Made In India: 75 Years of Business and Enterprise
- In Book Reviews
- 09:27 AM, May 29, 2023
- Venkataraman Ganesan
It was 2014. Amitabh Kant was nearing the end of his tenure as Secretary, Department of Industrial Policy and Promotion (DIPP). He was also one of the candidates shortlisted to don the mantle of Chairman, Competition Commission of India (CCI) following his retirement from the Government. However, the newly elected Prime Minister of India, Narendra Modi, had other plans in mind for Kant. Goading the latter to continue working in the Government, the Prime Minister appointed him as the CEO of NITI Aayog, a newly created body that had replaced the Planning Commission. The mandate provided to NITI Aayog, in reductionist terms, was this: to develop into “a state-of-the-art resource centre with the necessary knowledge and skills that will enable it to act with speed, promote research and innovation, provide strategic policy vision for the government, and deal with contingent issues.”
“Made In India” chronicles the strides taken – and continue to be made - by India since 2014 in developing an economy that is resilient to shocks, responsive to unforeseen exigencies (rather than being reactive), and relentless in its ability and intent to reimagine and reinvent itself. Amitabh Kant in his capacity as the helmsman of NITI Aayog had a ringside view of the reforms that were promulgated at the levels of both the Central and State Governments.
However, as he reiterates emphatically in his book, the one primordial feature of these reforms was the unshackling of the private sector. The yeoman contribution made by the private sector in many ways, resulted in the nation surging ahead of the United Kingdom to be the fifth largest economy in the world – a fact that warmed the cockles of the heart of every Indian! The recognition provided to the private sector also marked a departure from the pernicious Licence-Permit-Quota Raj that had thwarted the ambitions and aspirations of the private sector for over sixty decades!
Kant in the initial chapters of his compelling book, lays down the terrain of the land as prevalent during the post-Independence period vis-à-vis India’s economic planning and structural reforms. In 1944, a group of leading industrialists of the likes of J.R.D Tata, Ghanshyam Das Birla, Sir Purshotamdas Thakurdas, Sir Shri Ram and John Mathai, among others, published a blueprint for the Economic Development of Independent India. Popularly known as the Bombay Plan, it envisaged a key role for the private sector and an enabling and ennobling role for the Government.
Envisioning a doubling of India’s per capita income within 15 years, the Bombay Plan divided the industry into two segments: basic goods and consumer goods. Basic industries (including power, mining and metallurgy, engineering, chemicals, transport, armaments, and cement) were designated the foundation of India’s industrial transformation. Consumer goods manufacturing would be the prerogative of small-scale industries. However, as Kant informs his readers, not only were these recommendations ignored and the private sector relegated to the periphery of the economy, but capitalism was also equated with the perniciousness of colonialism.
The Industrial Policies and the Five-Year Plans proved to be the firm bastions and bulwarks of a central command and planning regime. Arms and ammunition, atomic energy and railways were monopolized, and six basic industries belonging to the sectors of coal, iron and steel, aircraft manufacture, shipbuilding, and communications equipment (telephones, telegraphs, etc.) were brought under State control. Protectionism and trade barriers ruled the roost as India found itself in the grip of a License-Permit-Quota Raj.
Establishing an industry became a rigmarole of obtaining approvals and accords. An ‘in-principle’ approval from the Ministry of Industry was the first step. This would be succeeded by a ‘letter of intent’ (LoI), containing a phased plan towards indigenization of manufacturing. The approval of the Chief Controller of Imports and Exports became necessary if imported capital goods were required. Separate import licenses were required, renewable on an annual basis, for other raw materials and intermediate goods. By the time the concerned industrialist succeeded in successfully obtaining a myriad of approval – without giving up being bogged down by physical fatigue and mental stress - it would easily be more than a year before the business could be incorporated.
The degree to which these stifling regulations strangulated the development of the nation is apparent from an analysis of the comparative progress made by an Asian counterpart of India, South Korea. “In 1960, India’s and South Korea’s per capita incomes were not different. In current dollars, India’s per capita GDP stood at $90, while South Korea’s incomes were $156. In the three decades since, by 1990, South Korea’s income widened to $6,600, while Indian incomes stood at $367. Investments in South Korea increased from 10 percent of GDP in 1960 to 39 percent of GDP by 1990. Exports increased from 2.5 percent of GDP to 25 percent during the same time. South Korea averaged a real GDP growth rate of 9.6 percent between 1960 and 1990. Per capita GDP, in turn, grew by 7.7 percent in the same period.”
India also suffered from the burden of an unimaginably high percentage of tariffs and levies. The highest tariff rate in 1990–91 was at a jaw-dropping 355 percent while the average tariff rate was 113 percent. However, under the astute stewardship of P.V. Narasimha Rao and the ingenuity of Manmohan Singh, many measures were undertaken since 1991 by way of liberalization. The draconian Industrial Regulation and Development Act was dismantled and by 1993–94, the top tariff rate had fallen to 85 percent.
Even though many encouraging initiatives were undertaken by the Narasimha Rao Government that birthed the Public Private Partnership system (the National Highways Act, 1956, was amended in 1995 to encourage private sector participation) the power and presence of the private sector was not fully harnessed. But the role of the private sector underwent a paradigmatic shift following the 2014 elections. The Government started playing an enabling role by facilitating a ‘light touch’ regulation approach.
PRAGATI, an information and communication technology-based, multimodal platform for proactive governance and timely implementation was established. The Prime Minister himself intervened to remove bottlenecks that were delaying projects in general and infrastructure projects in particular. This initiative had a desirable ‘knock-on’ effect.
As the ease of doing business in India increased, Foreign Direct Investments started gushing forth. Even at the height of the COVID-19 pandemic, FDI inflows touched record levels of $81 billion. In the seven months since April 2022, GST revenues soared above the 1.4 lakh crore mark. A horde of alluring initiatives such as Make in India, Startup India, PLIs, Aspirational Districts, eMobility, and Green Hydrogen, etc not only opened up the spigot of capital expenditure for the private sector to exploit (following the most recent budget the capital expenditure outlay stood at a remarkable INR 10 lakh crore) but also attracted foreign investors. This has provided an opportunity for India to make its mark in the Global Value Chains.
Kant does not write for just the benefit of hindsight to egg him on. Being at the forefront of NITI Aayog vested in him a responsibility to bring in the desired shift in initiatives and incentives. Being directly monitored by the Prime Minister also meant that NITI Aayog could not afford to blunder. But the resource centre has more than stood up to its challenge.
Ø NITI Aayog has formed a tech stack known as 'IndiaChain.' IndiaChain is the name given to an ambitious project to create a nationwide blockchain network.
Ø With the assistance of the Ministry of Health & Family Welfare (MoHFW) and technical support from the World Bank, NITI Aayog has been leading the Health Index initiative since 2017.
Ø As a result of NITI Aayog’s initiatives, 2,530 cities have implemented Online Building Permit System (OBPS) in thirty states and Union Territories
Ø Ten states have put in place Transit Oriented Development (TOD) policy and have identified corridors.
Ø NITI Aayog formulated a Model Agricultural Land Leasing Act, 2016 to both recognize the rights of the tenant and safeguard the interest of landowners. A dedicated cell for land reforms has also been established.
Ø NITI Aayog recommended the scrapping of the Medical Council of India and suggested a new body for regulating medical education.
Ø NITI Aayog devised an action plan on advocacy, awareness, and coordination of handholding efforts among the public, micro-enterprises and other stakeholders.
Ø Launched two incentive schemes to promote digital payments across all sections of society - the Lucky Grahak Yojana and the Digi Dhan Vyapar Yojana. A direct outcome was over sixteen lakh consumers and merchants winning Rs. 256 crores under these two schemes
Ø To foster creativity and scientific temper in students, NITI Aayog assisted in establishing five hundred ‘Atal Tinkering Laboratories’ under the aegis of the Atal Innovation Mission. This initiative means that students in schools across India can design and make small prototypes to solve challenges they see around them, using rapid prototyping technologies that have emerged in recent years.
India has also witnessed a veritable churn in her start-up ecosystem. ‘Startup India’ was birthed with the primary objective of catalyzing the start-up eco system and making it more inclusive and inviting. Many antediluvian rules that were hindering the growth of start-ups were removed and an encouraging platform was laid to foster innovations in this sector. As the adage goes, the proof of the pudding lies in the eating. Since the launch of Startup India, a mind-blowing 65,000 start-ups have been officially established. According to published research issued by NASSCOM and Zinnov, close to 25,000–26,000 tech start-ups were founded in India between 2011 and 2021. The year 2021 added three to four new ‘unicorns’ every month. India’s start-up ecosystem is now the third largest in the world. A new internet user is being added every three seconds. Seventy-five crore or 750 million people are accessing the internet every day.
But the most refreshing and promising aspect of the thriving start-up ecosystem, as Kant illustrates, has been its democratization. As opportunities and openings became increasingly accessible, geography ceased to be a hindrance or even a differentiating factor. According to NASSCOM, 29 percent of all tech start-ups in India are now coming up in the emerging start-up hubs of Ahmedabad, Kolkata, Indore, Lucknow, Coimbatore, Chandigarh, and Jaipur, among others.
The Government, while facilitating the growth of the economy, has preferred to take a back seat as far as intervention and involvement are concerned. Restricting its role to primarily that of a policy maker, the government has also been supporting start-ups by providing crucial market access. The Government e-Marketplace (GeM), set up Under the Digital India mission focuses on improving market access to startups. GeM recently launched an initiative called the ‘Startup Runway,’ a dedicated marketplace that covers a range of sectors such as advanced manufacturing/robotics, agritech, AI and big data, AR-VR, blockchain, clean tech/renewables, consumer/home electronics, cybersecurity, edtech, health, and life sciences, among others.
However, a glaring deficiency that has unfortunately not occupied much space in this otherwise insightful book, is the stagnating contribution of manufacturing to India’s GDP. The divergence between the contributions of services and that of manufacturing to GDP is not just increasing but it is also alarming. According to a McKinsey report, between 2006 and 2012, India’s manufacturing sector GDP grew by an average of 9.5 percent per year. “Then, over the next six years, growth declined to 7.4 percent. In fiscal year 2020, manufacturing generated 17.4 percent of India’s GDP, little more than the 15.3 percent it had contributed in 2000. (By comparison, Vietnam’s manufacturing sector more than doubled its share of GDP during the same interval).”
According to the report, for India’s manufacturing GDP to pick up momentum, a few urgent things need to happen:
Ø India’s manufacturing value chains must lift their productivity—in GVA output per full-time-equivalent worker—closer to global standards. Compared with India, manufacturing productivity in Indonesia is twice as high; in China and South Korea, productivity is four times higher.
Ø India’s manufacturers, if they have to compete with overseas peers, must source technology themselves through acquisitions and alliances. The government can assist in creating a stable framework of time-bound and conditional localization incentives to attract FDIs and Joint Venture collaborations in India.
Ø There would need to be sustained access to capital. The manufacturing sector would require investments totaling $1.0 trillion to $1.5 trillion over the next seven years to double its GDP in the same timeframe, provided that India also raises its GVA capture in these value chains by 25 percent.
“Made In India” makes for an absorbing read. Nostalgic in parts and optimistic in others, it is an especially useful handbook for obtaining an informed perspective on the opportunities, challenges and capabilities that would be the preserve of the fifth fastest-growing economy in the world.
Publisher: Rupa & Co; PP- 240 pages
Image source: Phoenix Academy for Excellence
Disclaimer: The opinions expressed within this article are the personal opinions of the author. MyIndMakers is not responsible for the accuracy, completeness, suitability, or validity of any information on this article. All information is provided on an as-is basis. The information, facts or opinions appearing in the article do not reflect the views of MyindMakers and it does not assume any responsibility or liability for the same.
Comments