Lo­cal Fo­cus

While the ma­jor ob­jec­tive be­hind the ‘Make in In­dia’ ini­tia­tive was job cre­ation and skill en­hance­ment in twenty-five key sec­tors of the In­dian econ­omy, it has not be­come quite a game-changer yet.

Southasia - - CONTENTS - By Sam­ina Wahid

‘Make In In­dia’ is still grop­ing in the dark.

The ‘ Make in In­dia’ ini­tia­tive launched by In­dian Prime Min­is­ter Naren­dra Modi on Septem­ber 25, 2014 is an ini­tia­tive aimed at mak­ing In­dia a global man­u­fac­tur­ing hub. It was rolled out with the aim of cre­at­ing mil­lions of jobs in the coun­try.

Un­der the 'Make in In­dia' ini­tia­tive, the govern­ment has an­nounced sev­eral steps to im­prove the busi­ness en­vi­ron­ment by eas­ing the process of do­ing busi­ness in the coun­try and at­tract­ing for­eign in­vest­ment.

'Make in In­dia' aims at in­creas­ing In­dia’s GDP and tax rev­enues by pro­duc­ing prod­ucts that meet high qual­ity stan­dards and min­i­miz­ing the im­pact on the en­vi­ron­ment. Fos­ter­ing in­no­va­tion, pro­tect­ing in­tel­lec­tual prop­erty, and en­hanc­ing skill de­vel­op­ment are the other aims of the pro­gram, ac­cord­ing to the 'Make in In­dia' web­site.

In­ter­est­ingly enough, Modi’s “Make-in-In­dia” push for a mil­i­tary that has been the world’s big­gest im­porter of arms for the last four years has also made lit­tle head­way, with ne­go­ti­a­tions stalled over var­i­ous is­sues in­clud­ing tech­nol­ogy trans­fer and the lo­cal as­sem­bly of equip­ment. His­tor­i­cally, In­dia has been us­ing tech­nol­ogy through li­cence agree­ments with Rus­sia and a smat­ter­ing of Western coun­tries. The ex­cep­tions are some of

the mis­sile sys­tems, small arms and their am­mu­ni­tion and tanks, where tech­nol­ogy has been in­dige­nously de­vel­oped by the De­fense Re­search and De­vel­op­ment Or­ga­ni­za­tion (DRDO).

The govern­ment’s ‘Make In In­dia’ pol­icy and in­crease in the For­eign Di­rect In­vest­ment (FDI) cap in the re­vised de­fence FDI pol­icy (from 26% to 49%), an­nounced with a lot of fan­fare dur­ing the Aero In­dia show in Fe­bru­ary 2015, was seen as a ma­jor step to re­vi­tal­ize the de­fence in­dus­try and awaken it from its long slum­ber. This govern­ment ac­tion was ex­pected to in­fuse re­fresh­ingly new at­ti­tu­di­nal change in In­dia’s pol­icy-mak­ing pro­cesses, foster trust be­tween the govern­ment and the in­dus­try and usher in ma­jor re­forms to im­prove In­dia’s stand­ing in World Bank rank­ings. Ac­cord­ingly, a num­ber of com­mit­tees un­der re­tired bu­reau­crats were set up by the govern­ment to re­view the prob­lems be­ing faced, and rec­om­mend suit­able so­lu­tions to im­prove the busi­ness en­vi­ron­ment in the coun­try. How­ever, de­spite the prime min­is­ter’s per­sonal thrust re­gard­ing the ‘Make in In­dia’ mantra, very lit­tle has changed on the ground. Man­u­fac­tur­ing re­quires a sig­nif­i­cant ed­i­fice of in­fras­truc­tural sup­port, which is cur­rently ab­sent in In­dia. There is lack of a reg­u­la­tory frame­work, es­pe­cially in the gen­eral avi­a­tion sec­tor, which has huge growth po­ten­tial. Re­forms re­quire on­go­ing con­sul­ta­tions with the in­dus­try and presently there is no pos­i­tive move­ment in this di­rec­tion.

Re­gard­less of all the tall talk of tax re­forms in the de­fence and aero­space in­dus­tries, they con­tinue to be taxed as be­fore. It should be noted that the high rate of ser­vice tax has placed In­dia’s Main­te­nance, Re­pair and Over­haul ( MRO) in­dus­try at a dis­ad­van­tage vis-à-vis the MROs in Gulf coun­tries and South East Asia.

The big­gest chal­lenge in the ‘Make in In­dia’ pol­icy frame­work is the ex­ist­ing an­ti­quated Re­search & De­vel­op­ment in­fra­struc­ture with a se­verely con­strained de­sign ca­pa­bil­ity and lim­ited sup­port, both sci­en­tif­i­cally and fi­nan­cially. The is­sue that needs to be ad­dressed is whether the govern­ment and the DRDO are fol­low­ing the right ap­proach and strat­egy for R&D and tech­no­log­i­cal de­vel­op­ment.

The ‘ Make in In­dia’ pro­gramme in de­fence will have to be fa­cil­i­tated by way of bold re­forms in pol­icy, pro­ce­dures and ap­proach to­wards global in­vestors. There is an ur­gent need to fa­cil­i­tate re­moval of other man­u­fac­tur­ing road­blocks, like land, power, trans­porta­tion in­fra­struc­ture, tax­a­tion and mul­ti­far­i­ous govern­ment clear­ances. The idea of tech­nol­ogy trans­fer through ei­ther li­cence pro­duc­tion or off­sets is mis­un­der­stood by the de­ci­sion-mak­ers. Mak­ing this the prin­ci­pal strat­egy and cor­ner­stone of de­fence tech­nol­ogy de­vel­op­ment and self-re­liance in the coun­try is like chas­ing a mi­rage. All it does is, per­haps, short-cir­cuit or kick-start a process. But it can never lead to re­al­iz­ing the na­tional strat­egy of in­dige­nous ca­pa­bil­ity and sel­f­re­liance. Noth­ing can sub­sti­tute strate­gic re­search and de­vel­op­ment. It can be achieved only by in­volv­ing the en­tire knowl­edge sec­tor of the econ­omy. The pri­vate sec­tor in In­dia to­day is in an em­bry­onic stage when it comes to de­fence tech­nol­ogy. Set­ting up man­u­fac­tur­ing fa­cil­i­ties, and fabri­cat­ing buy-back com­po­nents us­ing out­dated tech­nolo­gies as a part of the off­set pol­icy, may per­haps be a good start in the learn­ing cy­cle. How­ever, ma­jor ef­forts have to be made to hop step this learn­ing curve and ma­ture fast.

One sure way to do this is to de­velop tech­nolo­gies in-house, both de­sign­ing as well as man­u­fac­tur­ing, so as to catch up. In­dia has to de­lib­er­ately en­ter the age of in­no­va­tion in which re­search and de­vel­op­ment be­comes an in­te­gral com­po­nent of sci­ence, tech­nol­ogy and en­gi­neer­ing, an el­e­ment to­tally dis­re­garded by the In­dian in­dus­tries so far and un­think­able in the aero­space sec­tor. In this re­spect, HAL (Hin­dus­tan Aero­nau­tics Ltd.) has sin­gu­larly sur­vived on li­cence pro­duc­tion and shown im­proved bot­tom lines on cap­tive pro­duc­tion with­out any in­vest­ment in strate­gic re­search and de­vel­op­ment.

It is time that a level-play­ing field is pro­vided to the In­dian de­fence in­dus­try for be­ing able to show­case its ca­pa­bil­i­ties and man­u­fac­tur­ing plans to users in the de­fence es­tab­lish­ment in a much more struc­tured and for­mal man­ner than is pos­si­ble at present. Even though the Min­istry of De­fence (MoD) does in­ter­act with the In­dian de­fense in­dus­try in a num­ber of small and ad-hoc ways, the chal­lenge go­ing for­ward — for the ‘ Make in In­dia’ mantra to be­come an all-per­va­sive re­al­ity in de­fense ac­qui­si­tions — will be to mul­ti­ply man­i­fold the on­set, fre­quency, range and depth of its in­dus­try en­gage­ments.

While the mod­ern­iza­tion of the mil­i­tary re­quires sub­stan­tial bud­getary out­lays, in re­al­ity, the gap be­tween the re­quire­ment of funds pro­jected by the MoD and the ac­tual bud­getary al­lo­ca­tion has been widen­ing over the years. This trend is likely to con­tinue, as is clearly ev­i­dent in the de­fence bud­get for 2015-2016. But of greater con­cern is the fact that the MoD sur­ren­dered a to­tal of Rs28,000 crores be­tween 2001- 02 and 201011 un­der the cap­i­tal head. This was mainly due to stalled projects amidst al­le­ga­tions of wrong­do­ing, lack of in­di­g­e­niza­tion and com­plex­ity of pro­ce­dures. How­ever grave the sit­u­a­tion, a way out of the morass has to be found to en­sure the ac­qui­si­tion of op­er­a­tionally-crit­i­cal weapon sys­tems, in­clud­ing guns, he­li­copters, sub­marines, air­craft and am­mu­ni­tions that form the core of a na­tion’s de­fence ca­pa­bil­ity.

While the govern­ment has dis­played the nec­es­sary political will for in­di­g­e­niza­tion and es­tab­lish­ment of an ad­vanced man­u­fac­tur­ing base in the coun­try, the chal­lenge lies in its com­pre­hen­sive im­ple­men­ta­tion — an en­abling pol­icy frame­work, fo­cus and com­mit­ment, in­clud­ing ad­dress­ing the fis­cal and tax­a­tion is­sues, which cur­rently im­pact neg­a­tively on the pri­vate in­dus­try.

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