China, as expected, has announced plans to
invest $100 billion in India, about half of it in infrastructure alone, over
the next five years. The rest will go into a slew of SEZs around the country,
food processing industry, more bullet trains, and so on.
And Chinese banks, flush with funds, will
finance all the Indo-Chinese joint ventures expected to mushroom. President Xi Jinping is coming on the 17th of
September, Narendra Modi’s 64th birthday, for his first three day
visit to India.
For China, the time is right for this
economic tilt towards India. The new dispensation there recognises that China
has a lot of spare infrastructure-building capacity currently, and indeed a good
deal of surplus manufacturing capacity as well. This, given that its investment
driven domestic infrastructure growth is
now largely done with. China is in the process of promoting its consumption-led
avatar instead. The manufactured export story, once downright stellar, is no
longer robust, since both Europe and America are not buying as much. India, however,
presents a wonderful opportunity. It is large, under-developed, hungry for a
huge amount of capital, technology, product, know-how and expertise, and this
for at least a decade going forward.
India’s dance card for foreign investment
is looking good, even before Prime Minister Modi’s visit to America later this
month. Perhaps the US, which has never matched words to deeds when it comes to
investment in India, will also make bold this time. It may even attempt to
compete with the initiatives taken by Japan and China already, possibly in Defence
production, where billions are easily absorbed.
But, with all this happening, the challenge
will be in India’s ability to smoothly assimilate such unprecedented investment
flows, with even more to come. We must transform our obstructive processes and
bottle-necks. To digest such cash flow,
now that we have begun to attract it, the change that must come will give teeth
to Modi’s oft repeated promise of ‘red carpet, not red tape’.
This will have to go a lot further than
expeditious ‘single window’ clearances. We will have to provide quick, real-time
access in areas opened up to 100% FDI, such as the Indian Railways, soon in
Insurance, and conditionally, in Defence production. We need to develop a brand
new reputation as a truly business-friendly destination.
We do not have to do this as a precondition
for countries that want to exploit our markets while giving us little or
nothing in return. But we must make things as convenient as possible for China
and Japan, countries that are willingly and enthusiastically putting down their
money on India’s future.
Telecom giant Vodafone, Auto conglomerate
Honda, Oil major BP, and sundry others have recently reiterated that India
remains a very difficult place to do business. They have all invested billions
of dollars in India, and are hoping that Prime Minister Modi will change things
at last.
The taxes on manufacturing and inputs are onerous,
multiple, and applied multifariously. They need to be lowered, and simplified
into a GST soonest. Labour hire-and-fire laws have to be put in place to
engender efficiency countrywide, as they have been in Rajasthan, where
personnel changes up to 300 do not need Government prior approval. But even this hardly goes far enough. Consider
that the automobile and motorcycle industry in Haryana today employs about 10
lakh people. And there has been a great deal of labour unrest there, inclusive
of stoppages, gheraos, murders of
management, extensive production slow-downs/stoppages and property damage.
So
much so, that that the auto majors are unwilling to put in new factories in
Haryana, preferring Tamil Nadu, Gujarat, Rajasthan and elsewhere. Much of the
conflict has come on the back of trade union activity protesting terms for
large numbers of ‘contract’ personnel. They do not enjoy several service
benefits, but can indeed be let go, unlike ‘permanent’ employees. But then the
Socialist era Labour Laws make it difficult to hire personnel who are
‘protected’ by the Government .
Additionally, land, electricity, rail, road,
airport and port connectivity, need to be in place or developing. High quality office space, residential
accommodation and recreational facilities are equally important. Law and order,
and faster legal due process must happen. But perhaps, the greatest change has
to come in our attitudes, manners and mores. Corruption must be stamped out of
our dealings and be replaced by an eagerness to facilitate.
By the 18th of September, even
as Premier Xi Jinping will still be here, the world will learn whether
Scotland has indeed chosen to break-away from the United Kingdom. Even if she
does not, Scotland will necessarily be far more autonomous in future. Across
the world, by way of contrast, Hong Kong is inexorably losing its ‘special
status’, spawned in colonial times. Despite protestations, Hong Kong’s identity
as distinct from mainland China is certainly blurring. This, while democratic
India and nominally Communist China, make ready for a decade of unprecedented
collaboration.Gautam Mukherjee
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