Make In India needs strategic planning

Frank F. Islam Prime Minister Narendra Modi set out an ambitious agenda when he announced his administration’s Make in India programme in September 2014. The centerpiece of that programme is the National Manufacturing Policy, the purpose of which is to make India a global manufacturing hub. Its intent is to increase manufacturing’s share of the country’s GDP from 16 per cent to 25 per cent by 2022 and to create 100 million additional jobs by that year. The policy sets out 11 areas of concentration, including focus sectors, easing of regulatory environments and acquisition of technology and development. It identifies 25 specific focus sectors, including automobiles, defence equipment and medical technology. As Prime Minister Modi reported during the “Make in India week” in February 2016, progress had been made on the manufacturing agenda. Growth in manufacturing’s share of the GDP and employment since the introduction of the programme, however, has been quite sluggish. That is why, in 2017, Parliament’s Standing Committee on Commerce issued a report questioning the impact and implementation of the Make in India initiative. The government’s Department of Industrial Policy and Promotion responded by citing a number of measures that had been taken. According to The Hindu newspaper, the committee stated that many of the measures were more than two years old and urged “the department to take effective steps to implement initiatives such as Make in India in a ‘more robust manner’…” More recently, in mid-March, during a visit to India, American economist and Nobel Prize winner Paul Krugman called attention to the need for India to hit manufacturing with a much bigger stick. After lauding India for its significant economic growth and becoming a better place to do business, Krugman observed: “India’s lack in the manufacturing sector could work against it, as it doesn’t have the jobs essential to sustain the projected growth in demography. You have to find jobs for people.” As a knowledgeable Indian-American business person who participated in the India-U.S. CEO Roundtable convened during President Barack Obama’s Republic Day visit in 2015, I concur completely with the need to intensify India’s manufacturing efforts. The right way to do that, in my opinion, is to create a manufacturing strategic plan for the nation and its states. The Make in India’s National Manufacturing Policy outlines a broad range of initiatives covering a number of diffuse and diverse areas. A policy is not a plan. It is a prescription that must be targeted to achieve the desired end goals — in this instance, manufacturing being 25 per cent of the GDP and 100 million new jobs by 2022. A well-constructed strategic plan provides the means for that targeting. It translates policy into action with a laser-beam focus. It delivers the keys to the kingdom. It identifies: * Key Result Areas: The few areas (3-7) in which strategic action programmes must be developed and implemented effectively and efficiently. * Key Drivers: The critical factors or sources of competitive advantage that can be leveraged for success. * Key Partners: The top three allies who can contribute the most to achieving the plan’s goals. The Make in India Manufacturing Strategic Plan should be crafted by an independent commission comprised of a representative cross-section of business, academic, government and other leaders with appropriate experience and expertise. The commission can draw upon the National Manufacturing Policy and multiple other studies and position papers as inputs for the plan. My quick review of a variety of source material suggests the following as potential items for inclusion in that plan that might have great effect for simultaneously driving GDP growth and job creation: * Key Result Area: Infrastructure Development. India’s infrastructure problems appear consistently as the most important factor that is retarding its growth potential. * Key Driver: Automobile Manufacturing. The National Manufacturing Policy cites automobiles as an area in which India already has a competitive advantage that can be built upon. * Key Partner: The United States. These “indispensable partners” have just begun to scratch the surface of trade arrangements and exchanges that can be mutually beneficial. The Make in India programme is at a pivot point. The McKinsey Global Institute in an August 2016 report titled “India’s Ascent: Five Opportunities for Growth and Transformation”, observed: “India’s appeal to potential investors will be more than just its low-cost labour: manufacturers there are building competitive businesses to tap into the large and growing local market. Further reforms and public infrastructure investments could make it easier for all types of manufacturing.” India continues its ascent, but not as quickly as intended. A Make in India Manufacturing Strategic Plan will kick on the after-burners and accelerate that ascent. Putting the right plan in place and implementing it properly should make the sky the limit for the Indian economy and the Indian people.]]>

DOING BUSINESS IN INDIA, EASIER BUT NOT AS EASY

DOING BUSINESS IN INDIA MAY BE EASIER BUT NOT AS EASY AS IT SHOULD BE The chest thumping that accompanied the Modi government’s celebration of India having moved up 30 positions on the World Bank’s Doing Business 2018 rankings was understandable because it came as a silver lining to what has generally been dismal economic news—a slowdown, sluggish job creation and dwindling investment, particularly in manufacturing. Then there were the controversies surrounding a hasty demonetisation policy and the introduction of a new bug-ridden goods and services tax system. In the context of these depressants, a 30-position gain on a survey as credible as World Bank’s may provide good reason for elation. It is also good reason to feel quite chuffed about. But India’s position on the ranking of 190 countries has to be viewed in another context—that of relativity. Its rank on that list does not owe only to how it fared on the 10 parameters or topics that World Bank employs to arrive at its rankings but equally on how others fared on them. World Bank’s Doing Business 2018 rankings are its 15th annual survey and is based on surveys of entrepreneurs in each country to gauge their assessment on aspects that include the ease with which one can start a business, get credit, register property, pay taxes, enforce contracts, and so on. Most of these are affected by reforms and changes in rules and law that governments introduce and it is to India’s credit that some of the changes brought about by Prime Minister Narendra Modi’s government have had their impact on how India has fared in the survey. Programmes such as the Make In India campaign to encourage foreign and domestic investment in manufacturing by simplifying processes, StartupIndia to help facilitate setting up of small businesses, or even Skill India, which aims at equipping India’s vast population of youth with employable skills, are some initiatives that may have had an impact on how India fared on the World Bank rankings. However, India’s performance in the survey has to be viewed in a context that is relative to other economies. At No. 100, India is a market where it is easier to do business than it is in tiny countries such as Fiji and Haiti, less developed countries such as Namibia, Nigeria, Nepal, or Sri Lanka, and obviously risky destinations such as the West Bank & Gaza, Iran and Iraq. India could perhaps take credit for the fact that the ranking places it higher than it does Brazil, which at 125 is, like India, a part of the BRICS set of emerging economies, or that its neighbour and adversary, Pakistan, lags behind at 145 but the facts are that it is still way behind China (No. 78), with which it sometimes tries to benchmark itself, and that even Colombia, Indonesia, Chile and Turkey are places where it is easier to do business than it is in India. The point is that there is a long way to go. A close scrutiny of the World Bank survey shows that on some parameters India still languishes towards the bottom. Its system for granting permissions is still quite forbidding. On the ease of dealing with construction permits, it is ranked at 181 among the 190 countries covered. On the ease of property registration, which often involves myriad paperwork, it ranks 154. But perhaps most alarming is how entrepreneurs perceive the enforcement of contracts in India. The rule of law is often taken for granted in business-friendly economies but in India it can still pose a serious risk. On the World Bank’s ranking, India comes in at a low 164 rank on that parameter, certainly not a position that would enamour it to potential investors, particularly those who may have a choice of going elsewhere where contracts are enforced better. It is worth noting that the World Bank’s Ease of Doing Business rankings come with some other sorts of surprises. A deep dive into the data reveals how on certain parameters, conventional beliefs get upturned. Take enforcement of contracts, for example. Among the 17 Indian cities covered by the survey, Hyderabad, Patna, Ludhiana and Guwahati rank higher than Mumbai, Delhi, Gurgaon, and Bangalore. And while it is easiest to start a business in Delhi (it ranks No. 1 among the 17 Indian cities ranked), Bangalore is No. 17, Mumbai 12 and Ahmedabad 14. Data can be sliced, diced and analysed ad infinitum but these two examples could point to the lack of uniformity across India: there are places in India where some aspects of doing business might be easier but other aspects might not. There is also the matter of perception. Well-packaged programmes that the Modi government has launched (viz. Make In India, Startup India, Skill India, etc.) also create hype and influence the perception of entrepreneurs who are respondents in surveys such as World Bank’s but in the end it is what changes actually happen in practice that matters. Anyone diving deep into the data behind the Doing Business 2018 report can see that the average time and cost it takes to negotiate the procedures, obtain permissions and licences can still weigh down entrepreneurial efforts in India. All of this implies that it may be early to celebrate India’s “business friendliness”. But it definitely marks the beginning of a journey. Once it is glitch-free, the new uniform nationwide tax system for goods and services ought to make it easier for businesses to grow; the move towards cashless transactions, which was triggered by demonetisation, will have benefits for trade and commerce in general; and a government that kick starts investment which, in turn, has a multiplier effect on the rest of the economy, would be a facilitator for business. The most important signal from India’s better showing on these rankings is an endorsement that things may have begun improving. For the government and its policy makers what that means is not just that India is on the right path to reform but that it must keep on following it. // ]]>