5 How Can The New Government Make India A Global Manufacturing Hub?
5 How Can The New Government Make India A Global Manufacturing Hub?
5 How Can The New Government Make India A Global Manufacturing Hub?
Introduction:
The first PM of India had referred the Industries of India as “temples of modern democracy” and
it can hardly be refuted today. The industries of India were one of the major entities to protect
the democracy of India, to check the growth of Neo-Imperialism that pervaded through the cold
war and thereby helped sustain the economy and civil libertarian democracy which was left
The nature of growth of industries has seen transformation with the changing global scenario and
domestic conditions traversing from a centralised economy to now a neo-liberal free trade
economy.
Today, India boasts of 3rd rank in world in GDP in PPP terms even ahead of Japan, a heavily
industrialised nation and indeed the accolades has to be given to the economic growth and
development brought through our industries which otherwise would not have been possible.
However, there stands in front of us our dreams – a dream to make India a prosperous and
vibrant country. A dream to reduce the gross inequality that exists today and dis-empowerment
that exists today traversing region, gender & economy. A dream to bring sustainable and
inclusive growth and a dream to make India a global superpower and feel proud of our nation.
This dream forces us to introspect the past failures and reinvigorate our actions and policies that
not only make India a GLOBAL MANUFACTURING HUB but also a Nation of Our dreams as
In this essay, we shall see a brief evolution of the growth of industries in India and the present
scenario. We shall then go through the various problems that hinder the growth of India as a
manufacturing nation. We shall analyse how certain policy measures have affected the right
policy climate and confidence of the private sector which has curtailed investments from both
foreign and domestic avenues. We shall then suggest reforms and steps that needs to be brought
in to bring the right policy climate which is stable, predictable, enabling and irreversible and not
only boosts investments in India but make India a favourable business venture while also
keeping in light of the fact that India is still a developing nation and the interests of the Nation
1900- 1950:
The Indigenous Industrial growth in India was in contestation with the British on-going Financial
Capitalism. Thus the growth was highly resource starved, with lack of Indian heavy industries
and dependency on foreign imports. It checked the growth of Indian ancillary industries bringing
The backwardness and dependency of Indian private industries was precisely the reason when in
the BOMBAY PLAN-1946 , the industrial class accepted a State-Controlled mixed economy
over private led in-order to boost rapid industrialisation and also to pre-empt socialism by
1950-1990:
The Industrial Policy of 1956 had highlighted the need for a mixed economy and the need for
heavy industries. The Nehru-Mahalanobis model of growth boosted the growth of heavy
enterprises in India and India witnessed the growth of steel plants, huge dams, manufacturing
units – automobiles, ports, airports etc. which was slowly but steadily transforming India.
ICOR(incremental capital output ratio) of industries in mid-1980s and the failure to make a
timely shift to a liberalised economy which was rightly tapped by the south-east Asian nations,
culminated in the economic crisis of 1991 and forced institutional changes in the economy that
The Present:
The situation of the economy as it exists today is that it stands on solid grounds with lots of
POSITIVES:
India today is called as the Back-Office of the world with our IT sector dominating the world.
There is huge skilled Labour resource and booming market for the world with the growing
capacity of the people brought in through various enabling social legislations and the growth and
development.
The proximity to both Africa and south-east Asia and strategic location of India in the Indian
Ocean offers great business opportunity for the business community of the world. The growing
partnerships and FTAs(free trade agreements) with ASEAN, SAARC provides added
opportunity with the India’s growing interest in Regional Comprehensive Economic Partnership
(RCEP) — a grouping led by the Association of South East Asian Nations (ASEAN) and is
There are more than 13 major ports and 200 small ports that can be effectively used as trans-
shipment hub. The government today is much better prepared and motivated to boost
investments in the country and it can be ascertained by the vigour that the government has
displayed in the current budget-2014 that aims at resolving tax disputes, and bringing a stable
The Forex-Reserve is more than $300 billion, the average growth in the 11th FYP was 7.9% even
after facing two economic crisis. The CAD(current account deficit) was as low as 1.7% of GDP
The inflation as is witnessed currently is below 5.9 of CPI which is historic low. The growing
infrastructure like roads, electricity, transport, shipment etc have just transformed the economy
These factors coupled with huge demographic dividend, huge availability of raw materials are
the prerequisite and essential conditions for any country to be a manufacturing hub and is readily
available in India.
NEGATIVES:
However there are lots of drawbacks that have hindered the actual realisation of the potential that
India is capable of. This can be enumerated by the fact that despite substantive liberalisation
since last 6 months the economy has not really caught up.
The Economic Survey Report shows :
The statistics of the last year shows negative growth for mining sector (-1.4%) and
This statistics do not augur well to drive investments and thereby boost manufacturing. It also
brings forth the picture that there is no one factor inhibiting growth and investment and the
Let’s try to analyse the same one by one and recommend for changes.
Institutional Drawbacks
Bureaucratic RED-TAPISM.
Over regulation and delays in procedural clearances of projects (ex. POSCO steel plant got
No single window clearances for projects- the NeGP(national e-governance plan is yet to
Various archaic legislations like LABOUR LAWS [Industrial disputes act ,1947; contract
labour(regulation and abolition) Act,1970; trade Unions Act,1929) which has substantial
repercussion on the efficiency of enterprises (only recently laws are being passed in
Land acquisition is still de-motivating even after the LARRA, 2013(land acquisition
resettlement and rehabilitation act) making the land even more costlier than before .
The FDI in India is still regulated in various sectors and comes with extreme safeguards.
The FDI in MBR is classic example where India hardly received any investment despite
making it 51%.
There has been increasing demand for full convertibility of rupee which calls for more FDI
There is increasing number of regulatory bodies and control from plethora of organisation
adding to the confusion and woes of investors. (SEBI, PFRDA, IRDA all work in financial
The issue of RBI to contain inflation as well as maintain growth and investment is facing
criticism from all sectors with demand for a separate DMO (debt management office).
The retrospective amendment of the Income Tax law,1961 in the Vodafone case has been
one prime concern of business class and foreign investment seeking for a stable and clear
policy guidelines (which are yet to be detailed in elaboration since the budget speech of
FM).
which includes the private sector as well as the civil society (it must be noted that USA has
Infrastructural Bottlenecks
rural sector.
The Japanese delegation to India a week ago highlighted the need for power and infrastructure to
motivate Japanese investment of committed $35 billion in india. It brings out the grim reality
The software companies (Infosys) have started their own solar projects to meet their power
The need for a cheap means of transport and swifter travel is long felt.
The National water ways are yet to be developed with only recently some action can be
perceived. However the long gestation period involved in such projects is hardly motivating.
NUCLEAR LIABILITY LAW, 2011 of India has been well detested by the foreign market
and despite of the waiver granted for nuclear trade, the projects related to nuclear power
The gas pricing policy though addresses but is yet to yield result.
Economic Bottlenecks
The investments and budget allocations have not grown in accordance with the demand for
various sectors esp. MSME (medium, small and micro enterprises) which though is
infrastructure and facilities. (The former Chief Economic Advisor, Rangarajan has termed it
to be the factor responsible for hospitals without doctors and schools without teachers—
thereby affecting facilities and services affecting the human growth and capacity.)
The expenditure is increasingly tilted towards subsidies which is reducing the capacity of
the government.
Fiscal consolidation and fiscal prudence not well adhered to with the FRBM act being
There is also the growing challenge from the FED-TAPERING of the USA which is going
International bottlenecks :
The growing pressure in different forums to open up the market and free trade as per WTO
The growing prowess of Chinese markets and products and the acceptance of the Free Trade
Area of the Asia-Pacific (FTAAP) in the on-going APEC (Asia pacific economic co-
USA demand to include HFC (hydrofluro carbon) in the Montreal protocol need to be
The recent SC verdict to ban mining in Goa has led to the reduction in exports of iron ore
The increasing protests against protests by NGO some even vested ones(IB report on
GREEN PEACE acting against the developmental interests of India) calls for a effective
The growing consensus on clean energy and reduction targets according to the KYOTO
protocol and India’s dependency on fossil fuels can act as antithetical to growth of India.
There is a need to balance growth with sustainable development and it calls for distinct and
clear policy guidelines which is acceptable to all and projects do not get stalled.
The growth of LWE(left wing extremism) in the eastern corridor has substantially deterred
investment in the resource rich region of Jharkhand, Bihar , Odisha, West Bengal etc.
The Manufacturing Policy of india, 2011 that aims to make the sectors GDP to 25%. It
envisages to set up NIMZ (National Investment and Manufacturing Zone) which needs to be
given fresh impetus. The growth of industrial Corridors like the DELHI-MUMBAI,
developed with world class facilities and infrastructure and transport with enabling reforms
like tax holidays, tax benefits etc that can spurt investments in these clusters and make it the
Digital India Programme has to be reinvigorated and has to be mandatorily introduced in all
governmental departments. It should aim at making online filing of projects, tracking and
monitoring of clearances. Aim to bring transparency in the system and reduce bureaucratic
red-tape and procedural delays. Aim to make single window clearances for all projects
Try to rationalise regulation by curbing the number of regulators and check victimisation of
separate the role of RBI and better inflation targeting and UFA (unified Financial Agency)
will bring coherence in regulation in financial field to check discrepancy and all also not
over-regulate things. It will enhance investors sentiments especially in the financial sector
right direction. It has set up dedicated committees to explain the policy, sort out ambiguity
in laws, and faster clearances of projects. This programme needs more boost and effectively
Ease of doing Business needs serious look at and normalised to yield effective results on the
ground.
Needs-based holism (reorganizing government around distinct client groups)- along with
allocating business to ministries, departments and state agencies which will drive efficiency
The Public Procurement Policy needs a revamp and should not bias towards PSUs and
should create healthy platform for private sector to participate through transparent
competition.
The Labour Reforms brought in forth by the government is a welcome change and is very
well hailed by the business community. Incentives must be provided to the states to bring in
such changes in their respective state laws as soon as possible. Desirable legislations can be
FDI in various sectors need to come with more liberalised norms to facilitate investment.
The infrastructure sector especially Roads and power sector needs to be addressed
immediately. Rationalising of the clauses of the Nuclear liability law can be done to boost
nuclear energy.
The Gas pricing need to be more lucrative to drive investment to boost exploration .
JNNSM(Jawaharlal Nehru National Solar mission) has to be taken in a more dedicated manner
and at a national scale that can reduce the prices of the solar panels and spurt demand and
investment.
The various archaic laws need to be done away with. The Productivity
Vodafone case, Nokia case do not augur well for the economy and retrospective taxation
Taxation related reforms need to be brought in fast. Efforts to bring GST (Goods and
services taxes) act should be made faster. As envisaged it can boost tax collection and
thereby the capacity of the government to fund more projects. It is like a FTA signed with
the Indian states and can substantially reduce time and cost by reducing multiple check posts
Issue of human resource also needs to be addressed. The recent trend of brain-drain from
India has to be checked by further investment in Research & Development and higher
education facilities in India. It is critical for the development of new innovations and
research and growth of technology and latest product which drive the world market. The
recent controversy related to autonomy of IITs/IIMs should be done away with as fast as
The Diplomatic efforts should be towards gaining more access to markets especially in areas
where India has competence. Look East policy being replaced with ACT EAST has
reinvigorated the sentiment of the private sector. The Use of strategic location can be
effectively communicated to develop India into a trans-shipment hub for other nations
especially to Africa and South-East Asia via India. The Use of Andaman & Nicobar to
provide container facilities and shipments in a regulated manner should be carried out.
ESDM(Engineering system design and manufacturing) in India of worth $400 billion. The
Policy needs more clarity as to how such investments are to be brought in and should also
There is also a need to tap the vast labour resource present in the Eastern Sector of India.
However incentives must be given to industries to set up their base. The Use of National
Water High Way -1 from Allahabad to Haldia for providing cheap transport to the port for
Railways budget 2015 offers great opportunity to transform growth and manufacturing in
Make in India campaign was launched in new Delhi by the Prime Minister Narendra Modi
on 25th of September in 2014. It is an initiative to make a call to the top business investors
all across the world (national or international) to invest in India. It is a big opportunity to
all the investors to set up their business (manufacturing, textiles, automobiles, production,
leather, etc) in any field in the country. This attractive plan has resourceful proposals for
Make in India campaign launched by the Indian government focuses on building the
effective physical infrastructure as well as improving the market of digital network in the
country to make it a global hub for business (ranging from satellites to submarines, cars to
softwares, pharmaceuticals to ports, paper to power, etc). The symbol (derived from
national emblem of India) of this initiative is a giant lion having many wheels (indicates
peaceful progress and way to the vibrant future). A giant walking lion with many wheels
indicates the courage, strength, tenacity and wisdom. The page of Make In India on the
Facebook has crossed more than 120K likes and its twitter followers are more than 13K
contains attractive proposals for top local and foreign companies. This campaign focuses
on creating number of valuable and honored jobs as well as skill enhancement in almost
25 sectors for improving the status of youths of the country. The sectors involved are
leather, media and entertainment, wellness, mining, tourism and hospitality, railways,
The successful implementation of this plan will help in the 100 smart cities project and
affordable housing in India. The main objective is to ensure solid growth and valuable
employment creation in the country with the help of top investors. It will benefit both
parties, the investors and our country. The government of India has created a dedicated
help team and an online portal (makeinindia.com) for the easy and effective
communication of investors. A dedicated cell is committed to answer all the queries from
Digital India project was launched by the Prime Minister Narendra Modi on 1st of July in 2015. It
is an effective scheme to transform India for better growth and development of the people and
country. Digital India week (from 1st July to 7th July) was inaugurated by the PM on Wednesday
in the presence of senior ministerial colleagues and leading companies CEOs. It aims to give India
a digital push for good governance and more jobs. The PM of India has tried his best towards
digitizing campaign for India in order to bridge the gap between government services and people.
Digitalisation was the need to be implemented in India for bright future and grow more than any
other developed country. Following are the benefits of digital India campaign:
It makes possible the implementation of digital locker system which in turn reduces paper work
by minimizing the usage of physical documents as well as enabling e-sharing through registered
repositories.
It is an effective online platform which may engage people in governance through various
It makes possible for people to submit their documents and certificates online anywhere which
It may ease the important health care services through e-Hospital system such as online
registration, taking doctor appointments, fee payment, online diagnostic tests, blood check-up,
etc.
It is a big platform which facilitates an efficient delivery of government or private services all
Bharat Net programe (a high-speed digital highway) will connect almost 250,000 gram
panchayats of country.
There is a plan of outsourcing policy also to help in the digital India initiative.
For better management of online services on mobile such as voice, data, multimedia, etc,
BSNL’s Next Generation Network will replace 30-year old telephone exchange.
National Centre for Flexible Electronics will help in the promotion of flexible electronics.
Large scale deployment of Wi-Fi hotspots has been planned by the BSNL all across the country.
There is a Broadband Highways in order to handle all the connectivity related issues.
Open access of broadband highways in all the cities, towns and villages will make possible the
FUTURE PROSPECTS:
World Bank Report of SOUTH ASIA ECONOMIC FOCUS REPORT, 2014 has highlighted fact
that SOUTHASIA has the potential to become the “MANUFACTURING HUB” of the world
especially when the East Asian Labour costs have increased and requires further competitive
boosting.
It also highlighted that India will claim ALMOST 80% of the SOUTH ASIAN REGION
OUTPUT.
The above report sums it all for the future prospects of India and the potential that it carries to be
not only the “BACK-OFFICE” of the world but also the “FACTORY OF THE WORLD” and
Another report of World Bank in 2015 related to Urbanisation challenges the common notion
that urbanisation leads to inequality rather stated that it provides more opportunity for lower
class to move into upper class and thereby reduces inequality and is especially true for the
SC/ST/OBCs. Thus manufacturing and urbanisation which are intertwined can lead to not only
CONCLUSION:
The world is eagerly awaiting to witness the rise of the “ASIAN ELEPHANT” and it is time to
prove them right. The vigour of the political class displayed by the new government to boost
manufacturing and growth along with the favourable global conditions augurs extremely well for
the rise of India. The favourable policy climate brought in by various legislations and the
improving economy of USA and Europe has brought in new prospects for the Indian
Manufacturing Industry.
However there is more to be done than said or spoken about. This favourable conditions has to
be conditioned with the strengths of India which is its cheap labour, skilled resource and huge
market coupled with dedicated and transparent administration. Good Governance has to be
brought in through a networked approach of Government, private sector and the civil society that
will facilitate and build trust and confidence essential with adequate checks and balances for any
It is only through dedicated and sustained efforts that India will attain “SWARAJ” in its true
sense and be not only the global manufacturing hub but also the “light of the world”.