The 'Make In India' Roll-Out

 The ‘Make In India’ Roll-out

Never mind who grudges it, this will happen- Anne Boleyn

The catalyst may have been an obsessive love affair between Anne Boleyn and an heir-seeking Henry VIII, but the frisson did create the Anglican Church. It reduced the authority and sway of the Pope for all time, and created two rival camps of ‘Papist’ Catholics and ‘Reformist’ Protestants . It became a decisive moment, a turning point, in the history of Europe and the world.

There is a momentous quality, the feel of a tipping point, to Narendra Modi’s “Make in India’ initiative, first hinted at during his Independence Day speech on August 15^th, 2014, launched in September, elaborated in December. It is a break with the povertarian, needy outlook of the past. At its core, ‘Make in India’ seeks to manufacture, here in India, most of its high-value/high-tech domestic needs, particularly in Defense Production, and to a quality specification second to none, with the surplus production to be exported.

Defense is a priority area not only for the nation’s security but because India is the biggest arms importer in the world. This not only means we pay fat premiums because we are over a barrel, but have little control over the subsequent servicing and spare parts support. We also learn little about the technology deployed, and are quite often sold out-of-date equipment at very high prices, with no choice in the matter.

Our R&D capabilities and spends too are almost negligible, not only in defense production, but in other manufacturing sectors as well. But in all of this, as the Modi Government through Defense Minister Parikkar tries to change the system, it faces resistance from vested interests which have long profited from the importation and purchase regime.

Even government agencies such as DRDO and HAL have never delivered very much, except for missiles, and satellite-launch technology. Projects languish for decades, perhaps tainted by the same malaise of deliberately not making progress. The work to change all this will have far reaching effects to India’s benefit, but will call for a daunting systemic overhaul.

The recent export of a coast-guard vessel to Mauritius, inaugurated by the prime minister during his recent visit, is illustrative of the fact that we can now make and export such ships, including the bigger stealth frigates made for the Indian Navy. Work is also going on to build our own aircraft carriers, and when this is done, we will join the ranks of just  five or six countries that can make such  massive and sophisticated warships of 45,000 tonnes and more ( America makes 95-125,000 tonners).

The old British-made Vikrant, a WWII ship, and our only Aircraft Carrier for long, weighed in at just 28,000 tonnes. It was recently retired in favour of its bigger (45,000 tonnes), Russian built replacement, (the former Admiral Gorshkov), elaborately and expensively refitted after many delays. But China is already making 65,000 tonne aircraft carriers, nuclear submarines, other defense equipment and all sorts of aircraft.

India is presently conducting sea trials for the first indigenously built nuclear submarine named Arihant. But, it all takes far too long, and is soon overtaken technologically in the interim. And, all of these examples are describing the ponderous progress made by the government, bilateral efforts, and government-owned units.

The Modi ‘Make in India’ initiative seeks to embrace much greater private sector involvement for the first time, overcoming objections from  certain quarters wanting to keep defence production a monopoly of government enterprise. This despite overall poor results, and vast time and cost overruns.

The ‘Make in India’ initiative also is by no means confined to Defense, and lists at least 13 thrust areas.

But because of the trillions of dollars involved, many of our biggest private players are interested in the military manufacturing. The Anil Ambani led Reliance Group is keen to manufacture helicopters against a requirement of the Armed Forces alone valued at over Rs. 18,000 crores initially. The Tata Group, Mahindra, L&T, Mukesh Ambani’s Reliance, and several others, are also already invested in participating in the private sector cum foreign collaboration to make defence items in India.

The potentially transformative ‘Make in India’ initiative also aims to provide massive employment, coupled with great savings in cost, and a surging boost to the Gross Domestic Product. It is a policy with considerable breadth of vision, designed to sharply boost the declining manufacturing scenario in India from a GDP share of about 15% to 25%, while taking, along with the infrastructure development spends, to a decade and more of double- digit growth, going forward.

The enabling legislation and procedural overhaul is currently a work in progress, less than a year into this government’s five year term, but with only the Insurance Bill passed into law so far. This is in the face of immense Opposition obstruction and filibustering. Still, $ 15 billion in foreign investment is expected to come into the country as a consequence, just from the upping of FDI from 26% to 49%.

Insurance money generally goes into infrastructure projects, with their long gestation periods. The distressed Indian Railways, reviving under Union Minister Suresh Prabhu, has already contracted loans of Rs1.5 lakh crores over 5 years from the Life Insurance Corporation of India towards modernization, manufacturing and infrastructure projects, even before the passage of the Insurance Bill into law.

Minister of State for Finance, Jayant Sinha said India could well do with at least another five insurance behemoths the size of LIC, to meet some of its infrastructure financing needs alone. This is, of course, is quite apart from the fact that much that should be insured is currently not so, both because of the lack of resources in the  under-capitalised insurance industry, and the paucity of innovative products and coverage schemes.

The Government is also gathering unprecedented sums from its auction of spectrum and coal blocks currently, and expects to garner more from the just passed Mines and Minerals Bill which seeks to offer 50 year mining leases to the private sector, while bringing in much needed international mining technology into the country.

Other laws on labour, land, procedures, tax rationalisation etc. are being urgently fast-tracked to make it easy and convenient to Make in India. And then there is the substantial human resource and the infrastructure being built to complement it.

Some areas of manufacture such as automobiles and automobile components have already taken advantage of favourable terms, prevailing over several years now, to make more and more in India. And this, not just in terms of  CKD assembly operations, but sourcing much of the componentry domestically. This activity is slated to grow further and faster, as the second stage of reforms currently being undertaken, gains ground.

Many countries and companies from around the world have declared that they will soon establish specific green field projects. Others are busy expanding existing operations both in terms of size and scope.  Man y are in electronics, telecommunication, power generating and transmitting equipment, railway equipment, but also fashion, chocolates, furniture, more vehicles etc.

This Government proposes to press hard on this flagship initiative. It will give wings to its “Sabka Saath, Sabka Vikas” policies. It is expected to touch the lives of many Indians directly, perhaps more than all other thrust areas put together, including the massive boost planned in infrastructure.

The monies allocated for infrastructure in the 2015 Union Budget and going forward over five years is most encouraging however, and   has been very well received by business, industry and the global investment community. Global developmental lending agencies such as the World Bank, the IMF, ADB, the new upcoming BRICS Bank and so on are keen to  help too in various areas including the further development of  nuclear power.

Many countries will support India on this great manufacturing and related infrastructure building initiative, especially since India is today the fastest growing economy in the world.

Some of them are our traditional collaborators such as America, Japan, South Korea, Singapore and the leading countries of Europe, France, Germany, and Russia. But many others are coming forward too, with immense additional potential, the most important being China, followed by others in the Asia-Pacific Region and West Asia such as Australia, Myanmar, Thailand, Vietnam, Israel, Oman, Saudi Arabia, Iran and Iraq.

Countries in the SAARC region that will be our partners include Nepal, Bhutan, both for electricity generation and transmission, Sri Lanka, and Afghanistan, for many other possibilities.

Mr. Modi’s energetic foreign policy is hand- in-glove with his ‘Make in India’ dream, and designed to bring in massive investments. History will surely look back at this time and mark it as the period in which India began to realise its true potential at last. The spirit of Henry VIII knows now, perhaps in hindsight, exactly what this can mean.

For: The Pioneer

(1,464 words)

March 20^th, 2015

Gautam Mukherjee