DETAILS: Co-Authors
I.
Name
: Mr. Prashant Kumar Mishra
Designation
: Indian Administrative Service (Probationer)
Address
: Lal Bahadur Shastri National Academy of Administration,
Mussoorie, Uttarakhand.
Contact Number
: 9167625897
Email Id
: shant.mishra@gmail.com
II.
Name
: Ms. Balashri S. Jalgar
Designation
: Advocate
Address
: 538/D, Sector No. 3, Karanjimath Road,
Shiva Basava Nagar, Belgaum, Karnataka
Contact Number
: 9769881545
Email Id
: jalgar.balashri@gmail.com
Word count
:
BIOGRAPHY
Prashant Kumar Mishra
B.A. LL. B. (Hons.)
IAS Probationer, 2014 Batch, Karnataka Cadre
Mr. Prashant Kumar Mishra is a law graduate from Gujarat National Law University,
Gandhinagar. He practised as an Advocate in Bombay High Court before getting
selected for prestigious IAS in the year 2014.
He is at present completing his training for IAS and will be posted for district training
in June, 2015. His areas of interest include public policy and commercial laws.
Balashri Shankar Jalgar
B. Com. LL. B. (Hons.)
Advocate, Karnataka
Ms. Balashri Jalgar graduated from Gujarat National Law University, Gandhinagar in
the year 2011. She is currently having an independent legal practice in various legal
forums in the state of Karnataka. She is also a qualified Company Secretary. Her
area of interest is corporate and commercial laws.
Ms. Jalgar has published various articles in the journals of national repute. She has
presented research papers at various national and international conferences.
Make in India vis-a-vis India’s Manufacturing Sector
Introduction:
Make in India is a new approach introduced by the present government to make
India a manufacturing hub. Manufacturing industry is significant importance for the
development of any country. Developing countries like India depend largely on
manufacturing sector for growth and employment. Indian economy which is
traditionally dependent on agriculture is taking big leaps in promoting manufacturing
sector.
The objective of the mega programme is to ensure that manufacturing sector which
contributes around 15% of the country’s Gross Domestic Products is increased to
25% in next few years. This initiative would help in increasing manufacturing in the
country which in turn would lead to employment generation in secondary sector and
would provide more purchasing power in the people’s hand.
It involves new initiatives to facilitate investment for innovation and building best in
class manufacturing infrastructure. Major boost in infrastructure and innovation is
required. An investor friendly IPR regime will be put in place for encouraging
innovation in manufacturing sector. Tax concessions and FDI friendly systems would
be put in place. Government of India is determined on reaping demographic dividend
for which major thrust is on skill development. With an estimated 250 million people
joining Indian labour force over the next 15 years, it is important that skill
development initiative is followed in full earnest. Work on mapping for assessing skill
manpower demand for specific sectors in going on. There has to be synchronization
between the objectives of the government, academic world, industry and job seekers
for ensuring that industry specific skills are imparted.
But there are few hurdles like restrictive labour laws, abundance of unskilled
workforce over skilled workforce, lack of technology innovations are some of the
factors contributing to this. This article takes a look at what has been done so far and
what need more to be done to give much needed impetus to the sector.
Objective of Make in India
India’s manufacturing has been a puzzle. Since the late 1970s, even as its peers in
East Asia have greatly diversified into manufacturing, the sector’s share has
stagnated at around 15 per cent of the GDP. It is not that past governments have not
tried to revive manufacturing. For decades now, not just the Centre, the states too
have had an industrial policy. At some time or the other, many states have even
pursued it vigorously. Some of these policies have also been well designed. But the
results have been universally disappointing.
The revival of our stagnant manufacturing sector is arguably the biggest economic
challenge India is facing. Unfortunately, the problem is complex and intractable,
demanding several, often diffuse, sets of solutions. Hence Make in India initiative
aims at the initiative to focus on 25 sectors of the economy for job creation and skill
enhancement.
Some
of
these
sectors
are
automobiles,
chemicals,
IT,
pharmaceuticals, textiles, ports, aviation, leather, tourism and hospitality, wellness,
railways, auto components, design manufacturing, renewable energy, mining, biotechnology and electronics. The initiative hopes to increase GDP growth and tax
revenue. The initiative also aims at high quality standard. 1
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
creates more purchasing power.
The mood of gloom prevails among India’s business community in the last few years,
due to lack of clarity on policy issues. Businessmen generally leave India to set up
business elsewhere. No businessmen should leave the country is another major
objective behind Make in India.
1
Focus on 'Make in India'", Business Standard. 25 September 2014; 27 February 2015
The need to raise the global competitiveness of the Indian manufacturing sector is
imperative for the country’s long term-growth. The National Manufacturing Policy is
by far the most comprehensive and significant policy initiative taken by the
Government. The policy is the first of its kind for the manufacturing sector as it
addresses areas of regulation, infrastructure, skill development, technology,
availability of finance, exit mechanism and other pertinent factors related to the
growth of the sector.
The vision of Make in India initiative is to:

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.
Make in India focuses on FDI — First Develop India is a signal to the companies that
government should create an enabling environment for investment, which can be
expected they would reciprocate by committing their energies and investments to the
country. 2
Challenges in Manufacturing Sector
Make in India initiative has listed down various strengths in the manufacturing sector
of India:
2
PM launches “Make in India” global initiative, http://pmindia.gov.in/en/news_updates/pm-launches-make-inindia-global-initiative/

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
Though the strength is perceptible and sound still there are numerous challenges
that inhibit manufacturing sector. Sorely deficient infrastructure, inhospitable
business environment, corruption, poor quality of human resources, problems with
access to timely and adequate credit, difficulty of getting land, high burden of
taxation and restrictive labour regulations would figure prominently on any list.
In an ideal world, public policy would be tailored to address all these problems. But in
the real world, governments have limited resources and face serious administrative
and political limitations. Further, many of these are intimately linked to the country’s
stage of development.
Infrastructure tops the list of most surveys on doing business in India. In particular,
chronic deficiencies in transportation and power impose prohibitive costs and lower
business competitiveness. Multiple enterprise surveys have identified electricity as
the biggest constraint. Further, India lags behind on every measure of transport
connectivity. Though there have been considerable recent successes spurred by
private participation, much needs to be done.
Credit access for small and medium enterprises (SMEs) is a concern even in
developed economies. Interestingly, among the ten parameters in the World Bank’s
Doing Business Survey (DBS), India scores best on access to credit, better than its
emerging market peers. Other surveys also confirm this. The more important
concern would be the undoubted difficulties faced by informal firms in accessing
credit.
Scarcity of land and skilled labour have already started troubling businesses, though
it is difficult to describe them as binding constraints. Consider land where over
the
last decade, several states have generously allocated massive amounts of land,
virtually free of cost, for the establishment of manufacturing facilities. But, pointing to
constraints that go beyond land, only a minuscule proportion of these investments
have materialised.
Our poor human resource quality - 70 per cent of the workforce is educated up to the
primary level or lower, though only 10 per cent has received some skill training is
likely to emerge as a constraint in the days ahead. A more sustainable strategy to
bridge the “employability deficit” is to fix the quality of school education.
The regulatory hurdles are equally onerous. India has some of the most restrictive
labour regulations. They not only impose prohibitive costs on employers but also an
unbearable burden on employees, thereby forcing both sides into informal
contracting.
High taxes erode business competitiveness. A multiplicity of indirect taxes raises
both the tax burden as well as administration costs. In any case, our less-thanencouraging experience with tax concessions, the core of numerous Central and
state industrial policies over the years, does not lend credence to the view that
taxation costs are a binding constraint.
Labour taxes, infrastructure, and the business environment appear to be binding
constraints on the revival of India’s manufacturing sector. However, given the huge
size and vast diversity of the country, a diagnostic for each state may be a more
prudent strategy. In any case, instead of big-bang reforms, sustained efforts in
multiple directions, which cumulatively generate large effects, are required to relax
these constraints so that we can realise the goal of making in India.
Incentives for Make in India initiative
Under the initiative, brochures on the 25 sectors and a web portal were released.
Before the initiative was launched, foreign equity caps in various sectors had been
relaxed. The application for licences was made available online. The validity of
licenses was increased to 3 years. Various other norms and procedures were also
relaxed.
In August 2014, the Cabinet of India allowed 49% foreign direct investment (FDI) in
the defence
sector and
100%
in railways infrastructure.
The
defence
sector
previously allowed 26% FDI and FDI was not allowed in railways. This was in hope
of bringing down the military imports of India. Earlier, one Indian company would
have held the 51% stake, this was changed so that multiple companies could hold
the 51%. Out of 25 sectors, except Space(74%), Defence(49%) and News
Media(26%), 100% FDI is allowed in rest of sectors.
Further simplification of regulatory environments in the following ways will be done
by the government:

Timelines will be defined for all clearances.

Central & State governments to provide exemptions from rules and regulations
related to labour, environment etc. subject to the fulfilment of certain conditions.

Mechanisms for the cooperation of public or private institutions with government
inspection services under the overall control of statutory authorities to be
developed.

Process of clearances by centre and state authorities to be progressively webenabled.

A combined application form and a common register to be developed.

The submission of multiple returns for different departments will be replaced by
one simplified monthly/quarterly return.

A single window clearance for units in NIMZ.

Ease in environment approvals.
Additionally sector wise incentives are:
Transfer of assets:

In case a unit is declared sick, the transfer of assets will be facilitated by the
company managing the affairs of NIMZ.

Relief from capital gains tax on the sale of plant and machinery of a unit located
in NIMZ will be granted in case of the re-investment of sale consideration within a
period of 3 years for purchase of new plant and machinery in any other unit
located in the same or another NIMZ.
Green technology & practices:

5% interest in reimbursement & 10% capital subsidy for the production of
equipment/machines/devices
for
controlling
pollution,
reducing
energy
consumption and water conservation.

A grant of 25% to SMEs for expenditure incurred on audit subject to a
maximum of INR 1,00,000.

A 10% one-time capital subsidy for units practising zero water discharge.

A rebate on water cess for setting up wastewater recycling facilities.

Incentives for renewable energy under the existing schemes.

An incentive of INR 2,00,000 for all buildings which obtain a green rating
under the IGBC/LEED or GRIHA systems.
Technology development:

Incentives for the production of equipment/machines/devices for controlling
pollution, reducing energy consumption and water conservation.

SMEs will be given access to the patent pool and/or part of reimbursement of
technology acquisition costs up to a maximum of INR 20,00,000 for the
purpose of acquiring appropriate technologies up to a maximum of 5 years.
Special benefits to SMEs:

Rollover relief from long term capital gains tax to individuals on sale of
residential property in case of re-investment of sale consideration.

A tax pass-through status for venture capital funds with a focus on SMEs in
the manufacturing sector.

Liberalization of RBI norms for banks investing in venture capital funds with a
focus on SMEs, in consultation with RBI.

The liberalization of IRDA guidelines to provide for investments by insurance
companies.

The inclusion of lending to SMEs in manufacturing as part of priority sector
lending.

Easier access to bank finance through appropriate bank lending norms.

The setting up of a stock exchange for SMEs.

Service entity for the collection and payment of statutory dues of SMEs.
Government procurement:

The policy will also consider use of public procurement with stipulation of local
value addition in specified sectors. These include areas of critical
technologies such as solar energy equipment, electronic hardware, fuel
efficient transport equipment, IT based security systems, power, roads &
highways, railways, aviation and ports.
Industrial training & skill upgradation measures:


Skill-building among large numbers of a minimally educated workforce.
Relevant vocational and skill training through establishment of ITI in PPP
mode.


Specialized skill development through the establishment of polytechnics.
Establishment of instructors’ training centre in each NIMZ.
Exit mechanism:

It envisages an alternate exit mechanism through job loss policy and a sinking
fund or a combination of both.
Under foreign policy investment, domestic manufacturing will be the core and central
tenet as that puts job creation or employment generation at the top of the objectives
in inviting foreign investment to the country. Our foreign investment policy on efficient
and competitive domestic manufacturing will serve multiple objectives. First and
foremost, it will enhance job opportunities within the country; second, it will minimise
the imports of such products into the country, thereby mitigating the pressure on our
trade deficit; third, in the long run, if not in the near-term, it will help augment and
diversify our exports from the manufacturing sector; fourth, it will help in bringing
latest technologies into the country and lastly, such domestic manufacturing will help
minimize some of the trade frictions we have with other countries. The importance of
domestic manufacturing with foreign investment in reducing trade frictions with other
countries is at present ignored or underestimated. As a corollary, the focus on worldclass domestic manufacturing may also be the best way to cope with globalisation
and to maximise the possible benefits from it. The size of our domestic market and
the abundant availability of skilled and technical manpower at low cost is a leverage
that we need to put to use consciously to induce foreign investors to make India as a
manufacturing hub in their operations. If there is one lesson we can learn from the
Chinese, it is how the size of the domestic market and the availability of skilled and
disciplined manpower could be put to effective use for the industrial and
technological development of the country with foreign investment.
Also, National Investment and Manufacturing Zones are being conceived as giant
industrial greenfield townships to promote world-class manufacturing activities. The
central government will be responsible for bearing the cost of master planning,
improving/providing external physical infrastructure linkages including rail, road,
ports, airports and telecom, providing institutional infrastructure for productivity, skill
development and the promotion of domestic and global investments. Further the
identification of land will be undertaken by state governments. State governments
will be responsible for water requirement, power connectivity, physical infrastructure,
utility linkages, environmental impact studies and bearing the cost of resettlement
and rehabilitation packages for the owners of acquired land. The state government
will also play a role in its acquisition if necessary.
Make in India: Steps for success
There have been procedural delays, tax hurdles and complications and numerous
factors which are hindering the manufacturing sector. To achieve progress and
realise the dream of Make in India soon, following steps are essential:
Cutting down on procedural delay:
For making India an investment hub, the first and foremost importance step would be
to create an efficient administrative machinery which would cut down on delays in
project clearances. Economists say that India has been very stringent when it comes
to giving procedural and regulatory clearances. Besides a time bound clearance from
all regulatory authority would create a conducive environment for business. Delay in
getting regulatory clearances lead to rise in cost of production.
Tax sops & focus on innovation:
Economists have noted that with the globalization becoming a reality, Indian
manufacturers will have to compete with the best and cheapest the rest of the world
has to offer even in the domestic market. They urged for providing tax concessions
to any industry which would set up manufacturing facility in the country. Besides a
critical aspect is the country’s huge small and medium-sized industries which could
play a big role in making the country take the next big leap in manufacturing.
Skill development & thrust on education:
There has to be synchronization between the objectives of the government,
academic world, industry and job seekers for ensuring that industry specific skills are
imparted. Experts argue that the country needs to focus on quality education not just
skill development. In the last couple of years, National Skill Development Agency
(NSDA) initiated work on creating a labour market information system which would
help industry sourcing their manpower requirement. After getting information on
labour market, the government would provide accreditation to manpower agencies
so that the industry can access information on the manpower requirement.
Reforms in the labour laws:
Besides the skill development, labour law flexibility is a key element for the success
of this campaign for increasing manufacturing in the country. Economists say that
“labour law flexibility does not imply ‘hire and fire’ policy, it’s about providing a sound
social safety net to workers.” Experts say that the country has some of the most
comprehensive labour laws at the same time a large parts of working population do
not have access to social security net. Prime Minister had stressed the faster the
bulk of Indian middle class increases, the faster people move from poverty to middle
class, the faster will be their conversion into a favourable market for the world. He
said his government's focus will be on physical infrastructure creation as well as
creating a digital network for making India a hub for global manufacturing of goods
ranging from cars to softwares, satellites to submarines and paper to power. A
leading Economist said the big challenge for ‘Make in India’ campaign would face
constant comparison with China's 'Made in China' campaign. The China launched
the campaign at the same day as India seeking to retain its manufacturing prowess.
Demographic Dividend:
Notwithstanding the challenges faced in making India a manufacturing hub, the
country is poised to reap rich dividend for being one of the youngest nations in the
world. According to reports by 2020, India is set to become the world’s youngest
country with 64% of its population in the working age group. With the Western
countries, Japan and even China aging, this demographic potential offers India and
its growing economy an edge that economists believe could add a significant 2% to
the GDP growth rate annually. Prime Minister also had said that India is the only
country in the world which offers the unique combination of democracy, demography,
and demand from a rising middle class. Besides, the campaign would ensure closer
centre and states relations for promoting India as a global manufacturing hub.
Conclusion
Make in India is not a one stop solution for all the problem facing the Indian economy
but it is certainly a giant step in making India a globally competitive manufacturing
hub. However for this it is imperative that some essential criteria are fulfilled in right
earnest. To start with, infrastructure execution in India is abysmal, it needs to be
corrected. India will not be able to realise her true potential in manufacturing unless
there is tangible change in mindset.
REFERENCES
1. “Make in India: Turning vision into reality”; BCG-CII initiative, CII 13th
Manufacturing Summit, 2014.
2. “How can the New Government make India a Global Manufacturing Hub”,
CRISIL Young Thought Leader.
3. www.mea.gov.in/Portal/.../3174_Questions_on_Make_in_India.pdf, MEA take
on Make in India Initiative
4. Govt.
of
India
websites
viz.
employmentnews.gov.in/webmake.pdf;
www.investindia.gov.in/InvestIndia_Brochure_web.pdf; www.makeinindia.com