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Transforming India into a global hub
WITHIN months of entering office, Prime Minister Narendra Modi launched his signature "Make in India" campaign to position India as a global manufacturing hub and make the manufacturing sector a major source of economic development, employment generation and exports.
With the aim of raising the share of manufacturing sector in the GDP from 16 per cent to 25 per cent, the government is rapidly reforming policies and processes to make it easy to do business in India, rationalising the tax regime, building world class infrastructure at an unprecedented pace, improving connectivity, developing globally competitive skills base, investing in innovation and strengthening the IPR (intellectual property rights) regime. States in India, which have wide-ranging legal and regulatory responsibilities, are implementing wide ranging reforms.
Foreign investors benefit from one of the most liberal investment regimes in the world, a rapidly growing and stable economy and a strategically located export base.
Prime Minister Modi does not simply envisage India as a cheap manufacturing destination based on India's demography, but prepares India for the digitally driven and internationally distributed manufacturing systems of the new digital age. For this government is supporting investments in skills and innovation. Domestic efforts in research and development have been supplemented by India's emergence as the highest ranked global hub for R&D.
Make in India is India's most visible brand now, competing successfully with India's image as an information technology powerhouse. India has now risen from the ninth to the sixth largest manufacturing country in the world.
India's manufacturing ecosystem has seen vast improvement in three years. India has moved up several places in almost all indices of economic competitiveness. India has, for example, climbed 16 places to the 39th rank on the World Economic Forum's global competitive index in 2016-17. UNCTAD placed India among the top three prospective host economies in the world for 2016-18 in its World Investment Report (WIR) 2016.
International response to Make in India has been impressive. Between October 2014 and March 2016, US$100 billion of foreign direct investments have come into India.
FDI has increased by 75 per cent in the automotive sector; 200 per cent in the chemicals sector; 260 per cent in the telecom sector; and 400 per cent in the computer software and hardware sector.
Automobile majors are establishing or expanding capacity in India. These include Mercedes Benz, BMW, Volkswagen, Volvo, Ford, Honda, among others. Isuzu and Kia Motors have announced large investment plans in India.
GE is investing US$6 billion in a diesel locomotive plant for Indian Railways. Alstom is also making an equally significant investment in electric locomotives in India.
Seventy-two new manufacturing plants for cell phones have been set up in the last two years. The number of cell phones manufactured in India jumped from 60 million in 2014-15 to 175 million in 2016-17.
Thirty bio-incubators and biotech parks were supported/established during the two-year period from 2014 to 2016. In the food processing sector, six mega food parks, 56 cold chain projects, and 11 quality testing food labs were commissioned in the last two years.
The innovative "Bengaluru-Boston Biotech Gateway to India" initiative is connecting a range of institutes in Boston (Harvard/MIT) and Bengaluru to share ideas and mentor entrepreneurs in areas like genomics, computational biology, drug discovery and new vaccines.
As India moves quickly towards its target of 175000 MW of renewable energy capacity by 2022, manufacture of solar and wind equipment is attracting great interest. More broadly, the electrical machinery sector is expected to grow to US$100 billion by 2022, providing enormous manufacturing opportunities.
Defence manufacturing in India, both for major platforms and subsystems and components, is the next major frontier of India's industrial progress. India's indigenously developed platforms like light combat aircraft Tejas, light combat helicopter and advanced naval ships as also weapons systems have received a major boost in the past three years. Reforms in the procurement system, greater role for private sector in defence manufacturing and liberal foreign investment regime of up to 100 per cent in certain conditions have attracted major India and foreign firms to this sector. Kamov of Russia is setting up a plant for helicopter in India. Others with existing and announced plans include Boeing, Lockheed, Rafale and Airbus.
The finest example of Make in India is India's Space Programme. The indigenous programme has reached a high level of sophistication and global competitiveness. From the first successful maiden launch of the Mars mission to a record-breaking launch of 104 satellites in a single mission on Feb 15, 2017, the Indian Space Research Organisation has demonstrated India's indigenous manufacturing capabilities.
Equally impressive is the development of indigenous manufacturing capabilities in the entire nuclear fuel cycle, including the pressurised heavy water reactors for nuclear energy.
India's micro, small and medium enterprises constitute the backbone of the economy, industry and exports. There have been major sector-specific support initiatives, including skill and technology modernisation, for traditional sectors like leather, textiles, gems & jewellery and food processing. In addition, the MSME sector in India is thriving in new areas like biotechnology, biomedical devices, electronics and telecom, besides IT-enabled startups.
Indian startups are aggressively exploring international markets. Last month, for example, Syenergy Environics, which developed and produces chips in India to cut off harmful radiation from electronic devices, launched its global market development from Singapore.
Singapore's SME sector will find in India a market that offers sustained long-term growth potential. In addition to guidance from Singapore's government agencies and business chambers, the SME sector will get full support in establishing their businesses in India from government agencies such as Invest India and similar institutions established by state governments as well as business chambers. In addition, as manufacturers from countries like Korea and Japan have done, Singapore SMEs could draw upon Singapore's expertise and track record in setting up industrial parks in India to establish a collective presence in India.
- The writer is High Commissioner of India to the Republic of Singapore.