Make In India

Promoting ‘Make In India’

Defence Sector

The Honorable Prime Minister, Narendra Modi, has taken a very important initiative in the form of the ‘Make in India’ campaign to promote and encourage domestic manufacturing for various sectors. The most important sector being that of Defence Manufacturing, because it will not only save precious foreign exchange, but will also address the national security concerns at a local level.

The Indian Defence apparatus is the 3rd largest in the world with expected investment of upto ₹ 250 billion in the next 7-8 years. With 60% of India’s defence requirements being met through imports, local defence production is at the heart of the ‘Make in India’ Campaign. In the days to come, import of Defence Equipment is going to be the last option and first priority would be given to the Indian Industry to develop and manufacture the required systems. This programme will employ about 200,000 skilled people in the defence and aerospace industry in 10 years. There are studies showing even a 20-25% reduction in imports could directly add up to 120,000 highly skilled jobs.

The offset policy which stipulates the mandatory offset requirement of a minimum 30% for procurement of defence equipment in excess of INR 3 Billion has been introduced in the capital purchase agreements with foreign defence players ensuring that an eco-system of suppliers is built domestically. The government policy of promoting self-reliance, indigenization, technology upgradation and achieving economies of scale and developing capabilities for exports in the defence sector are a few options making investment in this sector a viable option.

Till now, there were many entry barriers for the domestic industry to enter into defence sector in terms of licensing, FDI policy restrictions etc. In the last six months, the Government has taken several policy initiatives to ease the process of entry into defence manufacturing. The most important is the liberalization of the FDI policy regime for Defence sector to encourage foreign investment in the sector. FDI up to 49% is allowed through Government route (with FIPB approval).

For the first time, a Defence Export Strategy has been formulated and has been put in public domain. The strategy outlines specific initiatives to be taken by the Government for encouraging the export of defence items. It is aimed at making the domestic industry more sustainable in the long run as the industry cannot sustain purely on domestic demand. It is for this reason that Foreign Defense Firms are being invited to enter this sector to not only invest capital, but also to share their know-how and train domestic partners in their respective spheres; namely military hardware, software, encryption and communications.

The Government is committed in creating an eco-system for the domestic industry to rise and to provide a level-playing field to all sectors of industry, both public and private.

Civil Sector

India expressed its intent to become a founding member of the China-led Asian Infrastructure Investment Bank (AIIB) as early as July 2014, hoping that it might become an effective channel to obtain financing for infrastructure projects and the country’s manufacturing sector.The country’s prime minister, Narendra Modi, sees manufacturing as an important part of India’s economy, and he initiated a “Make in India Campaign” in September 2014 to promote products manufactured in the country. The government has been aggressively promoting investing in India since then.Amitabh Kant, deputy minister of commerce and industry, pitched his country’s investment environment in Shanghai on April 3, saying that the Modi administration’s efforts will give Chinese investors better returns on their investments in India than in Europe or the United States.India’s consul general in Shanghai, Naveen Srivastava, said that after Chinese president Xi Jinping’s visit to India last year, there was a new round of Chinese investment fever in the country. Modi will also visit China next month to promote investment.

China-India trade totaled US$70 billion in 2014, or 70 times that of a decade ago. It hopes bilateral trade can hit US$100 billion this year.

But much of that trade was tilted in China’s favor, with India running a US$50 billion trade deficit last year. Getting Chinese enterprises to go to India to manufacture goods there could effectively address the trade deficit.

India’s manufacturing sector is its Achilles heel, Shanghai’s China Business News reported. For years, India’s IT and outsourcing services have enjoyed fame in the world, but its manufacturing sector has lagged behind.

Although India’s GDP rose 4.9% from 2012 to 2013, manufacturing output grew only 1.1% over that time. GDP growth slowed to 4.5% in 2014, and the output of the manufacturing sector fell 0.2%.

Yet India, with its large number of young people, stable political system and robust demand, has the right stuff to become a manufacturing giant.

The Modi administration reaffirmed its determination early this year to develop India into a manufacturing giant on par with China through his “Make in India Campaign.”

One of the pillars of the “Make in India Campaign” is the development of industrial and economic corridors that connect newly built smart cities via newly built railways. It could be the most ambitious infrastructure project since independence in 1947.

The Modi administration has planned four industrial corridors, linking Delhi and Mumbai, Chennai and Bangalore, Mumbai and Bangalore, and Amritsar, Delhi and Kolkata, and one East Coast Economic Corridor linking Kolkata and Chennai.

The Delhi-Mumbai Industrial Corridor has already obtained US$90 billion in financing and technical support from the Japanese government…

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