Suparna Goswami Bhattacharya

May 23, 2016: That India is known for its information technology services globally is widely accepted. But the country is also ready for the next phase of growth in manufacturing. According to a report by Deloitte, India is projected to be one of the leading destinations for manufacturing by 2020.

The report states that India, which is currently ranked 11th most competitive manufacturing destination in the world, is expected to jump to five by 2020 beating the likes of South Korea, United Kingdom and Singapore.

Interestingly, China may be dislodged by the US as the numero uno manufacturing nation.

Not many experts though are surprised by India’s projected ranking. The ‘Make in India’ campaign started by the Narendra Modi government to boost the manufacturing industry has rekindled interest among global players.

K Kumar, Senior Director, Deloitte in India, says, “The Make in India campaign by and large gives clarity on what needs to be done. There are a number of areas where the government processes have been improved – be it interface with the government, approvals or certification.”

A number of large projects that have taken time to implement have been taken up to clear the way for faster implementation. Some of the politically sensitive issues like labour reform and land acquisition are being taken up for implementation at the level of states through the provincial legislatures. Most importantly, demand is being created through government spending on infrastructure, which was a huge problem a couple of years ago.

Anwar Shirpurwala from Manufacturers’ Association for Information Technology (MAIT), an association empowering the ICT industry in India, says that proactiveness of the current government clearly shows there is a political mood to turn around the country into a manufacturing hub. “We always had a large domestic market but never the right attitude to tap it. For instance, Indian IT manufacturing sector has the potential to generate 4,00,000 jobs over the next five years, and can help achieve the Vision of Net Zero Imports by 2020,” remarks Shirpurwala.

“It looks like the Make in India campaign has started well. Since it is a flagship programme of the government, it gets all the attention it requires. The investment cycle looks like kicking in,” says Kumar. Additionally, programmes like Start-up India aspire to create entrepreneurs in the underprivileged strata of society.

According to Tarun Mishra, founder, Covacsis, there are many factors which will make India an attractive destination for manufacturing in the next five years. “The percentage of GDP contribution from agriculture is shrinking and will continue to do so in the next 10-15 years due to an aspirational middle class young population. The service industry alone will not be able to absorb the young population. Hence, industrial growth is the only option to provide employment,” he explains. Covacsis Technologies is a state-of-the-art platform that provides 360° visibility of the manufacturing floor in real time.

Mishra goes on to add that manufacturing will not be a blue collar job anymore. Profound adoption of mainstream technology like IoT, big data, stream, video, machine learning and artificial intelligence will make manufacturing look completely different and glamorous. And India has a natural supply of those kind of skills.

Though India will have an advantage thanks to its low cost of labour, this alone will not be the main factor. “Certain sectors and product space will emerge, which won’t be price sensitive. India will require to champion agile manufacturing, which will be the new reality,” says Mishra.

That said, there are a number of things to be done in quick time – rolling out of GST, for example. The pace at which reforms in land acquisition and labour laws will be taken to all the key manufacturing states will be critical. “There are sectors wherein government policy is crucial. For example, defence. While the legal systems are in place, it is still a time-consuming process. The extent of academic and fundamental research has to pick up for companies to manufacture innovative products in the country,” says Kumar.

Focus on scientific research and development is the fundamental driver for sustained and long term manufacturing economy.

Current Rank             Country

1                                  China

2                                  United States

3                                  Germany

4                                  Japan

5                                  South Korea

6                                  United Kingdom

7                                  Taiwan

8                                  Mexico

9                                  Canada

10                                Singapore

Source: Deloitte Touche Tohmatsu Limited and US Council on Competitiveness, 2016 Global Manufacturing Competitiveness Index

Projected Rank (2020)                       Country

1                                              United States

2                                              China

3                                              Germany

4                                              Japan

5                                              India

6                                              South Korea

7                                              Mexico

8                                              United Kingdom

9                                              Taiwan

10                                            Canada

Source: Deloitte Touche Tohmatsu Limited and US Council on Competitiveness, 2016 Global Manufacturing Competitiveness Index

The post India to be among top five in manufacturing by 2020 appeared first on International Finance.

Giovanni Puglisi

June 15, 2015: Since the election one year ago, Indian Prime Minister Narendra Modi has energetically toured the world meeting foreign political and business leaders, promoting his government as more friendly and welcoming towards investors than in the past, while urging global manufacturers to “Make in India”.  However, despite unquestionably improving his personal standing thanks to his foreign travels, he has arguably failed to meet the high expectations he had created. To better understand what has been achieved and what remains to be done, IFM spoke to Parag Pai*, Funds Manager and former VP Credit & Research at Mizuho Bank in Mumbai.

Is greater macroeconomic stability a mere result of declining oil prices or Modi’s upper-hand on the economy?

Tumbling oil prices have obviously helped strengthen India’s economy and external finances, especially considering that India imports over 80% of its oil needs. While oil has bounced back from sub $50 per barrel levels to around $62 per barrel, the expectation is that prices would continue to be subdued over the medium term at least, which certainly bodes well for India.

While one year is too short a time to assess the contribution or rather the impact of Modi’s government on India’s economy, there is absolutely no doubt that the government has taken all the right decisions and has done whatever possible to put the economy right back on the superior growth path it was about a few years ago. Most importantly, the government has shown great resolve in trying to tackle problems faced by the economy and provide the right atmosphere for investment and growth. So yes, the Modi government certainly deserves due credit for restoring confidence in the Indian economy while the actual results would only be seen over a period of time.

Despite the “Make in India” program, the country seems still far from becoming a global manufacturing hub and investor sentiment has dampened considerably. Is it due to the limited liberalisation of the labour market?

“Make in India” is probably the most ambitious campaign that the Modi government has introduced ever since its inception a year ago. It’s important to note that this campaign has just begun and has been launched with a very long term point of view. And, also considering the might of China in manufacturing, India is sure to face enormous hurdles to make this campaign successful over the next few years. One year is a very short time to assess and, therefore, we need to revisit the progress of this campaign, probably in another year’s time.

Tax reforms are still embroiled in political wrangling, shall we expect further delays on much needed fiscal adjustments?  

As far as tax reforms are concerned, the Goods and Services Tax bill which seeks to do away with various indirect taxes is the most important legislation that the government had been trying to push through and this effort is really commendable. This is exactly the point to be noted here again, the government’s strong resolve in bringing about “changes”. Though the government has been able to pass the bill in the Lower House where the government has a strong majority, the bill still needs to be passed by the Upper House where the opposition has a majority, before it becomes law. There is a very important point to note here. Despite Modi’s government commanding a strong majority in the Lower House, it still faces stiff opposition to pass important legislations. Another case in point is the Land Acquisition Bill in which case too it has faced strong resistance from the Congress and other opposition parties. This basically raises a big question on the usefulness of the strong majority of the Modi government in the Lower house to which it was elected with much fanfare and tremendous public support last year.

Foreign institutional investment is on hold as privatisation of major public sector giants is yet slow. What’s the future prospect? 

Foreign institutional investors (Flls) have been on the exit mode in India since the last couple of months. The economy and ultimately corporate earnings have grown at a much lesser rate than expected and this has been one of the most important reasons why the flow of foreign capital has been lower compared to the previous years. Add to this, the issue of Minimum Alternate Tax (MAT) has been worrying FIIs of late. I expect the MAT issue to be tackled in a positive manner by the government and FIIs to return back to the Indian markets once corporate earnings pick-up. As of now, the consensus is that the second half of the current fiscal would be the starting point for earnings to look up again. Divestment of public sector units is also expected to pick up pace as the government has been trying hard to push this process, so it’s only a matter of time.

The country has yet many inefficient state-run banks with a pile of bad loans, which constrains them as opposed to their private counterparts. Are there signs of improvement and is the worst over?

As we have seen even in the current earnings season, i.e. for Q1 in 2015, quality of assets, especially of the state-owned banks, have not seen any major improvement. It has been a legacy issue which the banks will face even in the future owing to their lending policies and commitments, due to their typical public sector nature. While on the other hand, their private counterparts do not face any strict “do and don’ts” while lending, and they would only provide credit based on the creditworthiness of their clients.

Cities are badly in need of renewal and still lack essential infrastructures, including roads, mobile-phone and power transmission networks. Is the current budget allocation sufficient or rather paltry?

In India, as far as infrastructure development is concerned, paucity of funds and other resources have not been as important an issue as much as the implementation of the various five-year plans, and all previous ones have missed their targets by a big margin and the key reason has been lack of political will and implementation. Funding and resource allocation have been smaller problems. However, the Modi government dismantled the Planning Commission and has put in place another body to take forward planned infrastructure development, which has been hailed as a very reformative and positive step forward.

*Mr Parag Pai is a Senior Financial Analyst, Equity Investor & Funds Manager with 20 years’ related experience in the banking industry. He has previously held positions of Vice President Credit & Research at Mizuho Bank and Operations Manager at Bank of America in Mumbai.

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IFM Correspondent

September 29, 2014: On Sunday, Madison Square Garden was jampacked with Indian-Americans who had turned up to listen to Narendra Modi, Prime Minister of India.

Thousands of supporters of Prime Minister Narendra Modi were seen lined up outside the venue. Modi’s hour-long speech about his vision for India received thunderous applause from the audience.

Modi’s appearance comes before he heads to the White House for meetings with President Obama on Monday and Tuesday. Modi addressed the United Nations General Assembly on Saturday.

“In India, democracy is not just a system, it’s a faith. It’s a belief,” he said. Modi is expected to meet corporate honchos on Monday.

Modi also took the opportunity to thank the NRIs for their support. “Many among you couldn’t vote in the recent Lok Sabha elections. But there won’t be one among you who would have slept on the day (May 16 when election results were announced). I couldn’t thank those who had contributed to our victory. Today, I say THANK YOU,” he said amidst loud cheering.

Speaking of his plans for India, Prime Minister Modi said, “A hundred million youth joining hands to transform our nation, to put the light of hope in every eye and the joy of belief in every heart, lead people out of poverty, put clean water and sanitation within the reach of all, make healthcare available to all, a roof over every head.”

He also expressed pride for those present on the occasion. “For you to convert your thoughts into action and devote your time and energy so that others may have a better future, to those living in poverty without education, without basic sanitation, without opportunity and worse, without hope, I salute you. I feel proud of each one of you and I am sure your family, your friends and your nation feels the same,” he said.

He ended his speech with a Star Wars reference, saying “May the Force be with you.”

Some interesting quotes:

• India was once known as the land of snake charmers. Had it not been for Indian Americans, who have excelled in various fields, that image would not have changed. During a foreign trip I was asked whether India was still about snake charmers. I said: Our ancestors used to play with snakes, we play with a mouse.
• To win an election is a huge responsibility. Ever since I have taken over this responsibility, I have not even taken a 15-minute vacation.
• You must have read that government officials in Delhi are reaching on time. Is that news? Should that be news? Painfully, I asked myself ‘isn’t it their responsibility?’
• People ask me, “Modiji, why are getting into messy things?’ If I were to touch simple things, people wouldn’t have made me the prime minister.
• Never before has an India leader been given so much love. I will repay this loan. I will make an India of your dreams.

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