the protection of intellectual property in ways that could constrain local adaptation, innovation and access to knowledge. But the rousing enthusiasm expressed in the declarations of support for this programme is not marked by caution or nuance, and simply sidesteps the harder but still necessary questions about how this is to be achieved in practice. This is not to say that the goal itself is unimportant. Certainly, this government should be commended for recognising the significance of industrialisation, and recognising that domestic production capabilities need to be encouraged, developed and expanded. Of course, this is not a particularly new insight since it was clearly also the driving spirit behind the now much-maligned Nehruvian agenda for development. But it is one that had been underplayed if not even forgotten in the years of euphoria around “service-led growth” and

the belief that liberalised market forces would deliver both higher growth and economic diversification in a desirable direction.

Over the past few years, several economists have indeed stressed the negative implications of the neglect of industry’s requirements. Their critique is based on an alternative conception of development that recognises the necessity of trade and industrial policies that

would promote economic diversification to higher value-added activities, as well as the need to developing the home market by emphasising employment creation and higher wage incomes. More recent concerns have been to ensure that growth is sustainable (by

not overexploiting nature) and inclusive (by focussing on the incomes of the less well-off sections).

Into private hands

But the Modi government does not seem to be coming at this issue from any of these angles. Rather, if the information on the website correctly identifies what this programme consists of, then its defining feature is the lack of any clear strategy for proactive trade and

industrial policies. The underlying idea seems to be that all that is required to achieve these ambitious goals is further deregulation of various policies associated with remaining licences and permissions for private investment, including allowing the entry of more foreign

direct investment into sectors such as defence and insurance, combined with loosening of environmental standards and easing of rules preventing easy access to cheap land.

Most problematically, the entire programme is to be achieved by incentivised private investment assisted by the hoary old strategy of relying on public-private partnerships, or PPPs. The PPP model manifestly failed during two successive tenures of the United

Progressive Alliance (UPA) government, especially with regard to crucial infrastructure spending. It proved to be fiscally demanding of more public spending as well as productively inefficient in terms of not meeting the planned targets of investment in crucial infrastructure areas. For example, the actual investment in rural roads under the PPP model was a small fraction of the planned investment, and the continued reliance on PPP and waiting for the private sector to respond to even more blandishments meant that

the required roads were simply not constructed. It would have been ultimately cheaper as well as more efficient and productive for the government to have simply invested directly in building those roads.

Future paradise

The main focus of the current plan seems to be to develop industrial corridors between major metros through the development of infrastructure along the connecting highways. This idea also is not new, and once again the usefulness of industrial clusters is something

that has been well recognised by policymakers for quite a while now. The main difference is the injection of the idea of creating new “smart cities” along these routes. For example, 24 new cities are envisaged along the Delhi-Mumbai Industrial Corridor Project. These new smart cities are clearly projected as paradises in the making: apparently they will be “transit oriented, walk-able and livable cities” with interconnected roads, rail and communication systems providing speed, access and worldwide connectivity. They will integrate land use into mixed zones to reduce commuter time, have multiple business districts to reduce congestion and provide affordable housing for workers near the industrial zones. They will develop high-access mass transit corridors and encourage cycling and pedestrian transport. They will also be “sustainable” cities in that they will recycle and reuse water and solid waste and ensure energy sufficiency through the use of renewable sources. They will be created keeping in mind the needs of “conservation of better agricultural land and protection of sensitive natural environment”.

Could not get better, could it? So attractive does this sound that I almost want to go and live in one myself as soon as it is created. How is this going to happen? In other words, who is going to invest in this and create these wonderful cities?

So here is the catch: most of this is supposed to happen through private investment, which apparently is going to rush in just at the sound of these wonderful phrases and as the dream of the dynamic and interconnected economy is dangled in front of them. The government’s role seems to be rather basic—provide the minimal start and the hype. So the government of India has a 49 per cent stake in the Delhi-Mumbai Industrial Corridor Development Corporation (DMICDC), an autonomous body that will provide the basic infrastructure of the industrial corridor. But the bulk of the projects are envisaged to be met by private investors, who presumably will have to be provided various incentives to do so.

How much all of this will end up costing the public exchequer directly and indirectly, and how effective such a strategy will be in achieving even a part of its ambitious goals, is anybody’s guess. But the recent history of the Government of India (in its UPA avatar)

trying to do the same thing (albeit with less publicity) is not encouraging. Private investors, especially foreign ones, are also good with the phrases and the handshakes—or even bear hugs—but they tend to wait for very real incentives before actually committing investment. And even then they have to be constantly cajoled and given further and increasing incentives, or they will simply abandon projects midway, as the half-built electricity generation plants all over the country provide testimony to. And if the investment is highly leveraged (as has been the case with most private corporate investment in India recently), these unfinished projects will become the problem of the mostly public commercial banks in the country which would have been “persuaded” to lend to them.

So a strategy that is based largely on bluster, bravado and marketing hype is not really likely to go far. Sadly, so far that seems to be the main strategy. A more serious approach to the issue of industrialisation would require first of all an assessment of the nature of existing manufacturing industry, its structure and performance, and the specific requirements of different categories of industry, especially small-scale enterprises. That would enable both a broad-sweep approach and a more targeted one to develop particular sectors. Just announcing a bright future with a lot of bombast will not work. The worrying thing is that such a lack of strategy might even lead to the Indian economy missing the boat of industrialisation once again, even as those at the helm loudly proclaim its fervent intent to be on it.

(Published in Frontline.in)

Make in India- Defence Sector

            Achieving selfreliance and reducing dependence on foreign countries in defence is a
necessity today rather than a choice, both for strategic and economic reasons. The
Government in the past has created production capabilities in defence in form of Ordnance
Factories and Public Sector Undertakings to cater to the requirements of our Armed Forces.
However, there is a need to enlarge the role of Indian private sector as well to develop
capabilities and capacities for production of various defence equipments.
            Our Prime Minister has taken a very important initiative in form of ‘Make in India’ to
promote and encourage domestic manufacturing of various items. The requirement for
domestic production of defence equipment is more than for any other sector because it will
not only save precious foreign exchange but will also address the national security concerns.
Government being the only consumer, ‘Make in India’ in defence sector will be driven
by our procurement policy. The Government policy of promoting domestic defence industry
is adequately reflected in the Defence Procurement Policy, wherein preferential treatment is
given to ‘Buy (Indian)’ and ‘Buy and Make (Indian)’ categories of acquisition over ‘Buy
(Global)’. In the days to come, import is going to be the rarest of the rare option and first
opportunity would be given to the Indian Industry to develop and manufacture the required
systems. As Indian companies presently may not have adequate capabilities in terms of
technology, they are encouraged to partner with foreign companies for joint ventures,
technology transfer arrangements and tie ups.
           If we look at the profile of Acceptance of Necessity (AONs) granted by Defence
Acquisition Council (DAC) in the last couple of months after the new Government has come
to power, proposals worth more than Rs.65,000 crores have been categorized under ‘Buy
(Indian)’ and ‘Buy and Make (Indian)’. The process of further orienting the Defence
Procurement Procedure towards procurement from domestic industry will continue in future
as well. The procurement process would be made more efficient, time bound and
predictable so that the industry can plan its investment and R & D well in advance to meet
the requirement of our armed forces.
           Till now, there were many entry barriers for the domestic industry to enter into
defence sector in terms of licensing, FDI policy restrictions etc. In the last six months, the
Government has taken several policy initiatives to ease the process of entry into defence
manufacturing. The most important is the liberalization of the FDI policy regime for Defence sector to encourage foreign investment in the sector. FDI up to 49% is allowed through
Government route (with FIPB approval). FDI above 49% is also allowed on a case to case
basis with the approval of Cabinet Committee on Security wherever the proposal is likely to
result in access to modern and state of theart technology in the country. Restrictions in
earlier policy related to Foreign Institutional Investment (FII) and majority shareholding to be
held by single Indian shareholder have been removed.
            Even though private sector industry was allowed to enter in defence manufacturing
since 2001, after obtaining industrial licence under IDR Act, the process of obtaining industrial licence was very cumbersome and used to act as a major road block for the industry, particularly small and medium industry, who were in the business of making part, components, sub systems and sub assemblies.
          The Government liberalized the licensing policy and now most of the components, parts, raw materials, testing equipments, production machinery, castings, forgings etc. have been taken out from the purview of licensing. The companies desirous of manufacturing such items no longer require industrial licence and will also not be subjected to FDI ceiling of 49%. A comprehensive Security Manual indicating the security architecture to be followed by various class of industries has been put in public domain, so that companies could easily access the same and follow it accordingly. The initial validity of industrial licence has been increased from two to three years.
          For the first time, a Defence Export Strategy has been formulated and has been put
in public domain. The strategy outlines specific initiatives to be taken by the Government for
encouraging the export of defence items. It is aimed at making the domestic industry more
sustainable in the long run as the industry cannot sustain purely on domestic demand. A
Standard Operating Procedure (SOP) for issue of NOC for export of military stores has been
finalised and has also been put in public domain. Requirement of End User Certificate (EUC)
to be signed and stamped by Government authorities has been dispensed with for most of
the defence items, particularly parts, components, subsystems and sub assemblies. This will largely ease out the export by the domestic industry. A web based online system to receive applications for NOC for export of military stores has been developed and has been put in place. There is a big opportunity in the defence sector for both domestic and foreign investors. We have the third largest armed force in the world with an annual budget of about US$ 38 billion and 40% of this is used for capital acquisition. In the next 78 years, we would be investing more than US$ 130 billion in modernization of our armed forces and with the present policy of MAKE IN INDIA, the onus is now on the industry to make best use of this opportunity for the benefit of both the business as well as the nation. Besides, under offset more than Rs. 25000 crore obligations are to be discharged in next 78 years.
            While on the one hand, Government is making necessary policy changes with regard to procurement, investment including FDI, licensing, export etc., the industry also needs to come up and accept the challenge of upgradation in terms of technology and required investments. Defence is the sector which requires huge investments and technology and is driven by innovation. The industry, therefore, has also to change its mindset and think for long term rather than temporary gains. We need to focus more on Research and Development and state of the art manufacturing capabilities. The Government is fully committed to create an ecosystem for the domestic industry to rise and to provide a level playing field to all sectors of industry, both public and private.
Shri Manohar Parrikar is the Union Minister for Defence (Raksha Mantri) Government of
India (Featured in pib.nic.in)

‘Make in India’: A Lion’s Step to boost manufacturing Part-2

Favourable Milestones:
· India has already marked its presence as one of the fastest growing economies of the world.
· The country is expected to rank amongst the world’s top three growth economies and amongst the
top three manufacturing destinations by 2020.
· Favourable demographic dividends for the next 2-3 decades. Sustained availability of quality
workforce.
· The cost of manpower is relatively low as compared to other countries.
· Responsible business houses operating with credibility and professionalism.
· Strong consumerism in the domestic market.
· Strong technical and engineering capabilities backed by top-notch scientific and technical institutes.
· Well-regulated and stable financial markets open to foreign investors.
              The government has also pledged other focused approaches. Among other things, it intends to leverage the existing incentives/schemes to boost manufacturing. A technology acquisition and development fund has been proposed for the acquisition of appropriate technologies, the creation of a patent pool and the development of domestic manufacturing of equipment used for controlling pollution and reducing energy consumption, official sources said in New Delhi. This fund will also function as an autonomous patent pool and licensing agency. It will purchase intellectual
property rights from patent holders. The government has also to deal with an existing menace in bureaucratic functioning. The bureaucratic bottle necks that hinder ease of doing business need to be removed.
Training of Workforce:
The manufacturing sector cannot develop on its own without skilled labour force and in this context it is heartening to note the government’s initiatives for skill development. The creation of appropriate skill would definitely set rural migrants and the urban poor on a track towards inclusive growth. That would be a vital step for boosting manufacturing.
The New Ministry for Skill Development and Entrepreneurship has initiated the process of revising the National Policy on Skill Development. It is significant to note that under the Rural Development ministry, the Modi government has undertaken another new initiative for skill development under a recast programme named after BJP icon Pt. Deendayal Upadhyaya.
The new training programme envisages setting up of at least 1500 to 2000 training centres across the country and the entire project would result in an estimated expenditure of Rs 2000 crore and will be run on PPP model.
The new training programme would enable the youths to get jobs in demand-oriented markets like Spain, US, Japan, Russia, France, China, UK and West Asia. The government proposes to train about 3 lakh youths annually in first two years and by the end of 2017, it has set a target of reaching out to as many as 10 lakh rural youths.
Other steps:
As part of other steps, there is need to address other issues too like adequate development of basic
infrastructures – the roads and the power chiefly. For long, MNCs and software service companies have relished doing business in India due to a robust market with enhanced purchasing ability of the citizens but in terms of building up ‘manufacturing facilities’, India has been a case of also-ran. In this context it is worth pointing out that a strong political will, business-like approach of bureaucrats and the entrepreneurs, skilled of workforce along with investment friendly policies can unleash the nation’s potential. It is in this context the government’s efforts to develop an “industrial corridor” between Delhi and Mumbai needs to be appreciated.
          The government is also working on multi-pronged strategies like development of infrastructure linkages including pioneer plants, assured water supply, high capacity transportation and logistics facilities. Carrying on the good works on these fronts, the government also has begun the process of reviving five ailing Public Sector units (PSUs). Of the 11 PSUs, the government also feels that for six other units that needs to be closed, it is working on one-time settlement involving voluntary retirement scheme entailing a cost of Rs 1,000 crore VRS for employees.
The state-run units which have been identified by the government for revival include HMT Machine Tools Ltd; Heavy Engineering Corporation; NEPA Ltd; Nagaland Paper & Pulp Co Ltd; and Triveni Structurals.
*Shri Nirendra Dev is a Special Representative with The Statesman
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‘Make in India’: A Lion’s Step to boost manufacturing Part-1

This is a path-breaking venture. In fact, the vision statement of official website, www.makeinindia.gov.in commits to achieve for the country among other things an increase in manufacturing sector growth to 12-14 % per annum over the medium term, increase in the share of manufacturing in the country’s Gross Domestic Product from 16% to 25% by 2022 and importantly to create 100 million additional jobs by 2022 in the manufacturing sector alone. These are quite highly ambitious targets given the background that the manufacturing sector in India, which accounts for fourth-fifth of the total output, grew a meagre 3.3 per cent in January 2010.

Achievable Targets:
· Target of an increase in manufacturing sector growth to 12-14% per annum over the medium term.
· An increase in the share of manufacturing in the country’s Gross Domestic Product from 16% to 25% by 2022.
· To create 100 million additional jobs by 2022 in manufacturing sector.
· Creation of appropriate skill sets among rural migrants and the urban poor for inclusive growth.
· An increase in domestic value addition and technological depth in manufacturing.
· Enhancing the global competitiveness of the Indian manufacturing sector.
· Ensuring sustainability of growth, particularly with regard to environment.
Tapping Golden Opportunity:
Now let us look at the opportunity, the initiative can actually benefit India from the ground reality, especially when the Chinese manufacturing leaps have come under strain. There are already reports that several western manufacturing players operating in China want to move away from the world’s largest manufacturing hub. Analysts say, Chinese wages are going up and the labour market is getting more challenging and that is driving away investors. Thus companies with operating factories in China should look for other alternatives in the region, such as Vietnam, Indonesia and of course India. What are the advantages Indian business and especially manufacturing sector actually offer?
The country is expected to rank amongst the world’s top three growth economies and amongst the top three manufacturing destinations by as early as 2020. This is far more ambitious scene than promised about 2050 sometime back in the context of India’s role at the BRICS level. Indian manufacturing sector has positive elements like “favourable demographic dividends” for the next 2-3 decades. The sustained availability of quality workforce is another advantage.
Importantly again, in India, the cost of manpower is relatively low as compared to other countries. There are responsible business houses operating with credibility and professionalism. The country has a democratized polity vis-à-vis the rule of law and a strong consumerism intake ability of the domestic market.

Make In India

A Shield That Is Not Required: The ‘Make In India’ plan effectively bars Indian firms from competing with the best in the world by Nayan Chanda

          In a bid to boost domestic manufacturing through its ‘Make in India’ programme, the Narendra Modi government may have taken an inadvertent, but backward step. Its decision to oblige ministries to procure only locally-built electronic products not only marks a protectionist turn but also undermines the government’s avowed goal of fighting corruption and increasing transparency. Government procurement of goods and services worldwide accounts for nearly $1.7 trillion in revenues every year. Opening that market to international competition has been the goal of the WTO plurilateral Agreement on Government Procurement (GPA). Its 42-member countries, including the United States, the European Union, Canada and Japan, open their government procurement to bidding by fellow members. In 2010, several countries, including China and India, joined the groupas observers in preparation for full accession. China since, has begun negotiation to accede to the pact, but India has restricted its ministries to domestically-made electronic goods. Supporters of the move argue that the decision will boost domestic producers of electronic goods and encourage foreign firms to invest in Indian companies that are assured of a big government procurement market. Central government procurement is estimated to be $125 billion a year. It is most likely that India’s electronic goods manufacturers will be overwhelmed by large-scale orders and import foreign components to meet the orders. This may not be a bad outcome in itself, but shielding Indian manufacturers from foreign bidders will deprive India of accessing low-cost bids by international suppliers. It cannot but have a negative impact on efficiency and quality of Indian manufacturers. Indian companies know how opening the country to foreign competition has forced them to improve their product quality and enabled them to compete abroad.The move to bar foreign suppliers diminishes India’s earlier expressed interest in eventually acceding to the GPA. China’s accession would enable its companies to compete in the international market on a par with rivals in developed countries. In contrast, the Modi government’s protectionist approach will hamper efforts by Indian firms to bid for foreign contracts. A recent example is the US Buy America Act (2009) that stipulates an additional 2 per cent tax on bidders from nations that are not members of this pact. Another cost of this plan would be borne by Indian citizens, whose frustration with the corruption of the previous government inspired them to elect Modi. The ‘Buy India’ decision will likely perpetuate the opaque, corruption-ridden system that Modi had pledged to dismantle. Indeed, India’s biggest recent corruption scandals — including the 2G scam, the Commonwealth Games fiasco and revelations about illegal mining contracts — were products of a non-transparent system in which venal officials had a free hand. Joining the GPA and opening procurement to international bidding would have obliged India to undertake measures to enhance transparency and accountability. It would have signalled to the world that India is ready to join developed countries with what is supposed to be a clean, predictable and transparent system that rewards efficiency and quality and not mollycoddle national firms, however non-competitive they may be. The GPA accession requirements would have pushed India towards adopting good governance methods compliant with international norms, while ensuring that the government got the best available goods and services at competitive prices.India’s emerging protectionist stance on government procurement will raise fresh doubts among foreign investors about the Modi government’s commitment to economic reform and liberalisation. If Modi wants local firms to be the best in the global marketplace, he has to start by first allowing them to compete against the bestforeign firms inside India. Like charity, competition too should begin at home.(This story was published in BW | Businessworld Issue Dated 26-01-2015)