How Modi's 'Make in India' is turning red tape into red carpet

On the eve of his departure for the United States, Indian Prime Minister Narendra Modi made a clarion call to investors in his “Make in India” campaign launch aimed at injecting renewed business confidence and trust in the government’s investor-friendly agenda.

Never before has India seen a government as committed to radical changes, as capable of articulating a clear and powerful vision, and one effective in its ability to mobilise an entire bureaucracy towards the achievement of its goals.

Modi’s genius is in his ability to cut through complexity and deliver a simple message that has galvanised an entire nation towards the promise of a brighter future.

Leading industrialists and CEOs of approximately 3000 companies from 30 countries attended the launch of this initiative and applauded Modi’s visionary leadership, now being viewed as a key factor in rising business confidence amongst captains of Indian industry.

The ‘Make in India’ movement has set in motion a process of translating into action a prime ministerial mission to turn India into a global manufacturing hub. Modi’s government is acutely aware that capital will not flow merely at their invitation. Instead, it will go where there is growth and a multiplier effect.

The government’s focus lies squarely on transforming the mindset of bureaucracy as enablers of the right conditions for attractive investment returns. This, in turn, is expected to offer investors the security, growth and returns they seek.

Modi’s launch was not about tax incentives, special economic zones or government handouts.

Instead, it was a call to local industry captains to urge them to have the confidence to ‘Make in India’. The call to global investors came with a clear directive to make a market in India, and not to view India as a market alone. Foreign Direct Investment, according to Modi, also brought with it a responsibility to “First Develop India”. A large prize awaits those who build the purchasing power in the Indian market.

The government’s commitment to efficient, easy and e-enabled governance is backed by a new online portal, makeinindia.com, which identifies 25 sectors including automobiles, aviation and construction that have the potential to attract investment. This web portal will provide a single window to all investment-related queries.

The government's manufacturing push is timed to attract many global companies seeking an alternative to China, as the costs and risks of manufacturing there rise. India is the only place that offers the unique combination of democracy, demographic dividend and demand. These are powerful differentiators, which may prove to be a winning combination in the long term.

Modi’s “Make in India” campaign is his initiative to transform the country into a global manufacturing hub, and in so doing provide jobs for millions of youths.

Over 10 million young Indians join the workforce every year, and keeping this population positively engaged in the skilled workforce is a central driving force for the government.

Leading captains of industry say this is an historic day for India as Modi takes a firm stance to reverse India’s international reputation for inefficiency and lack of competitiveness.

Since his election in May, Modi has bagged investments to the tune of $34 billion from Japan and another $20 billion from China, largely to assist in upgrading its infrastructure.

The government is bringing about changes to antiquated labour laws, the Factories Act and the Apprenticeships Act to offer greater flexibility to employers and create new opportunities for the workforce.

Opening new sectors like defence and railways to foreign direct investment is amongst the driving forces expected to boost the economy. Investment has been lifted up to 100% via the automatic route in construction, to fuel the vision of developing 100 Smart Cities.

Indian state-led programs, similar in content to Modi’s signature Vibrant Gujarat program which led to the transformation of that state, are expected to provide extra vigour to the initiative.

While the World Bank recently placed India a poor 134th among 189 economies in its ease of doing business report (regional rival China ranked 96^th) the message to foreign investors in the “Make in India” initiative is clear enough — “India is moving towards a better future, and is a better place to do business”.

India’s manufacturing sector, currently comprising 15% of GDP, will be pushed to 25% in the years ahead. The central government’s objective is to achieve 10% growth in the manufacturing sector on a sustainable basis in the longer term. This will be achieved through a focus on value-added, high-end precision manufacturing, innovation and design. The government’s development model includes the creation of 21 clusters supported by ecosystems consisting of infrastructure, labour, supply chain resources and skills.

While foreign investment rules have been relaxed, the reality of doing business in India involves engaging with byzantine rules and regulations and dealing with a stringent tax regime. British mobile giant Vodafone is locked in a $2.4 billion tax dispute with the Indian government, while Finnish company Nokia also saw its plant in India being seized over a tax dispute.

To roll out a red carpet for investors, the government has revamped an Invest India unit which will now act as the first reference point for guiding foreign investors on all aspects of regulatory issues.

This manufacturing push reflects a genuine and growing partnership between Indian industry, entrepreneurs and the government. India’s mission to Mars was hailed a world-class feat showcasing its strength in high-end, precision manufacturing.

This clarion call from the Indian prime minister to the world to come and “Make in India” could not have come at a better time.

Rohini Kappadath is director of Cross Border Business at Pitcher Partners.