"Make in India"- Rising Business Opportunities for the Midwest
By
Sampath Ramesh
Lecturer and Professor Global initiatives in Management – India 2015
Kellogg School of Management
Northwestern University, Illinois
Friends,
India is on the threshold of becoming the next Manufacturing destination. Prime Minister, Mr. Modi has been candid that his government wants investment in India and wants products to be produced in India. The new jargon “Make in India “has been the brain child of the Prime Minister. He recognizes the fact that development is interlinked to Manufacturing. It creates jobs, it creates national asset and directly contributes to the GDP of the country.
“Make in India” is a major new National Program designed to facilitate investment, foster innovation, enhance skill development, protect Intellectual property rights, and build best in class manufacturing Infrastructure .
What is so different about this initiative from the 1992 Economic Liberalization? Let me tell you that both these initiatives are different.
In 1992 – the economic liberalization by the then Government provided the impetus for changingbasic laws that were an impediment for investors. Many decision making process were pruned or disabled to enable the transformation. This attracted investors and we saw a phenomenal growth period. However, by the end of 2010 there were clear signs of slow down, some of which can be attributed to global readjustments due to melt down. Internal politics and poor growth initiatives also derailed many aspects of this growth.
The new initiative understands the inherent issues and has provided policy initiatives and frame work to provide a platform for“Make in India “. In the next few minutes it will be my intention to walk you through briefly some ofthese initiatives and Identify sectors that have been included for focus. And finally look at the opportunities it will offer the companies from the Midwest.
Let me start by saying that India needs no introduction as a potential manufacturing power house. There are many studies that provides the supporting reasons and predictions of growth etc. While other countries in the region pushed its agenda to become large production bases for the world, India lagged behind due to its internal compulsions. We are again provided with an opportunity due to the changing global scenario. Production bases in the developed world have migrated in the value chain and other potential countries are undergoing financial restructuring. This offers the right platform for India.
The need to create viable production infrastructure that can become a “plug and play model “was evident to policy makers. Learning from thesuccessful experience of other countries in the region and its relevance to India, several policy initiatives were taken to create a path for “Vibrant India”.
“ Make in India “ can become true only if infrastructure is world class, policy initiatives including incentives are made attractive, focus is made on specific sectors ( rather than spreading it thin) and implementation is flawless.
Some of the notable policy initiatives are:
· Impetus on developing pentagon of Industrial corridors across the country to boost manufacturing and to offer world class infrastructure.
· A new agency ‘National Industrial Corridor Development Authority’ created to coordinate, integrate, monitor and supervise development of all Industrial Corridors.
· In the first Phase the following Industrial Corridors have been planned: Bengaluru-Mumbai Economic Corridor (BMEC); Amritsar – Kolkata Industrial Development Corridor (AKIC); Chennai-Bengaluru Industrial Corridor (CBIC), East Coast Economic Corridor (ECEC) with Chennai Vizag Industrial Corridor. North Eastern part of India would be linked to the other Industrial Corridors.
· Chennai-Bengaluru Industrial Corridor will also have 3 new Industrial Nodes [Ponneri (TN), Krishnapatnam (AP), Tumkur (Karnataka)] in progress. These are meant to become the harvesting locations for many such nodes throughout the country.
· Work on 5 smart cities is in progress as a part of the Delhi-Mumbai Industrial Corridor: Dholera, Shendra-Bidkin, Greater Noida, Ujjain and Gurgaon.
· Twenty four manufacturing cities are envisaged in the perspective plan. In the first phase, seven cities are being developed, one each in the states of Uttar Pradesh, Haryana, Rajasthan, Madhya Pradesh and Gujarat and two in Maharashtra. The manufacturing cities will provide international and domestic investors with a diverse set of vast investment opportunities. The initial phase of the new cities is expected to be completed by 2019.
· National Skill Training centers will providevocational training to the young Indian work pool. This will be a major push as manufacturing companies look for trained manpower.
With the easing of investment caps and controls, India’s high- value industrial sectors – defense, construction and railways – are now open to global participation.
Policy in Defense sector has been liberalized and FDI cap increased from 26% to 49%.Portfolio investment in Defense sector permitted up to 24% under the automatic route.100% FDI allowed in Defence sector for modern and state of the art technology on case to case basis.
100% FDI under automatic route permitted in construction, operation and maintenance in specified Rail Infrastructure projects. This will include Suburban corridor projects, High speed train projects, dedicated freight lines, Mass Rapid Transport Systems and others.Construction Development sector is expected to get a new look and policy to be relaxed.
Sectors of focus in the “ Make in India” campaign will include general manufacturing; IT/ITES; electronics including high-tech industries; automobiles and auto ancillary; agro and Food processing; heavy engineering; metals and metallurgical products; pharmaceuticals and biotech; and services sector.
What is the Government offering to potential investors?
· A quick rapid transparent decision making process
· Series of incentives directed to specific sectors based on the needs of the sector
· Technology and trained manpower support in these corridors
· Project financing at attractive rates to accelerate investments
· World class infrastructure
· Centre – state cooperation partnership for these corridors to be successful
Opportunities for Midwest Companies:
· Act as Engineering contractors or consultants in the development of the Industrial corridors. Provide O and M support
· Equipment supplies :Consistent demand of equipment due to mega infrastructure development across sectors
· Setting up manufacturing in sectors of Biotechnology, Food processing, Material handling equipment, Transportation.
· Setting up and expanding Tier 1 and Tier2 automotive component manufacturing
· Create cooperation in health care for the benefit of both countries.
· Set up R and D centers for leveraging research
· Entry into financial and investment areas
· VC companies can explore investment opportunities under the “Make in India “umbrella.
A look at the top 500 Midwest companies shows that there are nearly 100 companies that have established operations in India and some operating through associated ventures. I would like to end by saying that we are looking at a Country poised for growth and a market untapped. The companies operating in the Midwest have the experience and ability to expand and take advantage of this opportunity.
Wishing you the best in your “Make in India “endeavor.
