Modi’s Make In India Suffers From Inaction

By Nantoo Banerjee

Prime Minister Narendra Modi’s government does not seem to be serious about making things in India, for India and for export. There is nothing particular in the NDA government’s first full budget that carries specific agenda to push structured production in India to substitute imports and create surplus for exports the way China first pursued such an objective through the 1990s and followed it over in the last 14 years of this century. China asked foreign companies and investors to produce in China through a joint venture route with the state participating in equity mostly in kind through land allotment and labour deployment. China insisted on board level berth, technology transfer over a period of time and a minimum operational schedule. The original Chinese model for make-in-China programme may have little relevance to the present day business situation in democratic India, but the government does not seem to have a specific programme to boost large production of goods and services in India. At least, the 2015-16 budget that seeks to raise Rs.23,300 crore from duties and levies does not provide any special push, specific incentives to all or select foreign investors to produce varieties of products in India at globally competitive quality and prices to tap the local market as well as to export.

The key feature of the 2015-16 budget has a section under ‘Make in India’ that carries as many as 15 provisions. But, they lack the strength to make the slogan inevitable for exporters to India to make things in the country – from ultimate consumer goods to inputs and basic items. India’s current level of imports is close to half-a-trillion dollars, or around $40 billion per month. The annual trade gap is about $150 billion. The monthly export earning comes close to $27 billion. Energy, comprising oil, gas, coal, etc., is the largest single item of India’s import. With time, this will only grow. It should not pose a problem for the country as long as it is able to organize its manufacturing sector, becoming more and more export led to pay for imports and earn reasonable surplus. The 2015-16 ‘Make in India’ budget provisions do not force such a situation. At best, they beat around the bush.

The first of the 15 provisions under the ‘Make in India’ slab points at ‘revival of growth and promotion of domestic manufacturing for job creation.’ The focus is rather subdued. It lacks the push. It is too wordy, unclear and fails to identify areas. Manufacturing for job creation is an early 20th century socialist concept. Massive expansion of Maruti-Suzuki in India through the ‘90s and over the last 14 years was not primarily aimed at job creation though it led to generation of large employment, skill development in a host of areas, servicing and marketing. Maruti-Suzuki became the country’s biggest car manufacturer, exporter, auto ancillary developer, metal, plastic and automotive tyre consumer, etc. Its singular success led to the growth of a host of other manufacturers in the automobile industry. The next year’s budget lacks the motivation to create such enterprises across industry.

Other provisions in the group of 15 are as vague as the first one. They include things like tax “pass through” to investment funds; rationalization of capital gains regime “for the sponsors exiting at the time of listing of units of REITs and InvITs”; deferment of GAAR (general anti-avoidance rule) for two years; additional investment allowance and depreciation to new units in notified backward areas in Telengana and Andhra Pradesh; lower income-tax on royalty and technical fees; lower customs duty on 22 items; lower excise duty on chassis for ambulance. These provisions are covered by some 19 steps of “ease of doing business”. Too many words, too many provisions make the document an uneasy reading – an art that has been mastered by bureaucrats over the years. Neither Finance Minister Arun Jaitley, a legal eagle, nor Prime Minister Narendra Modi, boasting a humble down-to-earth background, seemed to be active to prevent the brilliantly simple made-in-India concept from getting drowned in the focus-fee bureaucratic wordy cob-webs.

Make-in-India is a simple concept. It would appear to be like the ‘make-in-China’ concept in the early 1990s. With time, China changed the way to make itself the world’s largest manufacturing and export hub supported by a massive infrastructure built speedily over the years that boasts some seven of the world’s best ports and docks, a massive shipping enterprise, banking and insurance network and the world’s largest bankcard or payment provider, ChinaPay. In 20 years, the make-in-China drive, made the country surpass Japan to emerge as the world’s second largest economy, the largest exporter and the largest hoarder of US dollars outside the United States. It is already one of the world’s top military powers with massive state-owned manufacturing facility in the country. The $2.1-trillion Indian economy, boasting the world’s second largest population, is the world’s 10th largest. The country will need a big growth push in the coming years with focus on building a world class manufacturing base and infrastructure facility. Few will disagree that its budget 2015-16 don’t quite fit the bill despite the fact that the entire political executive team, including the prime minister and finance minister, is keen to see India move through a fast growth track. (IPA Service)

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