Make In India

DIGITAL INDIA, THE PATH TO GOOD GOVERNANCE

“If we have to put in use the education, the capability of the youth, we will have to go for manufacturing sector. Therefore from the ramparts of the Red Fort, I want to appeal all people across the world, “Come, make in India, come, manufacture in India. Sell in any country of the world but manufacture here.” This invitation of Prime Minister Narendra Modi in his maiden Independence Day speech to all manufacturers across the globe itself is testimony of the seriousness with which the government is looking at boosting the manufacturing sector for the overall development of the country. Currently the manufacturing sector’s contribution to India’s GDP is just 16 per cent, while services contribute to more than 56 per cent. It is no rocket science that if India has to reap the demographic dividend of its young and educated population, it has to promote its manufacturing sector and pull up its contribution to at least 25 per cent of the GDP. Only then can it create enough employment in the system to absorb the huge talent base. Considering all this, the call that Prime Minister, Narendra Modi has made comes at an appropriate time and the government is strategically working for the transformation of the Indian manufacturing sector. Th is approach has been applauded by industry as well. According to Chandrajit Banerjee, DG CII, “CII is happy to see the high importance attached to manufacturing and investment. As the PM said, manufacturing is necessary for employment and for trade expansion but some of the areas to be addressed for this would be taxation, including introduction of the GST, land acquisition, faster approvals, trade policy, etc.,”. Th at amply sums up what the industry feels about this approach.

SKILLED INDIA AND A DYNAMIC GOVERNMENT MACHINERY = A STRONG FOUNDATION FOR INDUSTRIAL GROWTH

The Government has already started working on building a huge skilled human resource pool and the recently proposed labour reforms replacing the archaic labour laws is a historic initiative in that direction. It may well transform the face of Indian manufacturing in coming days. Modi has clearly indicated this by saying “today, the world needs a skilled workforce. Today, India also needs a skilled workforce. We have young people, they are unemployed but the kind of young people we seek for are not available. If we have to promote the development of our country then our mission has to be `skill development` and `skilled India`.”

Experts too feel that to take the advantage of our demographic dividend it is necessary to make our workforce employable, which unfortunately is not at present. Quite clearly the government has put its focus on this crucial matter and it will surely show results in future. “Millions and Millions of Indian youth should go for acquisition of skills and there should be a network across the country for this and not the archaic systems…. Having taken a resolve to enhance the skill development at a highly rapid pace, I want to accomplish this,” Modi was heard thundering from the ramparts of the Red Fort.

The current government under the leadership of Modi seems to be moving strategically in a positive direction where it wants to correct all the lacunas in governance before it can go all out chasing growth in coming times. In the last three months, all the steps that have been taken clearly indicate towards corrective actions and clearing the systemic bottlenecks; be it the revamp of the environmental and forest clearance procedure, reforming the labour laws, enhancing the FDI limit in various sectors including defence and insurance, pushing for infrastructure development, easing power sector and coal supply problems and the more recent announcements of restructuring the planning commission.

“This is a strategic style adopted by the PM to improve governance first so that it will not create unwanted friction with growth engine going forward. He did the same thing in Gujarat and rest is history that we all know,” quipped a senior bureaucrat in the petroleum ministry. The Government is taking its time to improve upon the infrastructure to lay a strong foundation on which the growth engine can run smoothly at a brisk pace. This can well be perceived from Modi’s words; “Today in the face of global competition, when we have to realize the dreams of millions of Indians, the country cannot run on the lines of “it happens”, “it goes”. In order to fulfill the aspirations of masses, we have to sharpen the tool called the Government machinery, we have to make it keen, more dynamic, and it is in this direction that we are working.” Quality Improvement Is The Key We all know understanding global manufacturing complexities is very important to revamp the manufacturing sector and for this along with lower cost, focus on quality is crucial. It is quite encouraging to see a PM so involved in processes that his critics even name him “overseer” or “quality control manager.” The invitation extended by the PM to the business fraternity to setup their manufacturing base in the country to make electrical, electronics, satellite, submarine, paper or plastic comes with a rider of not compromising on two crucial counts; “Zero Defect and Zero Effect.” Industry too looks amused by the PM’s call. “We are now confident that the ‘Make in India’ and ‘Made in India’ vision will be supported by requisite policy and implementation measures for enhancing the competitiveness of our manufacturing sector. This is critical if we have to create a million jobs each month for next ten years and ensure a sustainable balance of payments” said Sidharth Birla, President, FICCI. Improving the quality of products is as important as improving governance. “It is imperative to for the manufacturer to focus on defect-free products so that credibility of India’s manufacturing capabilities would get a boost in the global market as Indian IT did in the past. Modi has attached “Zero effect on environment” to this thought process, which seems a robust vision,” explains economist Dr S K Dutta. It seems quite right that if our manufacturing follows this mantra than manufacturing goals can be achieved. Focus on quality along with putting more efforts on research and development can answer all complex questions of Indian panorama and the PM has quite clearly indicated towards the same.

DIGITISE TO REVAMP

Our digital progress until now has been associated with the rich and affluent class but the way this new government is moving, already a huge focus has been put on improving governance via the electronic route. Online submission for environmental and forest clearance has already begun, which of course is a big step forward. The Petroleum ministry is working aggressively in data matching of LPG connections via an online mechanism. All the processes in the government have been put on the electronic mode to reduce human interference. The PM himself called for a dream of “Digital India”, which would not be restricted to the elite but for poor people too. Work on connecting each and every village via broadband connectivity is underway so that facilities of quality education, telemedicine, marketing of agri-produce, etc. can reach every nook and corner of the country.

Taking another step forward, the government has spelt out a vision of creating mobile governance rather than e-governance. We have to understand that today though we have a low level of penetration of the internet via PCs, surprisingly a majority of the population have mobile phones in their hands. This powerful tool can be used to create mobile governance, through which each and every job can be done right from operating bank account, issuing e-challans, registrations, submitting applications, land records, etc., explains an official of the ministry of information and broadcasting.

Modi has in fact attached mobile governance movement with manufacturing as today, India imports a huge quantity of electronic goods that burdens Indian financial health. Considering all this, Modi has called all the stakeholders to pave the way for easy, effective and economic governance through e-governance.

GROWTH VIA REFORMS

While on one hand PM Narendra Modi has come out in the open to push the developmental and growth agenda so that the growth engine of the Indian economy can be put back on track, on the other, his government is actively working on tightening all the nuts-bolts that may hamper the full throttle open speed of the India economy. In this league if we have to select one ministry that has literally stepped on the peddle to fuel all its cylinders to make things happen, it is the Ministry of Labour and Employment. It we have to judge the performance of the current government on a 100-day scale then the ministry of Labour and Employment surely comes out with flying colours. In fact what we couldn’t do in the last 68 years, this ministry under the leadership of Modi has done in less than three months.

The Government has already proposed crucial amendments in the archaic labour laws that remained pending for many decades. These include amendments in the Factories Act 1948, Apprentices Act 1961 and Labour Laws (exemption from furnishing returns and maintaining registers by certain establishments) Act, 1988. Among these, the most commendable was the pace with which these proposals have been taken up by the government. It had issued a notice inviting responses for the proposed amendments on June 17 and the Union Cabinet, at an amazing speed, has okayed the proposed amendments on July 31.

In fact the proposed amendments were also tabled in the parliament along with the crucial Insurance Bill during the monsoon session but couldn’t be cleared due to dearth of time and lack of majority in the Rajya Sabha. The entire business fraternity was astonished by the pace with which the government has acted upon in the case of labour law reforms and the grit of the government to push the reforms agenda is indeed commendable. “The quick action has demonstrated the Government’s strong commitment towards pushing key labour reforms to encourage economic growth and generate employment opportunities in the country,” said Mr Chandrajit Banerjee, Director General, CII.

Proposed amendments in various labour acts are sure to bring about a sea change in the business environment of the country and will surely act as a facilitator for doing business. When DSIJ investigated the real thought process of the government while proposing these amendments in labour laws, the seriousness of the government to push growth became quite obvious.

“These proposals will surely change the whole scenario of employment in the country and will be beneficial for both employers and employees. Though people may criticize these amendments for the sake of lamenting the government, we all know that India, particularly the manufacturing sector needed these changes since very long,” comments a senior official of the Ministry of Labour. On the other hand, the opposition, including the left parties have opposed the move of amending the labour laws on various grounds, particularly allowing women to work in the night shift. Firstly the opposition is criticizing the unprecedented hurry with which these amendments are proposed and many are blaming that they have been proposed without much social security to the workers and that these proposals are unduly favouring employers.

GASSING UP

Along with tightening the screws of the economy and industrial development, the government is working in a multi-tasking mode. Along with pushing the much anticipated reforms in Labour, FDI, Financial Sector, Food and Public Distribution, the government is also making a swift progress toward making India self reliant in its energy needs. For this point of view, the Ministry of Petroleum and Natural Gas has already chalked out a seemingly well planned strategy to put the progress of India’s energy sector on course. If we gauge the performance of three months of the new government in the energy sector, there are some key initiatives that portray the seriousness of the government. Petroleum Minister Dhramendra Pradhan’s determination to boost India’s energy self reliance is commendable in this regard. But surely lot needs to be done in this sector if India really wants to improve its financial health as we today import more than 80 per cent of our crude requirement, which sends the country’s Balance of Payment haywire. Th e Government seems quite well versed with this situation and working on a strategy to cope up with both demand and supply side problems.

 ADDRESSING THE SUPPLY SIDE

On the supply side, the government is aggressively working on increasing the crude and gas supply to the country, both from domestic and overseas sources on favourable terms. DSIJ did a deep dive on the strategic initiatives that government has taken to solve the crucial energy problem of the country and found that the Ministry is working on a multipronged strategy to boost the domestic crude and gas production. “The Ministry has made all arrangements to launch the tenth round of NELP (New Exploration and Licensing Policy) and, for this, all the blocks have been marked. Learning from the failures of the past and problems faced thereof, the Ministry has changed its strategy and is mulling a proposal to get advance clearances form five key ministries for the blocks, informs a senior ministry official. “‘These ministries would be defence, Environment and Forest, Space, Shipping and Home,” he added.

This surely will be a big boost for the potential explorers as they can start work immediately on the blocks allotted to them via NELP just by taking corporate and other formal clearances. In the past, work on many blocks got delayed in the absence of crucial clearances form many ministries and departments. Also, the government has almost decided to do away with complex and controversial cost plus Production Sharing Contract (PSC) with Revenue Sharing model. ”The Government wants to implement a revenue sharing model as a lot of hassles are there in PSC that is dependent on cost and the government machinery wants to come out of these litigations and ensure active participation of private and international explorers in the sector,” explains a ministry official.

On the same lines the ministry is working quite seriously on implementing the Uniform Exploration Policy regime for all types of gas. Actually at present there are various sources of crude and gas like conventional crude and gas, coal bead methane (CBM), Shale gas and oil etc. Currently, all these energy sources are regulated by different policies but to omit ambiguity the government has finalised a proposal to implement a Uniform Exploration Policy for all types of hydrocarbons. This really will be a big boost for the sector as many international explorers dither away due to complex regulations and unclear policies relating to hydrocarbons.

On the crude import front, due to various problems and the political unrest in the Middle East, the country has witnessed a lot of pressure. Learning from that, the government is now quite focused on expanding its import destinations. For this, various sources have been earmarked in the last three months like Venezuela and South America, Russia, Africa apart from West Asia. In fact, imports from South America have doubled in the last two years from 14.53 MMT to 31.73 MMT while imports from west Asia have declined from 119 MMT to 116 MMT.

The government is also dealing quite strictly with upstream oil and gas PSUs like ONGC, OVL and Gail in the matter of increasing production. The Ministry on one hand has given fixed deadlines to work upon on these PSUs to increasing their stagnant production and monthly review is now being done on the 5th of every month. This is an unprecedented move. Also, PSUs are also being questioned for their failure to start production from the blocks allotted to them under various NELP rounds during the last two decades. “The message is quite loud and clear that the government will not tolerate any inefficiencies and everybody has to perform to make India a self reliant in energy,” quips the official.

PRUNING THE DEMAND SIDE

The Government is also keen to reduce the oil subsidy so as to improve the financial health of country’s economy as well as Oil PSUs. For this, a lot of activity is going on at the ministry as well as at the PSUs level. The Ministry has chalked out a plan to omit duplicity in LPG cylinders. It is mulling the implementation of Aadhar-based biometric system to omit this fl aw and soon a decision in this regard is expected. A survey of oil marketing companies (OMCs) clearly shows that a large number of duplicate cylinders exist throughout the country, seriously hampering the fixnancial health of the country owing to misuse of subsidy. Also, to curtail the costs, the ministry has instructed OMCs to share their infrastructure and other facilities so that efficient use of national resources can be made and companies’ margins can be improved. For this, the companies have hired E&Y to do a study so that they can do data sharing and implement best practices.

MINISTRY OF FINANCE: A LOT MORE IS NEEDED

The one Ministry that needs to work a lot more harder than its predecessor and which matters the most to the progress of the nation is the Ministry of Finance. Led by the most powerful Minister after the PM, Arun Jaitley, the Ministry of Finance has made much headway during its first 100 days. But these seem to be too small considering the situation that the Indian economy was in over the past five to six years. Also, all efforts of the government to propel the financial and business performance have received a big jolt due to the absence of adequate numbers in the Upper House of the parliament that proved crucial for various important bills, particularly the Insurance Bill that couldn’t be passed in the monsoon session.

GST THE ESSENTIAL EVIL

Though the ministry seems quite serious in implementing the much awaited Goods and Service Tax (GST), a lack of support from the opposition and other party ruled states is playing spoilt sport for the government. Experts and National Council of Applied Economic Research are of the view that if GST gets implemented, automatically India’s GDP will move up by at least 1.7 to 2 per cent.

 As far as the biggest achievements of the Modi-led NDA in its fi rst 100 days are concerned in the financial sector, softening of stand of biggest state of the country Uttar Pradesh over implementation of GST could be one that stands out prominently. Recently the Akhilesh Yadav, the Chief Minister of UP, reportedly sent a note to Finance Minister, Arun Jaitley, clearly pointing towards the softening of his stand over the GST issue.

“I have learnt that the central government is working towards speedy implementation of GST and would like to say that in principle Uttar Pradesh is not opposed to GST but there were a few concerns that the state government has which need to be looked into and a consensus arrived upon.” reads the note. It is being learnt that Yadav has put forward contentious issues like threshold limit, tax free goods, dual control, tax rates, place of supply rules and revenue neutral rates and called for a consensus mechanism on these points. UP has also made various suggestions to compensate state governments for the loss of revenue that will incur to them due to GST implementation like matching compensation for 10 years from the centre and list of goods that will be kept out of GST purview.

This is really a big respite for the government, which is working round the clock to clear the single tax regime and making India a common market place. Though many BJP-led state governments have raised doubts over the GST, a shift of stand of some crucial states is quite encouraging. The Empowered Committee of state Finance Ministers is meeting every month to clear the roadblocks for the smooth implementation of the GST.

FINANCIAL INCLUSION, THE KEY FOR OVERALL DEVELOPMENT

PM Modi and Finance Minister Arun Jaitley, both know the importance of bringing fi nancial services to the masses in the overall development of the country. Considering this, the government has chalked out a robust strategy to provide banking services to each and every citizen of the country and the PM has announced the crucial ‘Pradhanmantri Jan-Dhan Yojana’. For this scheme, Modi said; “I wish to connect the poorest citizens of the country with the facility of bank accounts through this yojana. Th ere are millions of families who have mobile phones but no bank accounts. We have to change this scenario. Under this scheme, the account holder will be given a debit card and an insurance of one lakh rupees will be guaranteed with that debit card for each poor family. 7.5 crore households, which account for around 42 per cent of the population, will be covered through this national scheme.

“Our objective is that each household should have at least 2 bank accounts and the whole program is being designed to accomplish this objective. In the new program the unit of contact will be a person, not a village,” marked FM Arun Jaitley, while explaining this scheme. In fact, for accomplishing the objective of financial inclusion, the government has designed a comprehensive campaign where manifold layer system is now being introduced. First layer of course is of brick and mortar branches of banks and they will be created wherever possible. Under that layer smaller branches manned by one or two people will be created, wherever big branches are not possible. Under that, another layer will be created of kiosks and yet another layer below that will be created of ATMs. Then there will be human contact through business correspondents (BCs) and their number will also be expanded.

INSURANCE BILL STILL REMAINS A BIG CONCERN

Along with various other crucial bills, the Insurance Bill still remains a problematic area for the government as it was not able to clear the Rajya Sabha roadblock due to absence of majority. “This was a very important cog in the “reform agenda” of the government and the PM wanted to clear this bill before his US visit next month. The Government now wants to clear the bill during the next session,” informed a senior Finance Ministry official. Importance of Pension Bill can be gauged from the fact that the PFRDA act and the Insurance Laws (amendment) Bill are quite interconnected and FDI limit of PFRDA act is governed by Insurance laws and despite the clearance of PFRDA Act, the government can’t increase the FDI limit in pension funds unless Insurance laws bill is cleared. Currently the FDI limit in insurance sector is 26 per cent that government wants to increase to 49 per cent and it will also lead to increase in FDI limit of pension funds.

MINISTRY OF CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION

Inflation The Worst Scourge T e biggest concern of any government during recent years has surely been the increasing inflation and the Modi government is no exception to it. Despite the many efforts made to control it, the government has failed to tame this demon of inflation during its first 100 days. The government has taken an altogether new approach towards tackling the problem. In fact the Ministry of Consumer Affairs, Food and Public Distribution has reached out to state governments to improve the management and distribution of food items so that crucial food inflation can be controlled. Also some legislative changes have been proposed by the government to improve management of food commodities.

Among these biggest change is the one that has been implemented in Essential Commodities Act so that an all out operation against hoarders and black marketers can be taken. On one hand, various measures have been implemented to cool off food item prices and on the other hand the government has chalked out an aggressive strategy to make hoarding a non-bailable offence. By these measures though prices of commodities like Onions and Potatoes have been tamed, the bleak monsoon have seen the prices of other staples sky rocket during the last three months.

To cool off prices of wheat in the open market, the government also released one crore MT of wheat in the market. Big bang announcements came in terms of proposal of setting up of ‘Price Stabilisation Fund’ to enable states to undertake market intervention to tackle rise in prices of commodities of the common man’s consumption. Also state governments have been urged to amend the APMC act to remove perishable items like vegetables, fruits and other perishable commodities so that farmers can straightaway sell these produces into the free market.

All said, the road ahead is difficult to traverse, but surely leads to the better days as promised by the new regime in its election manifesto. It is time to reiterate the fact that patience is the key to success for the nation as of now.