Earlier this year, Shri Govindaraja Textiles, a textile spinning company from southern Tamil Nadu, decided to set up a plant in the US. All it had to do was approach the office of Select USA, an agency tasked with facilitating investments in the US, at the American consulate in Chennai.
Shri Govindaraja Textiles, part of the Aruppukottai-based Jayavilas group, gave its wish list to Select USA. Within a few days, the US agency came back with a list of nine States where the company could set up the spinning unit.
When the 39-year-old Ramkumar Varadarajan, Managing Director, Shri Govindaraja Textiles, went to America, he told the authorities in the nine States that he did not have the time to visit each State and look at the facilities. Representatives from the economic development authority of each State came over and made their pitch for getting the investment.
The company weighed the offers and chose North Carolina, the lower electricity cost being one major factor. Then, registering the company and completing other formalities got done in a matter of days.
If it were to think of setting up a new unit in India, just getting details of incentives from the States alone would have taken a few months and, that too, after several visits to each State. Getting approvals and clearances to start work on the plant would have taken even longer.
Likewise, in 2003, when Sundram Fasteners, of the TVS group, decided to set up a plant in China, it got all approvals in a jiffy.
Company officials had then told the media that it just took two days for the company to get the approvals. It was done through a single-window system. The company had to merely sign the forms and its requirement of land, power connection and pollution clearance was taken care of.
For setting up a similar plant in India, the company officials had said it would have taken them a good nine months or more, just to get the approvals.
Make in India, may be Prime Minister Narendra Modi’s exhortation to industrialists, both Indian and foreign. But that is easier said than done.
Talk to industrialists across sectors and the problems and challenges of making in India unfold. At the top of the list is, of course, what industry leaders describe “the ease of doing business”. This is the first thing the government has to tackle if it is really serious about Make in India happening, they say. The ease of doing business includes everything from getting clearances, meeting regulatory requirements, acquiring land, regularly filling up and submitting within the deadline a maze of forms, and last but not the least, labour issues.
This is what the Planning Commission’s 12{+t}{+h} Plan document has to say: “…The business regulatory environment in the country is intimidating for manufacturers, especially small-scale enterprises. It saps their productivity and deters further investments. The Plan proposes some initiatives to tune up India’s business regulatory environment. Much of the action needed lies with the State governments.”
The manufacturing sector contributes to just 16 per cent of GDP and India’s share in world manufacturing is less than 2 per cent. In contrast, China’s manufacturing sector contributes 34 per cent to its GDP and its share of world manufacturing is 13.7 per cent.
The Byzantine laws that need to be complied with and the maze of forms that need to be filled regularly are the biggest bugbear for industry.
As Surinder Kapur, Chairman of the Sona group, which has a clutch of companies making automobile components, says, a manufacturing company has to sign more than 60 forms every month. “That is ridiculous,” he says, and adds that the Government is making the right noises now to reduce this burden.
When a company wants to put up a plant, it has to deal with land acquisition, power connection, compliance/regulatory issues, a maze of tax regulations. All these things are done to create obstacles to doing business, says Kapur. L Ganesh, Chairman of the Rane group, which is also into automobile components, echoes similar views. Laws governing factories need to be drastically reduced and simplified. Online compliance and certification by private agencies on issues such as safety should be introduced to reduce harassment and eliminate corruption, he says.
For India to take off as a manufacturing destination, BS Seo, Managing Director, Hyundai Motor India, says procedures have to be simplified. He welcomes the Government’s focus on manufacturing, but for it to bear fruit, the Government should address issues related to “ease of doing business” by bringing fast-track, single-window clearance for projects and approvals and introducing more industry-friendly laws.
Ganesh says the Make in India objective is apt, if manufacturing has to reach 25-30 per cent of GDP. Only then jobs for low- and semi-skilled youngsters can be created in large numbers. If not, the growth can be limited and skewed in favour of a few.
But, for this to happen, he says, “the States and the Centre, especially the former, must look at industry as economic engines for creating jobs. Today, they look at them mostly as avenue for corruption and golden geese for taxation.”
(This is part of a series on ‘Make in India’.)