From Elephant to Lion How Far Can We Make It?

By Sagarika Ranjan
In Cover Story
April 1, 2015
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Manufacturing is largely challenged by stringent Indian labor laws that curb the fluid functioning of the industry. Archaic policies such as the Contract Labor Act & Minimum Wages Act need to be done away with.

make-in-indiaThere is hope in the air, the new hope of growing India. Our country has grown mature and so have the people and their needs. Change is therefore inevitable and to bring about this change Modi’s magic wand has deployed tools like smart cities, Niti Aayog, e-governance, Swacchh Bharat Abhiyan and the most remarkable – Make in India, to metamorphose the elephant to a lion.

Budget 2015 has stressed that ‘Skill India’ needs to be closely coordinated with Make in India and that an upgraded skills mission has to substantially contribute in boosting the employability of the unskilled youth of the country. A more skilled workforce also contributes to higher productivity with same input.

Truth, however, when viewed from the pragmatic lenses of the economic analysts is that the lion is still a gigantic yet fantastic manifestation for the skill-starved nation of ours. The Make in India initiative has identified 25 thrust sectors where the government believe Indian industry can compete with global manufacturing giants. The key focus areas being automobiles, chemicals, IT, pharma, textiles, ports, aviation, leather, tourism and hospitality, wellness, and railways. These sectors will see inflow investments, sector specific FDI and other policies to generate maximum production. But the big question is where are the farmers and the cottage industry that are the backbone of the Indian economy?

Undoubtedly, the plans do consider this and there are roadmaps that talk of developing the foundation but the question here is that is India prepared  to take up the pressure?

A shift from the aims and focus to the roadmap unleashes the challenges. Several analytical reports present a similar idea of how these plans do not, for now, fit into the frame of the Indian economy. A recent decision of the government to drop the idea of aiming at the three per cent fiscal deficit for next one year questions the viability of the aims.

According to a report by the Greyhound Research, the campaign which is aimed to boost the country’s domestic manufacturing industry with initiatives like easing the process of industrial licenses, development of new manufacturing cities and logistic hubs
will also create immense employment opportunities for low skilled workers in the country. However, the groundwork needs to start from scratch.

As Sanchit Vir Gogia, Chief Analyst & Group CEO, Greyhound Research puts it, “We believe that for Make in India campaign to be successful, the government will have to focus on formation of effective regulatory framework for transparency in decision making and ensuring timely implementation of projects.”

‘Make in India,’ yes, but what will the industry make, for whom and how India will benefit in the long run are some of the questions that appear hanging. Are we looking at the goals and benefits – job creation, foreign investments, competition that is expected to churn out better quality and fair prices?

Surely these do paint a rosy picture but in the process are we failing to see the limitations and wearing off of the brush – the infrastructure, our Indian infrastructure.

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Adequate push is required to encourage small and medium sized units

And physical infrastructure such as roads, ports and power plants are not the only problem areas. Soft infrastructure is equally important  and is in similar state of shambles and is the physical infrastructure. The case of Nokia plant in Tamil Nadu is a glaring example of this. The plant that employed thousands in 2009, had to offer voluntary retirements for its employees, in their early twenties, as it was to draw the shutters due to ‘differences with the government.’ POSCO and ArcelorMittal had to scrap their multi-billion dollar projects because of the regulatory and land acquisition hassles The flip side of the Make in India, as per extensive research by the Greyhound, is that the scheme will promote domestic manufacturing for International consumption, but what about our Indian markets? While the government has incentivized manufacturing for the economy, it has still not created any provisions to guarantee that majority output will quench the thirst for local demand. The purpose of Make in India is to give power to the small and medium manufacturing units; however it still lacks a framework which encourages domestic consumption.

Then there are ecological concerns which need to be addressed while making a dash for manufacturing. “India must learn from the mistakes made by China. Policy and regulations to better manage environmental impact is critical. Also, we need to use a Cherry pick approach i.e. focus on niche segments where China hasn’t done well,” says Gogia.

The ideas of reforming the pay commission, taxation, labor laws and push for laws to suit the plans and make congenial changes does not necessitates achievement. The ambition to revitalize the Indian economy seems rigged and full of overambitious projects.

The present government aims to provide meaningful employment for the 10 million young Indians who will come of working age each year for the next 15 years. But this idea sounds utopian to many who point towards the non-enabling operating environment. The two factors which have become increasingly important in constraining the growth of organized manufacturing are the difficulties in securing environmental clearances and acquiring land.

Manufacturing is largely challenged by stringent Indian labor laws that curb the fluid functioning of the industry. Archaic policies such as the Contract Labor Act (aimed at regulating and checking limited inflow of contractual labor) and Minimum Wages Act; need to be relooked at. These policies are not flexible and often cause labor unrest and disruption.

GST, single window approval for projects, Swacchh Bharat Abhiyan, taking banking facilities to the people of the lower strata present etc. all paint progressive picture but where are we thorough with the foundational basics of these facilities? Surely these
initiatives cannot ride on obsolete labor laws, red-tapism, the huge unorganized labor force or the gasping judiciary?

Durgesh is a 12-year-old boy who sells flowers in Bengaluru. All he knows is to make these flowers to survive his long life. He fears that if the foreigners take over, “nobody will buy my products”. He says: “What will I do if these big factories come here? I do not know how to use the big machines. I will die of hunger.” Durgesh represents thousands from across India, who feel threatened by the possible onslaught of global industry. The answer to their fear is “skill development” which would equip them to coup with the changing market demand.

The vision indeed is commendable but it’s not new. Such novel visions in the past have all come undone and the sufferers were invariably the working class. Taking a thread from POSCO’s process of setting up industry in Odisha, hundreds were ruined and
all were downtrodden people with no scope of alternative livelihood. Forcible land acquisition led to widespread resentment, sparked protests and even led to deaths. The fear today is – what will happen when several POSCOs land on our soil? Is there a safety net? Tough questions begging answer.

The land belongs to the farmers but the land acquisition laws and labor laws are allegedly being engineered to favor the industry. Profit-driven goals appear to be ignoring the welfare of a large number of people in lower strata of society.

Yes, these farmers did get jobs at the factories but that is half the picture, the better half. The gray area was that these lords of their land and respectable tillers got the job of toilet cleaners, sweepers or at the most gate keepers for they are not skilled. The
colossal promises of training the locals and employ them were restricted to the papers.

“Make in India campaign should now align with the Ministry of labor and employment that has come up with the Smart Cards with unique identification number under the purview of the Unorganized Workers Social Security Act 2008. Given the fact that majority of unorganized workers belong to depressed classes, the government has to be more effective in addressing this issue as it is as much social as economical,” suggests Gogia.

He further says that an efficient business environment will be possible only when the administrative machinery in the country is effective. Easier approval of projects and hassle free clearance mechanism will help create a business-friendly environment. To ensure small and medium business units are able to operate and conduct smooth operations, the government has launched the eBiz portal, which will be the one stop portal for requisite government approvals.

It offers only 14 services at the moment such as PAN registry, Certificate of Incorporation, Direct Identification Number (DIN) etc. The eBiz portal is envisaged to offer more than 200 services in the future to enhance ease of doing business for Indian enterprises. This, according to the greyhound research, will definitely prove to be a boon for manufacturing units across India.

Make in India is a really good vision for the nation. It acknowledges that a country with such a large fork force cannot progress only on strength of services industry and that large scale manufacturing is the only option to put so many hands at work. But to
fully realize this vision, many tough questions would have to be answered, careful planning would be required and most of all, a humane approach will be needed because the initiative  would touch millions of lives.

Sagarika Ranjan