The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Avinash Mohapatra, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur.
India, as an Agrarian economy leapfrogged into a service dominated economy after the Economic Liberalization of the 90s. However, the reforms completely skipped Industrial growth. This caused a mammoth gap towards realizing an Industrial revolution that was witnessed by erstwhile European countries.
On 68th Independence Day this year, India got a new vision, a new ray of hope in the form of the purposeful ‘Make in India’ campaign launched by PM Modi. It has ever since remained the Centre’s objective to promote investment, boost manufacturing and improve India’s competitiveness in global market. Budget proposals, as hoped by many, are aimed at providing momentum to the ‘Make in India’ initiative and reinstate India as the mfg. hub of the world. With inspiring rhetoric and a flashy global advertising push, the Modi Govt. has got Everyone talking of it. The idea of India becoming a destination for investment has captured Nation’s imagination since then.
The National Manufacturing Policy, 2011, aimed at creating 100 million jobs and achieving the ambitious target of 25% GDP share of the Mfg. sector by 2022. The key to the policy lies in establishment of National investment and manufacturing zones, planned to be developed as Greenfield Industrial Townships with standards comparable to best mfg. hubs in the world. While planning is underway for mfg. corridors and industrial zones, several bottlenecks that have long clogged the surge in India’s mfg. domain were boldly addressed in the current budget with a growth-oriented and inclusive approach.
- High cost of logistics, wastage on the way forms the prime impediment. Travel time for products to reach markets and ports, is one of the highest in the world. With the broader aim of connecting mfg. plants with markets, the budget set aside huge allocation for infrastructure to build roads, ports and railway tracks in next few years. Creation of National Investment & Infrastructure Fund with an annual flow of 20,000 crores shall form an important budget vehicle for strengthening infrastructure. Tax-free infra bonds shall provide a long term source of funding outside the Consolidated Fund of India for roads,rail and irrigation.
- Power Outages have been strangling businesses to extinction. According to a World Bank report “India lost as much as 21% electricity in 2011 through Transmission & Distribution losses and pilferage” This is worse than countries as Ghana and Senegal. 5 new Ultra Mega Power Projects, each of 4000 MW announced to be set up in Plug and Play mode, shall contribute extensively to offset power crisis. The Plug and Play model implies that the project shall be created by Govt. and then handed over for investment by pvt. players.
Senior Journalist Priyaranjan Dash says “There is a need for speeding up investment projects in creating new capacity and utilize the existing capacities to the fullest extent possible by making available inputs such as coal”. The e-auction of coal was a monumental move in achieving self sufficiency in coal. Not only was the auction process transparent, but also the divestment of sale proceeds to States was an important step towards co-operative federalism.
- Severe shortfall in skill development – Manufacturing is a specialized feat that needs precise abilities, which is where our country is at a disadvantage. Coupled with lack of necessary skills, there is also dearth of managerial skills while young India is pursuing more lucrative career options. According to National Sample Survey report 55% graduates are deemed unemployable in mfg. sector. India’s demographic bulge, with millions of young people set to flood the job market in next decade, it is dangerously sliding into a lopsided paunch that shall fast invade the Nation. Feeling the heat of the situation, adequate focus has been laid this time on skill development and vocational training programmes. Deendayal Upadhyay Gramin Kaushal Yojana aims at enhancing skills and hence employability of the rural youth. Various Institutes to crop up across the country to empower the youth with education and skills mapped to industrial needs.
- Ease of doing business – Online application process for industrial licensing and entrepreneur memorandum introduced with 24×7 accessibility without human interference through e-biz platform. Simplification of the tax structure shall make it easier to do business in India. Corporate sector particularly applauded the move to cut corporate taxes from 30% to 25% over four years to spur investment. This shall find a lot of foreign currency filling our reserves because of the low tax rate. In a move to encourage MSME entrepreneurs, credit supply limit has been raised in priority sector lending. MUDRA bank under Pradhan Mantri Mudra Yojana shall refinance Micro-Finance Institutions for lending credit to small entities. Postal network across villages shall also be used for increasing access to financial system.
Over 9 months after coming into power, Modi Govt. presented its first full fledged budget. It provides a blue print of the reform programme that has the potential to push Indian Economy close to 8% growth on a sustainable basis. Improving overall competitiveness and fostering a business friendly climate shall attract investments, both domestic and overseas. Proper Competition policy aims at ensuring manufacturing sector grows in a healthy environment. Mfg. sector holds all the answer in transforming India’s future not only by boosting GDP but also creating jobs and encouraging exports.
6 months is what most politicians get to bask in the adulation of electoral victory. The new Govt.’s 6 month lease on public goodwill technically ended in Nov. 2014. The FM has already heeded at unleashing spanning cuts. Sticking to the reform agenda and provide necessary boost assured for the mfg. sector was a much awaited resolution to India’s economic conundrum by kick starting the stalled growth. The current budget has achieved the ends as far as declarations go. The crux however lies in their effective implementation now.