CEOSPEAK: 'Make In In­dia' has rekin­dled in­vestors' in­ter­est

FICCI Business Digest - - Special Features - * Philipp von Sahr is Pres­i­dent of BMW Group In­dia.

Make in In­dia', flag­ship project of the Gov­ern­ment of In­dia has the po­ten­tial to drive sig­nif­i­cant in­vest­ments and make In­dia a global manufacturing hub. The gov­ern­ment has been ag­gres­sively pro­mot­ing it with Prime Min­is­ter Naren­dra Modi him­self invit­ing global com­pa­nies dur­ing his in­ter­na­tional vis­its. The re­cent Han­nover In­ter­na­tional Trade Fair, where In­dia was a part­ner coun­try, also saw a strong state­ment that clearly com­mu­ni­cated gov­ern­ment's con­vic­tion to make the ini­tia­tive hugely suc­cess­ful.

As In­dia tar­gets a long term Gross Do­mes­tic Prod­uct (GDP) growth rate of 8.0% plus, manufacturing sec­tor ex­pan­sion will be a key com­po­nent of the growth strat­egy. In the past sev­eral years, the sec­tor's con­tri­bu­tion to the GDP has only marginally in­creased whereas other de­vel­op­ing economies have been able to achieve higher share of manufacturing in the GDP. In In­dia too, there is huge po­ten­tial wait­ing to be re­alised with the gov­ern­ment tar­get­ing 25% con­tri­bu­tion by 2022 from the cur­rent ~16%.

BMW Group In­dia is part of au­to­mo­tive industry that is a sig­nif­i­cant con­trib­u­tor to the manufacturing sec­tor in In­dia. We have be­lieved in 'Make in In­dia' phi­los­o­phy and have been manufacturing since 2007. The state-of-the-art manufacturing fa­cil­ity at Chennai (Tamil Nadu) pro­duces eight dif­fer­ent mod­els con­tribut­ing to more than 95% of our sales in In­dia. Our en­gage­ment in In­dia has fo­cused on deeper lo­cal­i­sa­tion and con­tin­u­ously ex­ploit­ing the sup­plier po­ten­tial for our global sourc­ing re­quire­ment. We are also proud of our strate­gic co­op­er­a­tion with TVS Mo­tors to jointly de­velop and pro­duce mo­tor­cy­cles in the sub 500 cc seg­ments. It strongly lever­ages BMW's ex­per­tise in de­sign, de­vel­op­ment and TVS' manufacturing strength.

'Make in In­dia' ini­tia­tive aims at fol­low­ing a struc­tured ap­proach fo­cus­ing on 25 sec­tors (au­to­mo­tive, avi­a­tion, tex­tiles etc.) to cre­ate an en­abling en­vi­ron­ment for fa­cil­i­tat­ing in­vest­ments. The 360 de­gree ap­proach of fo­cus­ing on in­no­va­tion, skill de­vel­op­ment and cre­at­ing best-in-class manufacturing in­fras­truc­ture makes it a com­pre­hen­sive ini­tia­tive. How­ever, trans­lat­ing the vi­sion into re­al­ity would need a clearly de­fined strat­egy, strong April 30, 2015 ex­e­cu­tion, favourable pol­icy frame­work, po­lit­i­cal com­mit­ment and con­certed ef­forts of all stake­hold­ers.

I would fo­cus on three di­men­sions that im­pact the mar­ket at­trac­tive­ness for global in­vest­ments - Pol­icy, Po­ten­tial, and Peo­ple.

Pol­icy: Pol­icy for­mu­la­tion and im­ple­men­ta­tion must lead to im­prove­ment in ease of do­ing busi­ness. Global in­vestors have a lot of neg­a­tive sen­ti­ments and ap­pre­hen­sions about the pol­icy regime. The gov­ern­ment's am­bi­tion of break­ing into top 50 from the cur­rent 142 on the 'Ease of Do­ing Busi­ness' rank­ing will need con­crete, de­ci­sive and quick ac­tion. Sta­ble, trans­par­ent and pre­dictable pol­icy frame­work is a pre-req­ui­site. The chal­lenges posed by ret­ro­spec­tive amend­ments, retroac­tive ap­pli­ca­bil­ity of rules, and sud­denly changed poli­cies with­out suf­fi­cient tran­si­tion pe­riod shake the con­fi­dence of in­vestors and deeply hurt in­vest­ment sen­ti­ments. Lack of clar­ity for fu­ture plan­ning al­ways re­sults in de­layed or de­ferred in­vest­ment cy­cle. There is also need for non-

The gov­ern­ment should en­cour­age en­trepreneur­ship and have a tar­geted ap­proach for small

and medium en­ter­prises that form the back­bone of a

vi­brant manufacturing

ecosys­tem.

ad­ver­sar­ial tax regime. We wel­come the gov­ern­ment's in­tent to cre­ate a pos­i­tive en­vi­ron­ment how­ever there are still chal­lenges on the ground. It is high time to bridge the trust deficit be­tween tax author­i­ties and cor­po­rate. The cor­po­rate needs to be viewed as part­ners in growth. The gov­ern­ment ought to move for­ward with po­lit­i­cally sen­si­tive pol­icy top­ics like labour, land re­forms that are crit­i­cal for manufacturing sec­tor's growth. Im­ple­men­ta­tion of Goods and Ser­vices Tax is ex­pected to sig­nif­i­cantly spur manufacturing growth.

Po­ten­tial: This has to be eval­u­ated from two per­spec­tives - a) growth po­ten­tial re­sult­ing in de­mand cre­ation and b) manufacturing po­ten­tial. Growth Po­ten­tial: A lot of stud­ies ex­pect In­dia to rank amongst the world's top three growth economies that will sig­nif­i­cantly out­per­form its peers in the medium to long term. This cou­pled with a size­able mid­dle class pop­u­la­tion with in­creas­ing dis­pos­able in­come cre­ates a huge po­ten­tial for do­mes­tic con­sump­tion led growth. How­ever, tak­ing a cue from the suc­cess of other manufacturing economies, this has to be ably sup­ple­mented with sub­stan­tial in­crease in ex­ports. There­fore it is im­per­a­tive to se­cure global mar­ket ac­cess for prod­ucts made in In­dia. In this con­text, eco­nomic April 30, 2015 co­op­er­a­tion and free trade agree­ments with key trade part­ners will play a cru­cial role. Learn­ing from ex­cel­lent ex­am­ple of Mex­ico in at­tract­ing sig­nif­i­cant in­vest­ments in the au­to­mo­tive sec­tor lever­ag­ing sev­eral free trade agree­ments, we need to view it more as an op­por­tu­nity than a threat.

Manufacturing Po­ten­tial: De­fines the ca­pa­bil­ity to pro­duce world class prod­ucts at a com­pet­i­tive price. An en­abling in­fras­truc­ture is a key build­ing block for driv­ing manufacturing com­pet­i­tive­ness. There has been con­sid­er­able progress made in the past how­ever a lot still needs to be achieved. There is an ur­gent need to de­velop fully equipped, pre-ap­proved (prior en­vi­ron­men­tal and other clear­ances) manufacturing zones/ clus­ters pro­vid­ing world class ameni­ties. This has to be fur­ther sup­ported by mod­ern, ef­fi­cient and high qual­ity ports, rail­ways, road high­ways and freight cor­ri­dors. The gov­ern­ment's fo­cus on de­vel­op­ing strong in­fras­truc­ture is very pos­i­tive and we look for­ward to smooth ex­e­cu­tion.

The gov­ern­ment should also en­cour­age en­trepreneur­ship and have a tar­geted ap­proach for small and medium en­ter­prises that form the back­bone of a vi­brant manufacturing ecosys­tem.

Peo­ple: The young work­force of­fers both a chal­lenge and an ex­cel­lent op­por­tu­nity. There is a con­tin­u­ous re­quire­ment of cre­at­ing em­ploy­ment op­por­tu­ni­ties for mil­lions of young peo­ple en­ter­ing into work­force ev­ery year. How­ever, this of­fers a golden op­por­tu­nity to in­vest in young and mo­ti­vated labour force, train­ing and skilling them to be glob­ally com­pet­i­tive thus lever­ag­ing the much famed In­dia's "de­mo­graphic div­i­dend". The cur­rent re­al­ity is a sig­nif­i­cant skill gap both in terms of qual­ity and quan­tity and mer­its a quick and com­pre­hen­sive ac­tion. Na­tional Skills De­vel­op­ment Coun­cil and Au­to­mo­tive Skills De­vel­op­ment Coun­cil (Au­to­mo­tive Sec­tor) are steps in right di­rec­tion. How­ever we will need to ac­cel­er­ate the 'Skill In­dia' drive to sup­port the fu­ture manufacturing growth. The suc­cess of "Make in In­dia" will also be de­ter­mined by the pro­duc­tiv­ity and com­pet­i­tive­ness of the labour force. We need to have right thrust on ed­u­ca­tion, vocational and tech­ni­cal train­ing mak­ing it more industry ori­ented. The cor­po­rate will need to play a big­ger role in bridg­ing the skill gap. BMW has been con­tribut­ing to strength­en­ing the skill de­vel­op­ment through its world class train­ing cen­tre in Gur­gaon. ‘Make in In­dia' cam­paign has rekin­dled in­vestor's in­ter­est in In­dia. The onus is on In­dia to seize the op­por­tu­nity and earnestly em­bark on trans­for­ma­tional jour­ney to­wards manufacturing ex­cel­lence. A com­pre­hen­sive ap­proach lever­ag­ing syn­er­gies across other projects like 'Dig­i­tal In­dia', 'Skill In­dia', 'Clean In­dia' and 'Smart Ci­ties' will pave way for In­dia right­fully claim­ing its lead­er­ship po­si­tion in the global manufacturing land­scape.

Philipp von Sahr*

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