ROADBLOCKS IN MAKE IN INDIA DRIVE
Road Blocks in Make In India Drive
- India has skill, abundant labour and, to top it all, English-speaking people. Yet, why has the country not seen FDI (foreign direct investment) gushing into it?
- Hurdles are aplenty for an overseas investor ‘to make in India’. First of all, the country requires an ecosystem that fosters FDI. One Vodafone case is enough to make oversees investors shy away. In any situation, the country’s interest needs to be protected.
- Let alone for overseas investors, making in India has become a pipedream even for Indian companies. Land has escalated into a major piece of dissuading force for India Inc.
- The abortive foray by the Tatas to make Nano cars in West Bengal, the escalating tension over land acquisition by SEZs (special economic zones) and the like have ensured that Corporate India thinks many times over before venturing into any greenfield project.
- After laws and land, labour is an important clog in the wheel. In an increasingly globalised economy, jobs tend to move towards one direction, that is, where the labour is cheap.
- If China could do, why can’t India? This question has often been posed in many a discussion forum. With a command structure, China could offer a ‘friendly labour ecosystem’ to overseas investors. Being a democratic nation, India is differently positioned vis-à-vis the labour.
- Archaic labour laws have proved a strong deterrent for any overseas company to set shop in India. Much of these have spawned inefficiency in the economy. From labour rights to human resource management, the employer-employee relationship has acquired a new meaning and definition in the context of a global village.
- Tree-trade pacts becoming impediments in Prime Minister Modi’s Make in India initiative, as certain sectors such as paper industry are feeling the heat of the cheap imports of key raw materials enabled by these trade pacts.
- This is happening at a time when the country’s green laws bar paper manufacturers from taking up farm forestry projects for accessing the same raw materials indigenously.
- Allowing commercial forestry on dry and wastelands, giving incentives to industry to develop forestry mechanisms and incentives for developing fallow land are the need of the hour. ITC has spearheaded a large-scale afforestation programme, which covers over two lakh hectares, creating nearly 90 million person days of employment.
- However, the furniture segment is slowly shrinking due to raw material shortage. This is also impacting India’s skilled artisans and craftsmen and the country is now importing not only the basic raw material but finished products too.
- India has to conceive a `Stay in India’ package to retain talent. Microsoft, Google, Apple and others are what they are today because of no mean contributions by Indians in those firms.
Other steps needed to be taken :
- Smart Controls: Trading or imports of goods for mass consumption especially in the food, consumer goods, electrical products and light engineering goods needs to be controlled. Control cannot be physical barriers but smart barriers. A smart barrier for food, particularly processed imported food flooding our markets, is to have strong regulations on quality clearances. Chinese chocolates and candies flood Indian markets since importers presently do not have to take FDA permission.
- Smartcities and Manufacturing clusters: Smart cities need to be combined with manufacturing clusters in a manner that creates liveable places for a workforce
- The trouble with the government policy on Special Economic Zones was that it allowed builders and developers to create these islands which did not have all the components of an ecosystem.
- Smart Taxation : Manufacturing constitutes just 16 per cent of the GDP but pays more excise duty than services which constitutes 60 per cent of GDP, and pays service taxes. Excise duty exemptions are region-specific or state benefits granted by the Centre.
- The trouble with an excise tax holiday is that it distorts the manufacturing landscape. Entrepreneurs use the tax benefit region for packaging and shipping and wait for the next region to be granted the benefit for planning their investment. This does not help anybody and has to change.
- Excise benefits need to be linked to the number of jobs created as a percentage of turnover and should not be region-specific. This would level the playing field and at the same time allow labour intensive SMEs to avail of these benefits.
- High Fright rates: Another problem that haunt manufacturing sector is high freight rates. Freight rates cannot be raised endlessly by railways to subsidize passenger fares. Manufacturing sector and the locations of manufacturing units is highly dependent on the cost of logistics.