26 September 2014
'Make in India' campaign launched to make India a global manufacturing destination

India's Prime Minister Modi announced a historic programme to facilitate investments and build best-in-class manufacturing infrastructure in the country.

On 25 September 2014, India's Prime Minister, Narendra Modi, launched the 'Make in India' campaign to tell the world that things are changing in India: doing business is going to get easier, efficient and transparent. In his Independence Day speech on 15 August, the PM invited businesses from across the world saying, "Come, make in India! Come, manufacture in India! Sell in any country of the world but manufacture here." 

Consequently, 'Make in India' is a programme for making India's environment conducive to business. The Government aims to eliminate unnecessary laws and regulations and shorten bureaucratic processes, upgrade physical infrastructure to support growth, open up more sectors to foreign direct investment (FDI), and most importantly, be seen as a true business partner instead of a mere 'permit-issuing authority'.

Manufacturing accounts for only 15% of India's GDP, which is dismal compared to other developing South East Asian nations. The Indian Government wants to raise that share to 25% by 2022 and is committed to transforming India into a global manufacturing destination, while ensuring that goods are manufactured with 'zero defect' and with 'zero effect' on the environment.

The Government has identified 25 sectors that India could become a world leader in and listed growth drivers, investment opportunities, the FDI policy, sectoral policies and specific reasons to invest in each sector. These sectors include automobiles, aviation, biotechnology, chemicals, construction, defence manufacturing, electronics, information technology and Business Process Management, pharmaceuticals, renewable energy, textiles, ports, tourism and hospitality, wellness, etc.

Pro-business initiatives: red carpet, not red tape for investors
India is laying out the proverbial red carpet for foreign investors where Invest India, the Government's official agency, will act as the first reference point for guiding foreign investors with all regulatory and policy issues and assist them in obtaining regulatory clearances. A dedicated investor facilitation cell will answer queries from business entities within 72 hours through
www.makeinindia.com. It will proactively assist and hand-hold foreign investors right from their arrival in India until their departure.

Measures have been taken to reduce red tape and have an efficient system with online applications for industrial licenses, whose validity has also been extended to three years.  The eBiz website, a convenient, single-window IT platform for all Government-to-business services, will work as a catalyst in the investment process.

FDI norms are being liberalised
India's high-value industrial sectors – defence, construction and railways – are now open to global participation with liberalised foreign investment norms. The FDI cap for defence has been raised from 26% to 49% with up to 100% being allowed on a case-to-case basis and foreign portfolio investment will be permitted up to 24% under the automatic route. Up to 100% FDI through the automatic route is now permitted in areas related to railway infrastructure and FDI in construction is also being liberalised to support increasing urbanisation and provide affordable housing for all. Modi also urged Indian business leaders to look at FDI as 'First Develop India' and then as Foreign Direct Investment.

Impetus to infrastructure
The Indian Government is committed to improving manufacturing infrastructure by developing industrial corridors, industrial clusters and smart cities across the country. It has also signed several agreements with foreign governments to assist in the process. With the focus on building a Digital India, the PM also spoke of the importance of 'i-ways' (digital information highways) besides highways.

Inclusive growth: skill development and financial inclusion
The National Manufacturing Policy aims to see 12–14% growth in the sector annually over the medium term. As creating a labour-intensive manufacturing sector is a priority for the Government, besides having the necessary policies and infrastructure in place, a skilled workforce is essential. With 65% of the population below 35 years of age and some 12 million new entrants joining the workforce each year, job creation and employability are crucial to boost economic growth. The manufacturing sector alone can add 90 million jobs over the next decade. The PM stated that creating jobs would increase the Indian youth's purchasing power, which in turn would lead to higher demand for manufactured goods, creating a much larger market (private consumption accounts for about 60% of India's GDP). He announced a major programme, 'Skilled India', and the creation of a separate Department of Skill Development and Entrepreneurship, to equip the working-age population with relevant skills so that the manufacturing sector finds them employable.

The Government has decided to amend key labour laws to provide flexibility in working hours and increase the intake of apprentices for on-the-job training, which will boost job creation as well as ease recruitment for businesses.

With its focus on inclusive growth, financial inclusion is an important priority of the Modi Government in order to have increased savings, security and empowerment of the weaker sections of society. In August 2014, the PM launched the Pradhan Mantri Jan-Dhan Yojana – a scheme to ensure that every Indian has access to a zero-balance bank account, a debit card, accident insurance cover of INR 100,000, and additional life insurance cover of INR 30,000. The scheme's initial target is to open 75 million bank accounts by 26 January 2015. On the first day itself, 15 million bank accounts were opened across 77,000 locations. This programme even caught the attention of the co-chair of the Bill & Melinda Gates Foundation, Bill Gates, who has offered to help in monitoring its progress.

The already visible impact of measures taken by the new Government
It is evident that in the first four months of the new Modi Government, there has been a remarkable shift in domestic as well as foreign investor sentiment. FDI equity inflows were up 52% at USD 10.7 billion during April–July 2014. Investments (equity and debt) by Foreign Portfolio Investors/Foreign Institutional Investors rose to USD 20.5 billion in the first five months of FY 2014-15 compared to USD 8.6 billion in the whole of FY 2013-14. 

Real GDP growth accelerated to 5.7% in Q1 2014-15 compared to 4.7% in the same period last year. Manufacturing sector growth as measured by the Index of Industrial Production (IIP) rose to 2.3% during April–July 2014 compared to a 0.1% decline in the corresponding period of the previous year. Cumulative exports for April–August 2014 were also 7.3% higher at USD 135 billion.

International engagements on the rise
Modi has been actively engaging with international leaders over the last few months, following which several investment commitments have been made and agreements signed. Japan has committed to USD 35 billion of investment and financing to India, and China has committed to investing USD 20 billion over the next five years. Several areas of cooperation have also been identified with both countries, including setting up industrial parks, building infrastructure, etc. India and Australia signed a bilateral Civil Nuclear Cooperation Agreement, enabling the sale of Australian uranium to support India's growing energy needs.

Besides India's 'Look East' policy, Modi added that it was essential to 'Link West' in an increasingly globalised world. The PM is on his way to USA to explore areas of cooperation between India and the United States as well as to have several multilateral talks. He also has a series of meetings lined up with 17 CEOs/business heads of leading organisations, which include Boeing, IBM, General Electric, BlackRock, Goldman Sachs, Google, Mastercard and Pepsi among others.

Optimism in the air
During the launch of the 'Make in India' campaign, Modi urged investors not to look at India merely as a market, but to see it as an opportunity. He stated that India is blessed with three Ds – democracy, demographic dividend and demand – which would not only help build businesses but also help build a vibrant India.

India's inherent advantages and the new Government's initiatives make it an attractive investment destination like never before and this optimism is being echoed all over the world. The execution and impact of the initiatives will only be seen with time. However, for now, it is clear that India is open for business.
 

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