Make in India slowly making a mark

The Narendra Modi government's relentless efforts to boost domestic manufacturing and generate millions of new jobs in the country are slowly beginning to bear fruit. The Narendra Modi government's Make in India initiative seems to be paying dividends. For the first time ever, domestic production of electronics exceeded imports. The domestic output of electronics in 2016-17 was $49.5 billion compared to $43 billion of imports. Electronics manufacturing is a major focus area of the Indian government and it has announced several measures to boost local output of smartphones, televisions, appliances, set-top boxes and LED lamps. The government is targeting a turnover of $1 trillion in digital activities by 2022 and the manufacture of electronics items has been identified as a big a focus area enroute to achieving this goal. The background About 12-15 million youngsters enter India's job market every year but the country's predominantly service sector-oriented economy is not structurally geared to absorb this massive influx of human resources. The only sector that can is manufacturing. Rising costs in China are also prompting many of the world's largest companies to consider setting up manufacturing bases in alternative locations. So, the time may also be propitious for India to present itself as that alternative. Thus, the Narendra Modi government has unveiled the ambitious Make in India initiative to place India on the world map as a manufacturing hub. The goal: Ramp up the share of the Indian manufacturing sector, which currently accounts for about 18 per cent of the country's GDP, to 25 per cent by 2025 and create up to 90-100 million additional jobs. Infrastructure still a roadblock India needs FDI as much as the foreign investors need India's low-cost manufacturing bases to make their products and the country's vast domestic market to sell their goods in. A major roadblock to faster growth rates - a necessary pre-condition for generating jobs, spreading prosperity and lifting millions out of poverty - is India's creaking and outdated infrastructure. Finance Minister Arun Jaitley has said India needs approximately $646 billion over the next five years to fix the country's infrastructure. That's about $129 billion every year for five years. Jaitley has taken the lead by allocating $90 billion on infrastructure creation and renewal in this year's Budget. With private sector investments remaining tepid and banks unable to lend because of the NPA overhang, FDI remains the only route to make up the deficit. Fiscal incentives To incentivise the local manufacturing of electronics goods, and discourage imports, the government has recently increased import duties on a number of electronic components that go the manufacture of items like mobile phones and television sets. The idea: encourage foreign companies to set up factories in India to manufacture these items as part of the Make in India initiative and generate jobs and create local competence in this field. The import duty on components for mobile phone has been increased from 10 per cent to 15 per cent and that for televisions doubled from 10 per cent to 20 per cent. This approach has already paid huge dividends in the automobile industry and enabled the country to emerge as the world's small car hub. Now, the government is replicating this tried and tested formula in the electronics sector, which accounts for the second largest component after oil in India's import bill. Focus on defence sector Meanwhile, the Modi government's efforts to develop an indigenous defence-industrial base continues to gather place. Close on the heels of signing a deal with Russia for the local assembly of Kamov helicopters and the launch of the first Made in India Scorpeone class submarine, Defence Minister Nirmala Sitharaman has cleared the tender for the acquisition of 61 air defence guns under the Make in India programme. The cost: $1.6 billion. “The tender cost will be more than Rs 10,000 crore and prominent indigenous defence firms such as Tata Power SED, Punj Lloyd, L&T, Mahindra Defence, Bharat Electronics Limited and the Ordnance Factory Board are expected to bid for the contract,” government sources told the media. These guns will replace the Russian-origin L-70 and Zu-23 air defence guns. As part of the deal, the Indian company that wins the contract will have find a foreign partner that will help them make the guns under the “Buy and Make” clause of the defence acquisition procedure. The guns will have to delivered within seven years.

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