Can We Make in India?

Prasanth Aby Thomas
Published: April 2015

The government’s ambitious project to bring manufacturing to India is commendable, but there are quite a few challenges ahead before it can become a reality.

makeRecently Prime Minister Narendra Modi had embarked on an ambitious and perhaps herculean project, to bring more manufacturing activity to India. This seems similar to what China undertook about a couple of decades ago, and has managed to have a positive result for the country. Interestingly the recent slowdown in the Chinese economy has prompted Beijing to come up with a recharging campaign, dubbed ‘Made in China’ – more on this later. While Modi’s initiative appears strategic and purposeful, analysts are wondering if India has what it takes to overcome the inevitable challenges in this route. One cannot deny the fact that Modi can generate a sense of enthusiasm among the masses. His event to launch ‘Make in India’ was yet another moment where he showed off his skill. Accompanied by the heavyweights from India’s corporate sector, and broadcasting it across the country and Indian missions abroad, the event did manage to catch the attention of the international community.

The government wants to make sure that the country becomes a place favorable for the manufacturing industry and steps that have already been taken include a dedicated cell to answer all queries from business entities. The administration has also made clear that it would closely keep track of all regulatory procedures to make things as simple as possible for the businesses.

However, the challenges that lie ahead of this venture are not minor. The first and most significant among them is creating a business-friendly environment. India is infamous for its red tape woes when it comes to approvals for new projects. New businesses, regardless of foreign or native origin will come up here only if the government can make sure that the red tapism is obliterated and procedures are made easier.

At times, the constraints are merely in acquiring land for setting up factories, as seen in the recent Tata manufacturing plant issue. Land acquisition laws need major reform if it should become easy for setting up factories. At the moment, it is tangled in a lot of complicated rules and clauses, just as the dusty old files stacked up in our government offices.

There should be more effort from the government policy side to discourage issues that affect competitiveness in the industry. A recent cause of concern for private companies in the country was uncertainties in the tax sector. Starting with the retrospective tax clause imposed on the British company Vodafone and then that on Nokia, businesses here are wary of changing laws that are unpredictable.

A major disappointment after Modi took the office also has to do with the tax sector. It was widely expected that the Modi government would implement the much delayed Goods and Services Tax (GST), making India a more attractive market. But unfortunately, up to the time this article is being written, no decision on the matter has been reached.

The government should also be able to give more focus to the small and medium enterprises in India. There are a lot of innovative business ventures in this sector, but they often fail either due to lack of funding, problematic government regulations or lack of proper guidance at the right time. In fact, India has a number of ambitious youngsters who want to become entrepreneurs, but hesitate only because of the unfriendly business climate here. A strong push to encourage these people would revitalize our manufacturing sector and ensure that the benefits are taken not just by the big corporates, but also by anyone who has the will and aptitude for entrepreneurship.

As mentioned earlier, China has recently started a ‘Made in China’ campaign, coinciding with Modi’s ‘Make in India’ venture. China’s timing of the project can only be seen as a challenge to the Indian administration, one that would no doubt be reviewed with utmost care, and would create quite a bit of competition between the Asian giants. The Modi government, thus, not only have to make the situation better within the country, but also make sure that it scores better than the Chinese government, which already has a good history being the manufacturing hub, to attract foreign companies to here.

India must also encourage high-tech imports, research and development (R&D) to upgrade ‘Make in India’ and give edge-to-edge competition to the Chinese counterpart’s campaign. To be competitive in today’s world, being a manufacturer of designs that are made outside the country would not be enough, we need to be innovative enough to be able to design and manufacture with in India.

To do so, India has to be better prepared and motivated to do world class R&D. The government must ensure that it provides platform for such research and development by increasing the grants and funding that is available for this sector. Universities and educational institutions should play a major role here, by becoming centres of learning, innovation and research.

Regardless of all these challenges, Modi’s vision to start this venture deserves appreciation, at least on the point that there is a clear idea which way we should be heading. Now, if the rest of the problems are solved, we can safely march towards a better economy and life.