The Hindu Business Line : `Fiscal sops alone will not attract industry'

In the Government's industrialisation efforts, ranging from promoting the manufacturing base of the country to attracting foreign investment, from setting up centres of excellence to skill development activities for the young population, Mr Ashwani Kumar, Minister of State for Industry, in his own way, remains active though not necessarily in the limelight. In an interview with Business Line, Mr Kumar shares his views and plans and discusses various steps initiated by the Government.

Excerpts from the interview:

The National Manufacturing Competition Council (NMCC) has repeatedly stressed development of the manufacturing industry. Anyaction from the Government on this front?

I am a member of the High-Level Committee on Manufacturing that is part of the NMCC. I have received excellent reports from various sub-groups, particularly those on textiles, leather, electronic hardware, food-processing and skill-upgradation. These are also labour intensive areas. A very purposeful initiative on all the fronts has been taken. Soon you will find concrete recommendations from the Centre.

Can you elaborate or give some examples?

Yes. For instance, in food-processing, it has been estimated that in the next five-seven years this sector alone can absorb about hundred lakh crores of rupees in investment. Backward and forward integration in the food-processing sector is imperative because a large quantity of our agricultural produce is destroyed. India is perhaps the only country in the world where processed food is more expensive than fresh food.

To fully utilise the farm sector potential the move to allow foreign direct investment (FDI) in developing an integrated cold chain (from the farm to the market place) would play an important role.

Likewise in the leather sector, value addition is possible at each step. And this is again highly labour intensive at every level and a lot of jobs could be provided to the weaker sections. Another very important sector is electronic hardware. Perhaps very few people are aware that by 2025 or 2030, electronic hardware would run up one of the largest import bills. And if India has to become a manufacturing hub we will have to ensure a very dynamic hardware industry.

Where do we stand with regard to our skill level in the manufacturing sector?

It's surprising to know that today while we talk of the demographic dividends saying India is a young nation, we are not finding at least in the manufacturing sector capable and technically qualified people and jobs here are going abegging. Many corporates have come to me and said we have the jobs but are not able to find suitable people with requisite qualifications. So what if we have large number of people we have to train them and equip them. This is also a focus for us.

What initiatives are being taken with regard to the targeted development of backward areas?

From 1960 until 2005, there have been about 15 reports on the various causes of industrial backwardness of certain districts. The Planning Commission, in its last report, has identified 170 such districts which include 55 extremist prone districts. There is, therefore, reasonable amount of data available for the various causes. And I can say that around 17 causes have been identified in a very scientific manner. But even then the fact remains that these districts continue to remain industrially backward. Therefore, to provide even handed employment opportunity and industrialisation in the country, I have initiated a review of the entire basis of industrial backwardness and what we can now do is to shift and allocate more industrial activities to these areas.

The first meeting was on April 12 and the next one is expected soon. And by the monsoon session of Parliament we will be able have two or three more meetings to have a clearer view on what needs to be done. And then a concrete policy will be formulated that could shift some industry in an environment of competitive advantage as well. Unfortunately, capital goes where profitability is assured. And in places there is no chance of getting the private sector, my recommendations would be to have one or two large projects in the public sector.

But why would a company which is doing well shift its base?

Exactly for this reason we are holding meetings on what should be done to lure industries to go to such districts. Maybe extending some fiscal concessions or other sops might help. So wherever the Government creates good infrastructure industry goes there.

Do you think tax concessions or fiscal incentives are enough to lure industry, or some other kind of incentives are more important?

I think other factors such as adequate infrastructure, connectivity, good law and order and availability of power are much more vital than fiscal concessions. My clear view is that fiscal concessions in themselves will not attract industry. Fiscal concession along side fulfilling the basic needs of industry is more important.

So what incentives are being considered?

The Government understands that all States and districts are not blessed equally. So the Government has to create conducive conditions. And in this regard we are introducing a concept called `Manufacturing Investment Regions' (MIRs). These would be spread around 100-250 sq km (around 6,000 acres). The idea is to designate certain areas as MIRs and the Government will invest and create world-class infrastructure as an inducement to private capital to come an invest in these areas. The MIRs are going to be on the same lines as the PCPIRs (petroleum, chemicals and petrochemicals investment regions). But unlike the PCPIRs, which are in the costal areas, the MIRs will be where manufacturing land is available.

Any other initiatives under consideration?

Yes, recently the Prime Minister announced the Delhi-Mumbai Freight Corridor. Now we are looking at creating a Delhi-Mumbai Industrial Corridor. Along side the freight corridor we will create zone of industrial corridors using the MIR concept. We envisage creating 20 such MIRs or what we call the industrial corridor. This is big vision like what is between Tokyo and Osaka — the industrial belt of Japan. The Indian corridor will help six States — Delhi, Uttar Pradesh, Haryana, Rajasthan, Gujarat and Maharashtra. It is likely to see an investment close to $50 billion.

By when will the Delhi-Mumbai Industrial Corridor come up?

The plan is in the conceptual stage and we aim to start work in January 2008. We have experts from the Government of Japan helping us. It will take another four-five years for the corridor to come up.

What are the projections in terms of the FDI flows?

We expect FDI flows in the next five years to touch around $70 billion. This would be roughly equal to that of China. Last fiscal we closed at $19 billion and this financial year we expect to reach $30 billion. Though China today is at $60 billion, we are growing at a much faster rate.

How satisfying has been your stint as a Central Minister?

I have found my new role challenging and interesting. Within the parameters of my responsibility I have tried to do my best and I feel completely satisfied in being able to do what has either been entrusted to me or what I felt was important for me to do. Of course, being a Minister of State one knows that we have to function under certain constraints which are given. But on the whole within the scope of my duties and responsibilities I do have the satisfaction of having done quite a bit.