In this article, Anirban Dip Ghosh pursuing M.A, in Business Law from NUJS, Kolkata discusses How to avail benefits under the Make in India policy.
Availing Benefits under the Make in India Policy
“In the beginning, God created the heaven, hell and the earth. After that, everything else was made in China” – Internet Humor
Wait a minute, if you thought this article is going to discuss Make in India Policy, then yes that remains to be my agenda, so please stay with me. But before I go into that, let us understand the backdrop against which this entire matter bears relevance.
It is common knowledge today that India has carved a name out for herself over the last 15-20 years as the epicenter of technology revolution, providing labor and skill to the developed economies to the tune of 5,800 billion INRin annual revenues. The influence on the tech sector needs no elaborate description, after two of the world’s biggest Technology Companies Google and Microsoft hired Indians at the helm of their affairs for defining global domination, in recent times. Names of Companies such as Wipro, TCS and Infosys cannot be left behind, who have together created a new industry that today produces lakhs and lakhs of workforce and revenues.
However, at a macro level, when we consider the overall growth, relatively speaking, the country was left far behind by our neighbor, China during this period. China’s growth has been fueled in three critical dimensions over these years. Investments, Infrastructure and Manufacturing.
While India’s growth was fueled in 1991 after the revamped economic policy popularly known as Economic liberalization by then Finance Minister Dr. Manmohan Singh, opening our doors to foreign direct investments, the culture of subsidies and poor tax collections have prevented Government from making its own investments on nation development, as compared to its super poor neighbor. By statistics, 30% of the country’s GDP goes into investments, as compared to 50% by China. Similarly, Manufacturing is 20% of India’s GDP compared to 30% of China and on the infrastructure space, China is significantly ahead, in line with western countries, while India is still considered a nation of broken roads, poor power generation and hydel capacities and low on bandwidth.The Narendra Modi Government, which came into power after winning the 2014 general elections decided to change the course of the country as he announced the ambitious initiative of Make in India.
Among the various nation-building initiatives, make in India initiative is a wider set devised to transform India into a manufacturing hub as well as a global design. This initiative for sure represents an unprecedented and comprehensive overhaul of backdated policies and processes. It represents, most importantly, a complete shift in the Government’s mindset – a major change from issuing authority to business partner, in line with ‘Minimum Government, Maximum Governance which is the Prime Minister’s tenet.
In December 2014, a national workshop was held on sector specific industries. The primary objective was to aim to raise the contribution of the manufacturing sector to 25% of the GDP by 2020. This national workshop created an opportunity to bring the Secretaries of the Government of India and industry leaders together under one roof in order to facilitate discussion and debate to formulate the plan of action for the consecutive three years.
It has been speculated that India is the ‘next China’, which will be possible within a decade or so, if not today. However, if this happens to be true with regards to expansion and growth, India seems to be a very different country altogether if compared to China on the basis of democracy, multiple fundamental dimensions and demography being the most important factors among the rest. While India has barely touched the surface of infrastructure, investment and manufacturing, China has been most importantly been built on these three critical aspects which is required for strong economy of any country for that matter.
As already mentioned, India initiated its economic reform in the early 1990s, more than a decade after China. But in the last 25 years, while India has languished in relative terms, China has turbocharged its economy.
Some of the world’s highest investment rates have actually driven the Chinese growth. In turn, this has made it possible to revolutionize the infrastructure of the new cities, airports and ports, high-speed trains and rail lines as well as manufacturing muscle that is the envied by the world now. For 20 long years now, China has also been the world’s factory. One of the critical ingredient of its own growth miracle and been its strong ability to quickly and efficiently move what it produces domestically and around the world.
Unlike China, the development for India will not be through government investment, because the Indian state is crippled by limited taxation and endemic budget deficits of big subsidies. The ‘Make in India’ initiative is very promising as it does not depend on the Indian government. ‘Make in India’ is an invitation for the global firms to maximize their financial commitment to India. ‘Make in India’ has been boldly launched with keeping an objective in mind for India surpassing China with regards to direct foreign investment Currently innovative firms as varied as Samsung, Lenovo and Boeing have openly supported this initiative showing evidences that the private sector is ready to pitch in.
However, it seems that the private sector won’t take a change until and unless it is more confident about political scenario prevailing in India. India is nowhere different from China if we consider the world of politics. But this does not prove that India will not be able have a growth rate, the way China has. India has very rich raw material to work with. The current challenge is to catalyze it now.
Policies to Encourage Investors
To encourage foreign and investors from India itself, the Indian government has developed certain specific policies for each sector as follows, under the Make in India campaign:
Automobile and Automobile Components
- Foreign equity investment up to 100% will get automatic approval with no minimum investment criteria.
- Manufacturing and imports are exempted from licensing and approvals.
- Rebates on R&D expenditure for encouragement
- Airport Authority of India (AAI) has been given the responsible to develop, finance, operate and maintain all public sector airports.
- New airports are permitted under the Greenfield Airport Policy 2008 and investment is encouraged under the PPP Policy of the Government of India.
- Exemption of landing, parking and navigation fees to airlines operating at designated airports in non-metro areas as per the Regional Air Connectivity Policy which offers these attractive incentives.
National Guidelines for Stem Cell Research 2013 which applies to stakeholders including individual researchers, organizations, sponsors, oversight/regulatory committees, have been laid down to ensure that research with human stem cells is conducted ethical and in accordance with the regulatory requirements.
Guidelines on Similar Biologics-Regulatory Requirements for Marketing Authorization in India 2012 address the regulatory pathway for manufacturing process and quality aspects for similar biologics in addition to addressing the pre-market regulatory requirements including quality, preclinical and clinical studies and post-market regulatory requirements for similar biologics.
The National Biotechnology Development Strategy 2015-2020 launched on December 30, 2015, intends to establish India as a world class bio manufacturing hub
National Intellectual Property Rights Policy 2016 (IPR Policy 2016)released in May 2016 with an aim to create awareness of IP (Intellectual Property) in the country
- Industrial licensing has been removed for most sub-sectors except for certain hazardous chemicals.
- To facilitate greater investment in technology upgradation and modernization, the government is continuously contracting the list of reserved chemical items for production in the small-scale sector.Various strategies have been made to facilitate setup of PCPIRs throughout the selected locations.
- Smart Cities Mission; and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) to transform 100 cities to smart cities in India
- Swachh Bharat Mission aims at eradication of manual scavenging, scientific Municipal Solid Waste Management, elimination of open defecation, to generate awareness about sanitation and to improve public health
- Heritage City Development and Augmentation Yojana (HRIDAY) aims to preserve the rich Indian heritage city and reflect its unique character
- Procurement Policy governed by the Defense Procurement Procedure (DPP 2016-latest revision in March 2016).
- Offset Policy aims at leveraging capital acquisitions in order to develop the domestic defense industry.
- Procedures for the Grant of Industrial Licenses have been streamlined by increasing the validity period of industrial licenses from 3 years to 15 years with a provision to grant extension for a period of 3 years.Also, guidelines for the extension of validity of industrial licenses have been issued.
- Delicensing of electrical machinery has been done, facilitating entry of global majors in India
- The customs duty on power generation equipment is 5% at present whereas transmission and distribution equipment attracts 7.5% customs duty.
- Various Initiatives to Increase Power Generation by end of 2017 has been taken.
- National Electricity Policy (NEP) targets per capita electricity consumption of 1,000 kWh
- Vision 2022 for the Indian Electric Machinery Equipment Industry to reach an output of USD 100 billion by having balance exports and imports.
- National Policy on Electronics, NPE’s aim is to develop a globally competitive Electronics System Design and Manufacturing (ESDM) industry to meet the country’s needs and meet the international market standards. State specific policies have also been developed in this sector.
- Preferential Market Access to domestically manufactured electronic products in Government procurement
- Information Technology Investment Regions (ITIR) developed which involves huge investments in Karnataka and Telangana
- As per new manufacturing policy in 2011, food processing has been recognized as a priority sector in the country.
- Government has set up a special fund called “Food Processing Fund” of approximately USD 300 million (at Rs. 67.25 to 1 USD) in National Bank for Agriculture and Rural Development (NABARD).
IT and BPM
Indian IT & BPM industry is expected to grow to USD 300 billion by 2020. Several IT centers in the country have come up due to rapidly growing urban infrastructure supported by favorable government policies and incentives to facilitate investments in IT sector.
- Capacity modernization and up-gradation of technology of the leather sector has been largely brought about by the Integrated Development of Leather Sector (IDLS) sub-scheme implemented as part of the ILDP
- There is no central excise duty and import duty on raw hides and skins, semi-processed leathers like wet blue, crust leather or finished leather. Various other raw materials have been made duty free.
- State governments have developed single window clearance system to fast-track approvals for the establishment of production units.
- Imported leather too is now available to the industry at competitive prices.
Media and Entertainment
- ‘The Cable Television Networks (Regulation) Amendment Act’ was passed in December 2011, for digitization of cable television networks by the year 2014. Customers can access subscribed channels through a set-top box (STB) while cable operators under the digitization regime are bound legally to transmit signals digitally only.
- Various countries like Italy, Brazil, UK and Germany have signed co-production treaties in order to increase the distribution of the films abroad.
There has been a recent amendment to the MMDR Act, which governs the mineral sector This amendment brought in greater transparency by confirming auction to be sole method of grant of major mineral concessions and bringing in deemed extension of mining leases.
National Mineral Exploration policy, 2016 has also been announced in July, 2016.
Oil and Gas
Numerous policies have been made, the most recent one being Hydrocarbon Exploration & Licensing Policy (HELP) which has been notified on March 30, 2016. A uniform licensing system has been developed as per this policy to produce as well as explore all hydrocarbons such as coal bed methane, gas, oil, shale oil/gas, etc. under one licensing framework. This policy also provides various incentives to facilitate development of this sector.
On December 7, 2012, the National Pharmaceutical Pricing Policy, 2012 (NPPP-2012) has been notified. This policy helped to bring about regulation of prices of drug depending on various factors. A Drug Price Control Order 2013 has been notified in May 2013 to implement the provisions of NPPP-2012.
Ports and Shipping
Government of India plans to develop two major ports as well as two port hubs. There are also plans to implement complete mechanization of movement and cargo handling at ports.
Huge investments are required to modernize and expand the existing railway network. Privatization will help to fasten the process of development of the railways. The Ministry of Railways has issued Sectoral Guidelines for allowing domestic/foreign direct investment (FDI) in construction, operation and maintenance in the various areas.
The Indian Government has worked towards the development of solar, wind energy and biofuels in a major way. Various policies have been developed in India for setting up of Solar Energy Corporation in India, Offshore Wind Energy, Repowering of Wind Power Projects and State Initiatives.
Roads and Highways
This sector has received strong budgetary support over the years from the Government since development and maintenance of road infrastructure is a key priority for development of any country’s economy.
A policy framework for Satellite Communication in India was approved by Government in 1997. The norms, guidelines and procedures for implementation of the Policy Framework for Satellite Communications in India was approved by the government in the year 2000. INSAT Coordination Committee was formed and Remote Sensing Data Policy was made in 2011.
Textiles and Garments
The Government of India has made the following initiatives to strengthen the textile production and encourage this industry to cater to the domestic and international market efficiently.
- Technology Upgradation Fund Scheme (TUFS)
- Scheme for Integrated Textile Parks (SITP)
- Integrated Processing Development Scheme (IPDS)
- Integrated Skill Development Scheme (ISDS)
- Amended Technology Upgradation Fund Scheme for textiles industry (ATUFS)
- Market Access Initiatives (MAI)
- Market Development Assistance (MDA)
- Technology Mission for Technical Textiles (TMTT)
- Special package for Textile and Apparel sector
- Implications of Goods and Services Tax (GST) for Indian Textiles Sector
GST will result in ‘Fibre-neutrality effect’ that means all man-made and natural fibres will have equal tax levied.
Following sector policies have been developed for Thermal power:
- Electricity Act, 2003:
- National Tariff Policy, 2006:
- Revised Tariff Policy, 2016:
- Ultra Mega Power Projects (UMPPs):
- Renovation & Modernization of Distribution System
- Domestic and Street LED lighting program
- Fuel Supply Agreement
- Public Private Partnership(PPP)
- National Electricity Policy
- Ujwal DISCOM Assurance Yojana (UDAY)
Tourism and Hospitality
National Tourism Policy, 2002 aims to increase employment within this sector and also to increase the economy of the country.
To promote this sector a National Health Assurance Mission has been developed along with number of AYUSH clusters in the country. The improvement and availability of medical services in the rural areas is also a point of focus in this sector.
Challenges faced by Make in India
In addition to availing the benefits of Make in India, let us look at five challenges that ‘Make in India’ could possibly face:
- A conducive and healthy business environment can only be created when the administrative machinery is effective and efficient. When it comes to procedural and regulatory clearances, India has always been very stringent. A business-friendly environment can only be created if India can develop easier and quicker approvals of projects and can set up a hassle free mechanism for clearance.
- India should also be prepared to face various factors that negatively affect competitiveness for manufacturing. All the unfavorable factors must be eliminated to make the country a manufacturing hub. India should also encourage companies who come and set up unit in the country, by giving tax concessions to them.
- A major role can be played by India’s small and medium-sized industries in making the country take the next big step in manufacturing. Indian economy should largely focus towards novelty and innovation for these sectors. Special sops and privileges should be planned to be given to these sectors by the government to encourage such sectors.
- India should constantly keep up its momentum and strength so as to outpace China’s supremacy in the manufacturing sector. India’s make in India campaign will be constantly compared with China’s ‘Made in China’ campaign. The ‘Made in China’ campaign was launched on the same day as India seeking to retain its manufacturing prowess.
- India will to be motivated and better prepared to do world class research and development. The government must ensure that it provides relevant and adequate platform for such research and development. These steps will also encourage high-tech imports, research and development (R&D) to upgrade ‘Make in India’ and to give edge-to-edge competition to the Chinese counterpart’s campaign.
On the other hand, the introduction of ‘Make in India’ and this whole drama and debate over Land Acquisition is an indication that India is on the verge of creating a new horizon of industrialization. But what should be the length and breadth of the industrial expansion about to happen? This is a very serious question and describes the type of results (good or bad/positive or negative) we will get from industries. In order to answer this question let us initially have a look at certain facts. Increase in pollution, overcrowded cities, unhealthy residents and lack of sanitation were some of the hazards which were the direct result of intense industrialization which happened in Europe during the mid 18th to 19th century. The live example is China of an overly industrialized country which is economically doing excellently but is a masterpiece of pollution to such extent that some 1.6 million Chinese citizens die per year because of it and rest of the population suffers from serious and severe lung diseases. It is a common practice therein China to wear a mask when someone is going outdoors.
Incidents like Bhopal Gas Tragedy have resulted from blindfolded industrialization in India. The residents of some major industrial cities like Chennai, Bangalore, Kolkata, Delhi and Mumbai to name a few are facing serious pollution and health problems even today due to pollution.
Even though Make in India is an ambitious project, but it is the need of the hour now and one that India desperately needs to start and sustain its economic growth momentum. With simple and easy to follow policies developed towards this end, it is definitely possible to make India the powerhouse of manufacturing sector in the world. Any country would need factories and farms both in proper ratio.Too much or too less of either of them will be a wrong decision to be taken. Having said that, India being a developing country has the huge benefit of learning from the mistakes of other developed countries and further redefining the meaning of development.
Note: Written while pursuing the NUJS M.A. in Business Laws.