As MNCs head for the exit door in China, India has to make its move

N Ramakrishnan Chennai | Updated on May 02, 2020

Onus on the States to get their act together and frame attractive policies

As a direct fall out of the Covid-19 pandemic, many multinationals with manufacturing plants in China are looking to shift operations out. National governments, as part of their economic package, have said they will assist these companies if they were to move their plants to other countries.

Japan, for instance, has earmarked ¥243.5 billion of its economic support package to help manufacturers shift production out of China. This includes yen 220 billion for companies shifting production back to Japan and ¥23.5 billion for those planning to move to other countries. Media reports indicate that the US Government will support companies contemplating India as an alternative to China.

Will India be able to attract a bulk of those companies opting to switch their production out of China? The Centre has set up a committee of joint secretaries from different ministries and departments to see how to attract foreign investment in these trying times. A couple of States too have got into the act.

The Uttar Pradesh Chief Minister Yogi Adityanath recently had a video conference with a number of American companies. The UP Government is working on a package to attract them.

Tamil Nadu Chief Minister Edappadi K Palaniswami has set up a special investment promotion task force headed by the Chief Secretary to attract investments from multinationals looking to move out of China. In particular, it is trying to get companies from Japan, Korea, Taiwan, Singapore and the US. The task force will have representatives from trade bodies of these countries. The Government will provide special incentive package and fast-track clearances to industries looking to relocate.

Think differently

Venu Srinivasan, Chairman and Managing Director, TVS Motor Co, says the onus is on the States to attract companies looking for an alternative manufacturing base. The States, he says, have to frame more liberal policies across all sectors.

Other industrialists, not wanting to be quoted, say there is only so much the Centre can do; it is up to the States to get their act together, be it on land acquisition, labour laws and providing social and other infrastructure. The States have to think differently to attract these companies. They have to work on establishing self-contained “industrial cities” that earmarks space for manufacturing, commercial, educational, residential and social infrastructure. Common effluent treatment plants must be provided and clearances must be “single window” and fast-tracked. All these will enable companies to plug-and-play at the earliest. There should be space for expatriates who work in these companies to enjoy their evenings or week-ends without any restrictions.

When industry wants reforms in labour laws, says an industrialist, it is not asking for permission to hire and fire. No company would want to do that. Instead, it should be given the leeway to strictly enforce discipline within the factory premises and demand higher productivity. Many South-East and East Asian nations have higher productivity than in India, he points out. The whole approach in India is adverse to managements, according to him.

KE Raghunathan, former national President, All India Manufacturers’ Organisation, is sceptical about India being able to attract companies looking to shift out of China, and says India missed the bus when it framed the Make in India policy. At that time, it should have insisted that all government purchases be made only from companies that progressively have local manufacturing.

What needs to be done

India, according to MP Shankar, Director – Operations, Tech Plaastic Industrie Pvt Ltd, which makes injection moulded parts for various sectors including automotive, says companies may not shift entirely out of China, but will start increasingly depending on India for their supplies.

What does he think needs to be done? “Cut down the number of approvals required. Laws right now are built on the premise that businesses are out to cheat and earn money — similar to how we like to put speed breakers assuming all are lousy drivers,” says Shankar. To start a factory in a SIPCOT estate (a Tamil Nadu Government undertaking that develops industrial estates), he adds, more than 25 statutory bodies have to give approvals.

Assuming an entrepreneur has identified the location for a plant, building the factory to starting production will take a minimum of 12 months: three to four months for clearances, assuming one has all the documents ready; construction on the plant will take at least five months; getting power connection, which is most cumbersome, time-consuming and expensive.

Shankar said there was a need for a team of experts at the Centre that can prepare a five-year plan on getting at least 60 per cent of the companies to India. “Today, customers I talk to speak of Vietnam in the same sentence as India. This is so sad. We need to improve our image as a difficult-to-work country,” he added.

Published on May 01, 2020

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