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CONTACTS
FOREWORD
By 2025, India's manufacturing sector is expected to generate over 100 million new domestic jobs and contribute 25% of national GDP compared to ~15% currently. However,
for India to grow at 910% over the next 3 decades, we must aim to be a part of the global supply chain and produce for both domestic as well as international markets.
Hon'ble Prime Minister of India, Shri Narendra Modi has launched the landmark 'Make in India' campaign aimed at steering investments, infrastructure development,
employment generation as well as financial inclusion, thereby making it one of the most transformational initiatives to augment India's economic development.
'Make in India' and domestic manufacturing are also the central plank of India's 2015-16 Union Budget with focus on job creation through revival of growth and investment. I am
confident that the progressive proposals of the Union Budget, such as liberalization of foreign investments will enable companies to raise long term capital at competitive prices
and immensely boost the dual agenda of 'Invest in India' and 'Make in India' thereby making India a global manufacturing hub of excellence.
To support the efforts of the Government of India, ASSOCHAM, India's apex Knowledge Chamber, has formed the Global Investors' India Forum to attract foreign investments
into India by leveraging the newly established network of 14 International Offices as well as 14 International Business Promotion Councils in India. The Forum will aim to
improve Ease of Doing Business, promote cross-border business development, initiate strategic collaborations and focus on policy advocacy, thereby actualizing the 'Make in
India' strategy.
I am pleased to present this ASSOCHAM YES BANK special publication which is being released at this highly significant Interactive Investment Forum - Fast tracking India's
Growth Story with Confidence & Conviction, under the aegis of ASSOCHAM Global Investors' India Forum in New York. This special occasion also marks the formal launch of
ASSOCHAM's US office which will further strengthen India-US strategic and economic partnership.
The publication provides an overview of India's manufacturing sector and suggests key recommendations for actualizing the transformational 'Make in India' strategy. I am
confident that the contents of this publication will be insightful for the Government, policy makers and industry towards heralding a manufacturing-led economic resurgence.
Thank You.
Sincerely,
Rana Kapoor
President
Chairman, ASSOCHAM Global Investors' India Forum
Founder & CEO
Contents
1
03
07
13
27
35
51
57
01
04
Reinforcing the vision to develop India into a global manufacturing giant, the NDA Government last year unveiled a national
program of Make in India with an aim to facilitate investments, foster innovation and build world class manufacturing
infrastructure. A strong political mandate and push for reforms, Reserve Bank of India (RBI) commencing its rate easing cycle,
benign global commodity prices along with gradually improving global growth have created a favourable setting for Indias manufacturing sector. The envisaged creation of smart
cities and investment corridors, allowing higher FDI in sectors such as defence and railways, actions to foster project execution including faster approvals and clearances,
appeasing investor sentiment, correcting inverted duty structures amongst others, have been some of the encouraging efforts that the Government has undertaken over the last
10 months. However, these efforts needs to be supplemented with proper implementation here on along with overhauling some of the fundamental factors such as labour laws,
poor infrastructure, and tax policies that have held back Indias manufacturing potential.
05
30
25
100
90
80
70
60
50
40
30
20
10
0
20
15
10
5
United
Kingdom
India
United States
OECD Members
Japan
Singapore
Philippens
Indonasia
Malaysia
China
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
Thailand
06
2. Strengths of
Indias Manufacturing Sector
Demographic Dividend to Indias advantage: With a population of 1.2 bn people, and the worlds highest youth population (India has 572 mn people under the age of 24);
labour is a vital factor of production for India. As per the Economic Survey 2014, the proportion of working-age population in India is likely to increase from around 58% in 2001 to
more than 64% by 2021. Demographics indicate that India will soon surpass China, with Indias dependency ratio declining from 61% in 2002 to 36% in 2020 and Chinas
remaining stagnant at 44% (UN department of Economic and Social affairs) (See chart 3).
Low Labour costs in India: Indias harnessing of its manufacturing potential will lie in tapping its low cost labour. India fairs as the most competitive economy in terms of both
average monthly wages and minimum monthly wages as compared to its Asian peers. Cheap semi-skilled and unskilled labour intensive products give India a natural
competitive advantage (See chart 4).
Adequate availability of raw material inputs: India has rich availability of raw materials inputs such as cotton, coal and iron ore. India has the worlds 5th largest coal reserves,
India is the fourth largest iron ore producer accounting for 5% of global production, and is likely to overtake China as the largest cotton producer. Abundant raw materials give
India a comparative advantage in terms of low-cost manufacturing inputs, reducing the overall cost of production. Further, domestic availability of raw materials can insulate
Indias manufacturing sector from global commodity cycles.
08
Rising incomes with rising exports: With growing labour intensive exports and increasing prosperity, the low cost wage dynamics in China are gradually seeing a shift (see
chart 5). Average Chinese wages have grown 14.2% YoY from 2000 to 2013. Average wage in China is more than three times of India, and about double the wage in other Asian
manufacturing hubs. This suggests that China is losing advantage as a lowcost manufacturing destination and inducing investors to shift to other South and South-East
destinations for low-end manufacturing bases. Further, demographic dividend is expected to cap labour force growth in China as population ages; hence creating room for India
in the global markets to export labour intensive products like clothing, textiles, footwear, furniture, plastic products, bags and toys
Make For India: Indias domestic demand offers tremendous potential to tap economies of scale in manufacturing consumer goods segment
Recognition of Indias neo-middle class: Indias domestic consumer market is the most rapidly growing consumer market in Asia. The new aspiring Indian middle class is
expected to touch 267 mn over the next 5 years as per National Council of Applied Economic Research (NCAER), presenting tremendous opportunities to realize economies of
scale for fast moving manufacturing consumer goods. With consumerism and disposable incomes on the rise, retail sector has experienced rapid growth in the past decade
with many global players entering the Indian market
110
100
90
80
70
60
50
40
30
20
China
India
600
Indonesia
Philippines
500
400
Srilanka
300
200
100
India
Indonasia
Vietnam
Philippens
Thailand
China
2100
2090
2080
2070
2060
2050
2040
2030
2020
2010
2000
1990
1980
1970
1960
1950
0
Malaysia
Source: ILO (2012), National Wages and Productivity Commission, YES BANK Limited
Hecksher-Ohlin Model
This pioneering model of international trade states that relative endowments of the factor of production (land, labour, capital) determine a country's comparative advantage. In other
words, countries have comparative advantage in those goods for which the required factors of production are relatively abundant, such that a rich country (i.e an advanced economy)
that is capital abundant would export a capital intensive good and import a labour intensive good (from a developing economy) and vice-versa.
09
10
60
30000
25000
20000
40
15000
30
10000
20
5000
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2000
2001
10
0
1990
2003
2013
11
30
30
25
25
20
20
15
15
India
10
10
China
5
South Asia
14
India
UK
USA
Brazil
Russia
Japan
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
China
Indias vast endowment of cheap unskilled and semi-skilled labour gives India a natural comparative advantage in low value added manufacturing goods. Basis this, we
recognize four sunrise sectors which are expected to most effectively tap Indias labour endowment.
Comparative
Advantage
Skilled and semi skilled cheap abundant manpower: With over 45 mn people, the industry is one of the largest sources of employment
generation in India
Raw Material: India accounts for about 14% of the worlds production of textile fibre and yarn, and is the largest producer of jute and the second
largest producer of silk and cotton
Exports in textiles and apparel from India are expected to increase to USD 65 bn by FY17 from USD 40 bn in FY14
With consumerism, favourable demographics, rising per capita income and shifts in preferences for branded products is expected to be a major boost
in demand for textiles and apparels
The domestic textile and apparel industry in India is estimated to reach USD 100 bn by Fy17 from USD 67 bn in FY14
Reasons
to
Invest
The sector contributes 14% to industrial production, 4% to Indias GDP and constitutes 13% of the countrys export earnings
India has the second largest manufacturing capacity in textile sector, globally
The Indian textile industry accounts for about 24% of the worlds spindle capacity and 8% of global rotor capacity
India has the highest loom capacity (including hand looms) with 63% of the worlds market share
Domestic
Demand
15
Leather Industry
Comparative
Advantage
Semi skilled cheap abundant manpower: With 55% of the workforce below the age of 35, the Indian leather industry has one of the youngest
and most productive workforces
Raw Material: India is endowed with 21% of the worlds cattle and buffalo and 11% of the worlds goat and sheep and produces 2 bn sq. feet of
leather, accounting for 10% of the world's leather
Exports have grown from USD 1.42 bn in 1990-91 to an all time high of USD 6 bn in 2013-14 and are projected to grow at 24% per annum over the
next five years
Rising purchasing power and growing middle class, domestic demand for light manufactures and consumer goods in the leather industry, offers
tremendous opportunities
The domestic market is expected to double in the next five years
Reasons
to
Invest
16
Domestic
Demand
The total production of the Indian leather industry stands at USD 11 bn with great potential for exports and a huge domestic market
High growth potential of exports, the ready availability of leather, the abundance of essential raw materials and rapid strides in the areas of
capacity modernization offer significant growth potential to the sector
Comparative
Advantage
Skilled cheap abundant manpower: The sector is also one of the largest employment creators, with growth in direct employment in the
organised food processing sector growing 6.05% YoY in FY12
Raw Material and Geographical Advantage: With a large agricultural resource base, abundant livestock and cost competitiveness, India is fast
emerging as a sourcing hub of processed food
Large and distinct consumer brackets to support customised offerings, new categories and brands
There is an awareness and concern for wellness and health, for high protein, low-fat, wholegrain, organic food
Reasons
to
Invest
A global outsourcing hub with large retailers sourcing from India due to abundant raw materials, supply and cost advantages
Food processing sector ranks 5 in the world in exports, production and consumption, and has grown at 8.4% for the last 5 years
Value addition of the food processing sector as a share of GDP manufacturing was 9.8% in 2012-13
Investment in registered food processing sector had grown by 20.1% at the end of 2012
Domestic
Demand
th
17
Comparative
Advantage
India is deemed to be the hub of the global jewellery market because of its low costs and availability of semi-skilled labour
India is the worlds largest cutting and polishing centre for diamonds, with the cutting and polishing industry being well supported by Government
policies. Moreover, India exports 95% of the worlds diamonds, as per statistics from the Gems and Jewellery Export promotion Council (GJEPC).
The sector is witnessing changes in consumer preferences, as the westernization of lifestyle is responsible for changes in the buying habits of the
consumer. Increase in per capita income has led to an increase in sale of jewellery, as jewellery is a status symbol in India.
The domestic gems and jewellery industry had a market size of USD 40.45 bn in 2013, and has the potential to grow to USD 80.59 - 85.43 bn by 2018
The country's gems and jewellery market is expected to double in the next five years. The growth will be driven by a healthy business environment
and the Government's investor friendly policies
Reasons
to
Invest
18
Domestic
Demand
The Gems and Jewellery sector contributes around 6-7% of the countrys GDP
The Government has declared the sector as a focus area for export promotion based on its potential for growth and value addition. The
relaxation of restrictions of gold import is likely to provide a fillip to the industry
India's Gems and Jewellery sector has been contributing in a big way to the country's Foreign Exchange Earnings (FEEs). In FY14, it
contributed USD 34.74 mn to the country's FEEs
At a disaggregated level, the labour component in domestic value added of India has increased mainly for agriculture, food processing, whereas capital contribution has
increased for machinery, metal products among other sectors.
Non-labour component
1998-99
2003-04
2007-08
1998-99
2003-04
2007-08
Merchandise exports
34.2
32.1
27.9
50.7
47.3
42.9
Services exports
48.8
51.4
50.9
42
41.4
35.8
Total exports
39.2
38.9
39.1
47.8
45.2
39.5
Sector
19
India's Comparative Advantage stems not only from low labour costs but also technological capability
Know-why related technological progress: These encompass major innovations or shifting of the technological frontier
Know-how related technological progress: We must broaden the definition of comparative advantage to not only include major innovations but minor changes, which
reflects the ability of developing countries to adapt and invent around a given technology. This absorptive capacity of developing countries gives countries like India a
competitive edge that enables them to compete in global markets with the advanced industrial nations.
The technology factor can prove to be a key determinant of manufactured exports from Emerging Market Economies (EMEs) even for high-technology products. Technological
capability is not only in terms of shifting the technological frontier but minor innovations around a given technology, which have historically succeeded in augmenting exports for
Less Developed Countries (LDCs) and made them successful in competing in global markets.
There are significant inter - industry differences in developing countries. For some industries the 'know-how' variable generates significant results and for others the
'know-why' variable plays an important role. It is not the absolute level of technological capability which augments exports but the efficiency with which R&D is employed.
Therefore, comparative advantage of developing countries like India lies not only in low labour costs, but even technological capability.
20
We identify five key industries with tremendous growth potential where India enjoys a competitive advantage in terms of technological capability
Pharmaceutical Industry
In India's pharmaceutical exports, comparative advantage stems from both know-how and know-why-oriented technological capabilities (reverse engineering). Product development, in
the context of the pharmaceutical industry in general, implies development of formulations using a particular bulk drug and in the Indian context it means simple alteration of dosage forms.
Comparative
Advantage
Indias cost of production is significantly lower than that of the USA and almost half of that of Europe
Indias generic drugs account for 20% of global exports in terms of volume, making the country the largest provider of generic medicines globally
The healthcare sector in India is expected to grow to USD 250 bn by 2020 from USD 65 bn currently
The generics market is expected to grow to USD 26.1 bn by 2016 from USD 11.3 bn in 2011
In 2011, Indias OTC drug market stood at USD 3 bn and a rise to USD 6.6 bn is forecasted by 2016
Pharma companies have increased spending to tap rural markets and develop better infrastructure. The market share of hospitals is expected to
increase from 13.1% in 2009 to 26% in 2020
The purported rise of lifestyle diseases in India is expected to boost industry sales figures
Indias patient pool is expected to increase to over 20% in the next 10 years, due to the rise in population
Reasons
to
Invest
Domestic
Demand
India's pharmaceuticals industry accounts for about 2.4% of the global pharma industry by value and 10% by volume
Industry revenues are expected to expand at a CAGR of 12.1% during 2012-20 and reach USD 45 bn
Between 2011 and 2016, patent drugs worth USD 255 bn are estimated to go off-patent, leading to a huge surge in generic product and
tremendous opportunities for companies
Following the introduction of product patents, several MNCs are expected to launch patented drugs in India
21
Electronic Systems
In Electronic Systems Industry in India, know-how or production engineering rather than know-why would better explain export success in this sector. Rather than absolute levels
of technological capability it is the efficiency with which technological capability which is acquired is likely to play an important role. The sector comprises Electronic Products,
Electronic Components, Semiconductor Design and Electronics Manufacturing Service.
Comparative
Advantage
India has the third largest pool of scientists and technicians in the world
Strong design and R&D capabilities in auto electronics and industrial electronics
Large demand generated due to Government schemes like the National Knowledge Network (NKN), National Optical Fibre Network (NOFN), tablets
for the Education sector, a digitisation policy and various other broadband schemes
Growing consumerism and rising middle class contributing to significant local demand
Reasons
to
Invest
22
Domestic
Demand
The Indian Electronic System Design & Manufacturing (ESDM) Industry was estimated to be worth USD 68.31 bn in 2012 and is anticipated to be
worth USD 94.2 bn by end of 2015 with a CAGR of 9.88% between 2011-15
Existing R&D capabilities can be encouraged to develop Made in India products and generate local Intellectual Property (IP)
Adequately developed Electronic Manufacturing Services (EMS) industry is set to be a significant contributor to the entire industrys development
Bio-Technology
In this sector, India's comparative advantage stems from both know-how oriented and know-why-oriented technological capabilities. The sector is divided into five major segments
bio-pharma, bio-services, bio-agri, bio-industrial and bio-informatics.
Comparative
Advantage
India is in the top 12 bio-tech destinations in the world and ranks 3rd in the Asia-Pacific region
India has the second-highest number of USFDAapproved plants, after USA. No. 1 producer of Hepatitis B vaccine
India has the potential to become a major producer of transgenic rice and several genetically modified or engineered vegetables
Global companies looking to economise, outsourcing to lower cost economies results in a cost arbitrage of more than 50%
The market size of the sector is expected to rise up to USD 11.6 bn by 2017 due to a range of factors, such as, growing demand for healthcare services,
intensive R&D activities and strong Government initiatives
India constitutes around 8% of the total global generics market, by volume, indicating a huge untapped opportunity in the sector
Reasons
to
Invest
Domestic
Demand
The sector has seen high growth with a CAGR in excess of 20% and the key drivers for growth in the biotech sector are increasing investments,
outsourcing activities, exports and the governments focus on the sector
The industry is expected to grow at an average growth rate of around 30% per annum to reach USD 100 bn by 2025
The Indian bio-economy grew to USD 4.3 bn at the end of 2013, up from USD 530 mn in 2003
23
Defence Sector
The opening up of defence sector provides significant opportunity for know-how oriented technological progress in defence modernization and advanced weaponry. The
Government aims to promote self-reliance, indigenization, technology upgradation, achievement of economies of scale and development of capabilities in the defence sector.
Comparative
Advantage
India has one of the largest defence budgets in the world, but is also the worlds largest arms importer
Developing institutional mechanisms to identify technologies that need to be developed for defence does not only offer potential to be self
sufficient but also to transform into an exporter in the long term
India's modernization plans, increased focus on homeland security and growing attractiveness as a defence sourcing hub
The opening of the strategic defence sector for private sector participation will help foreign original equipment manufacturers to enter into strategic
partnerships with Indian companies and leverage the domestic markets by building domestic capabilities
Reasons
to
Invest
Domestic
Demand
Defence Production Policy, 2011, to encourage indigenous manufacture of defence equipment. The Policy has been amended to provide for the
following: 1. Preference to Buy (Indian)
3. Simplification of the procedure for Buy and Make (Indian)
2.
4.
24
Auto Sector
Growing population and an expanding middle class are expected to remain massive drivers for know-how oriented production progress. This along with Government support can
allow know-why technological progress.
Comparative
Advantage
Global car majors have been ramping up investments in India to cater to growing domestic demand. These manufacturers plan to leverage Indias
competitive advantage to set up export-oriented production hubs
An R&D hub: strong support from the Government in the setting up of NATRiP (National Automotive Testing and R&D Infrastructure Project)
centres. Private players such as Hyundai, Suzuki and GM are keen to set up an R&D base in India
A low cost market and engineering skills are likely to give India a competitive edge when it comes to frugal engineering
By 2015, India is expected to be the fourth largest automotive market by volume in the world
Over the next 20 years, India will be a part of the big global automotive triumvirate
Tractor sales in the country are expected to grow at CAGR of 8-9% in the next five years
Two-wheeler production has grown from 8.5 mn units annually to 15.9 mn units in the last seven years. Significant opportunities exist in rural markets
Indias car market has the potential to grow to 6 mn+ units annually by 2020
Reasons
to
Invest
The sector currently accounts for ~7% of the countrys GDP and employs about 19 mn people both directly and indirectly
India is currently 7 largest producer in the world with an average annual production of 17.5 mn vehicles, of which 2.3 mn are exported
The total turnover in 2010-11 was USD 58.5 bn turnover by 2016 is slated to be USD 145 bn
Domestic
Demand
th
25
28
Labour Productivity: Manufacturing entails enhancing labour productivity and a sustained availability of skilled workforce. Relative labour productivity in India falls
behind its global peers, despite a cheap and abundant labour resource. Only 14% of labour force in India is endowed with primary education, 36% with secondary
education and 10% with tertiary education. Literacy rate in India stands at 62%, much below comparable levels of above 90% in other EMEs. The public expenditure on
education is a meager 3.3% of GDP as compared to 5.5% of GDP in OECD nations and 4.4% in lower middle income nations, respectively. As a result of poor
education, labour productivity remains low in India, serving as a deterrent for attracting investment and manufacturing opportunities.
High concentration of Informal Labour: Rigid labour laws and limited adsorptive capacity of the manufacturing sector, have led to restricted job creation in the
organised sector. As per the latest NSSO 68th round Employment-Unemployment Survey, nearly 72% of the workforce is employed in the informal sector. The
corresponding figure for developing countries is 40%. Waged and salaried workers comprise a meager 18% of workforce, with close to 84% of the workers being self
employed.
105.7
81.8
113.7
1420
527.3
654.5
185.9
146.5
159.1
6
5
Public spending on
education, total (% of GDP)
50
3
2
40
Singapore
India
Indonesia
Russia
Low income
Russian
Federation
India
Malaysia
Singapore
Hongkong
SAR, China
Philippens
Brazil
Indonasia
Lower middle
income
10
US
UK
20
OECD
1
0
30
Brazil
60
10
Malaysia
70
30
50
Japan
54.8
US
24.4
Germany
47
South Africa
70
Brazil
25.2
Taiwan
8.9
Thailand
28.4
Sri Lanka
90
South Korea
7.6
Singapore
4.8
Philippens
11.9
Malaysia
110
Indonasia
Hongkong
Chart 10: Labour productivity lags behind both AE's and EME's
China
Infrastructure Bottlenecks
Infrastructure and logistics in India lag far behind international standards adding significantly to the cost of doing business. Highways, bridges, world-class airports, reliable
power and clean water are in short supply. Power shortage is estimated at 12% at peak levels and 8% at non-peak levels. Indian ports have a vessel turnaround time of 3-5
days as against only 4-6 hours in Singapore and Hong Kong. Lack of clear-cut policies on land acquisition, multiplicity of authorities and bureaucratic hurdles lead to delays
in the implementation of industrial and infrastructure projects in India.
Makein
Make
inIndia
India- -Pressing
Pressingthe
thePedal
Pedal
29
United Kingdom
Singapore
Singapore
Malaysia
Japan
United Kingdom
United States
Logistics
performance
index:
Frequency with
which
shipments reach
consignee
within
scheduled or
expected time
(1=low to
5=high)
China
Hong Kong SAR, China
Japan
United States
Logistics
performance
index: Ease of
arranging
competitively
priced shipments
(1=low to 5=high)
OECD members
Philippines
India
Indonesia
Low & middle income
0
0.5
1.5
2.5
United Kingdom
Singapore
United States
United Kingdom
Singapore
Japan
Japan
United States
Hong Kong
OECD members
Malaysia
OECD members
Malaysia
China
China
Logistics
performance
index: Competence
and quality of logistics
services (1=low to 5= high)
Indonesia
India
Philippines
Low & middle income
0
30
3.5
4.5
Logistics
performance
index: Efficiancy
of costoms
clearance process
(1=low to 5=high)
Philippines
Indonesia
India
Low & middle income
0
United Kingdom
Logistics
performance
index: Overall
(1=low to 5= high)
India
Philippines
Low & middle income
0
Brazil
Russia
US
Japan
Indonesia
UK
China
China
Malaysia
Philippens
OECD members
Singapore
South Africa
Japan
India
United States
Malaysia
7
6
5
4
3
2
1
Singapore
Indonasia
Tax Structure
Currently the taxation regime faces challenges such as double taxation, inverted duty structure and lower incentives which have rendered the manufacturing sector
uncompetitive. Taxes on international trade account for 15% of revenue (as compared to 5.6% in Low & Middle income nations and 0.3% in OECD nations) taking a toll on
manufacturing exports. The indirect taxation regime is riddled with double taxation such as sales tax on cenvat, sales tax on central sales tax, entry tax on sales tax, and
income tax on service tax. Further, the current direct tax structure is a major impediment towards building an investor friendly ambience and boosting consumer
sentiment. Taxes on income profits and capital gains comprise 45% of total revenues in India with comparable ratios at 23% in OECD nations and 21% in low income
nations, reflecting disincentives the current tax structure at present imposes. In the recent FY16 budget, the Government proposed to reduce the corporate tax rate to
25% from 30% over a four-year period along with removal of exemptions. While this may imply a higher tax rate vis--vis the current effective tax rate of 23%, it
nevertheless imparts predictability to the tax regime.
Makein
Make
inIndia
India- -Pressing
Pressingthe
thePedal
Pedal
31
3.5
India
2.5
Brazil
China
1.5
Malaysia
India
Malaysia
Russian
Federation
Brazil
United Kingdom
United States
United Kingdom
Japan
Singapore
0
Russian
Low income
OECD members
Hong Kong
SAR
OECD
members
United States
Japan
Malaysia
Indonesia
Brazil
China
India
China
Brazil
Singapore
10
Hong Kong
10
Indonesia
20
Philippines
15
India
30
Philippines
8,000
40
20
Russia
6,000
50
Taxes on international
trade (% of revenue)
25
32
4,000
30
2,000
United Kingdom
China
Singapore
OECD members
OECD members
0
United States
1
0.5
One of the fallouts of the recent proliferation of regional / bilateral Free Trade
Agreements has been the inverted duty structure (that makes domestic products
less competitive against imported products) which has adversely impacted Indias
manufacturing industry. While some of the inverted duty issues were addressed in
FY15 Budget (certain chemicals, battery waste and scrap, coal tar among others)
and more recently in FY16 budget (electronics and several raw materials), several
sectors (aluminum, steel, tyres) still continue to suffer from Inverted Duty Structure.
There is a rampant economic debate whether India should produce for itself or
Given the limited success of FTAs so far, on the front of international trade, India has
two policy choices in the form of measured integration or ambitious integration.
India must carve its space in global value added chains by forging measured regional
integrations, but strategizing its policy keeping in view the progress of TPP (Trans
Pacific Partnership) and TIPP (Trans-Atlantic Trade and Investment Partnership).
for the global markets. Given the slowdown in global growth, replicating an
export oriented growth strategy aka East Asian Economies might be difficult for
India. India must develop as a manufacturing hub, but cater to both domestic and
external demand. Import Substitution and satiation of domestic demand must
be accompanied by Export Optimism. A low share of India in global trade leaves
ample scope for tapping global markets.
33
Develop domestic manufacturing base for power equipments to ensure consistent power
at competitive prices
We invite valued inputs from bankers, bureaucrats, economists, industry leaders and regulatory agencies to make India a Global Manufacturing Hub. Do write to us with your advice.
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Source: 1 National Manufacturing Policy 'Make in India';
Deloitte Survey; 3 DGCI&S Data 2013-14; 4 McKinsey Quarterly Report; 5 ASSOCHAM Internal Study; 6 YES BANK Analysis; 7 Department of Electronics & IT
We invite valued inputs from regulatory agencies, bureaucrats, economists, industry leaders and bankers to improve the ease of doing business in India. Do write to us with your advice.
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Source: 1World Bank; 2UNCTAD - FDI inflows, by region and economy, 1990-2013; 3National Council of Applied Economic Research; 4CAG (Mar 2013); 5Economic Times, Sep 23, 2014; 6ASSOCHAM analysis
Widen individual taxpayers base from 3.6 Crore to over 5 Crore in the short term and increase tax revenues
Single and unified GST as indirect tax for efficient resource allocation and to boost the manufacturing sector
Progressive and reoriented Direct Taxes Code (DTC) to consolidate all direct taxes and simplify the taxation
structure
Promote infrastructure development and investments in Power and Housing sectors through increased tax incentives
Gross Taxes-GDP ratio projected to increase from the current 10.6% to 11.9%
0.9-1.7% potential increase in GDP annually, accrued to comprehensive rollout of GST3
3.2-6.3% y-o-y gains in exports estimated subsequent to GST implementation3
Streamline indirect tax regime through a pan-India Goods and Services Tax (GST) roll
out through:
Concurrence of all states for the rollout
Nationwide uniform rate to prevent tax arbitrage
Mechanism to compensate states for tax revenue shortfall
Constitutional amendment to operationalize GST
Revisit the DTC bill by rationalizing taxes to create a more investor and business
friendly environment and improve tax collections
Provide tax relief to corporates for mandatory CSR spend
Institute an efficient arbitration mechanism for speedy resolution of tax disputes
Extend tax holiday by 5 years under Sec 80-IA of the Income Tax Act to encourage
investments in the Power sector and help realize the vision of 24x7 electricity for all
Treat infrastructure projects, particularly water, roads, power at par with SEZ
projects to extend all applicable exemptions and tax benefits
Extend sunset clause under Sec 80-IC of the Income Tax Act to facilitate industrial
growth of specified areas, including the North East
Facilitate manufacturing sector growth by introducing investment allowance and
increasing rate of depreciation on machineries
Review existing Double Taxation Avoidance Agreements (DTAAs) particularly with Mauritius, to
improve investor confidence leading to higher tax revenues
Avoid retrospective application of tax laws and defer General Anti Avoidance Rules (GAAR) rollout
to reassure industry concerns and investor sentiments
Institute e-governance in tax system and consider merging Direct and Indirect Tax departments for
more efficient compliance
Strengthen and widen the scope of advance ruling mechanism for cross border transactions to
reduce tax disputes and litigation
Rationalize tax liability from transfer pricing through more robust Advance Pricing Agreements and
Safe Harbor Rules
Overhaul customs and excise duty structure and favorably review tax benefits of SEZ for Minimum
Alternate Tax (MAT)/ Dividend Distribution Tax (DDT) to catalyze exports and industrial growth
Encourage technology up-gradation through foreign collaborations and investments by abolishing
the R&D Cess Act
We invite valued inputs from regulatory agencies, economists, industry leaders and bankers for inclusion in the policy submission to the Government of India by ASSOCHAM. Do write in to us with your advice.
110021 | Ph: +91 11 4655 0555 | Fax: +91 11 2301 7008 | E-mail: believeinindia@assocham.com | www.assocham.org
Tax Administration Reforms Commission; 2 Planning Commission 12th Five-Year Plan; 3 National Council of Applied Economic Research
Estimated savings of 30-50% from import substitution and low cost of maintenance due to strong domestic defence sector
Additional 1.2 lakh direct and 5-10 lakh overall jobs to be created from increased involvement of domestic players
Cost advantages in manufacturing and growing talent pool of engineers to drive USD 6-10 billion exports of engineering services
Indian private sector to be at par with PSUs, foreign suppliers for defence
contract bids and liberalize guidelines on partnering foreign firms for know-how
Industry status for aerospace, infrastructure industry status for defence to
provide tax incentives and facilitate funding to increase role of private sector
Mechanism to provide protection against Foreign Exchange Rate Variation to the
private sector akin to that for Defence PSUs
Allocate products and services for MSMEs in support and maintenance activities related to high value-contracts
Increase allocation for Technology Development Fund from INR 100 crores to INR 500 crores; set up Patent Pool
Fund to support Intellectual Property development by MSMEs
Prioritize development of propulsion, weapon systems, military electronics and communications as core
manufacturing capabilities
Implement corporatization of Ordnance Factories & liberalize investment through private sector strategic alliances
with Defence PSUs, including BUY vs BUILD acquisition of private sector shipyards by financially strong PSUs
Defence and aerospace incubators with common R&D infrastructure and support facilities for MSMEs; PPP to
support sector specific skill development initiatives
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1
BCG Report on Defense Manufacturing Sector, 2012; 2 Edelweiss Report on Defense, 2014; 3 McKinsey Report on Indian Defense Industry, 2013; 4 Vijay Kelkar Committee Report, 2004
MSMEs in India account for over 95% of the total number of industrial enterprises1
Diverse manufacturing base, with 8000+ products ranging from traditional to high-tech2
Labour intensity of the MSME sector 4 times higher than that of large firms2
Scope to provide institutional finance of USD 418 billion to MSMEs3
Contributes about 45% of the industrial production and 37.5% of the national GDP4
Accounts for 40% of the total exports from India4
Employment for 500 million non-graduates including women in the 700+ million working age population by 20222
Enhanced technology adoption to increase MSME economic output by USD 56 billion5
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1
CARE Ratings Research; 2 Centre for MSME (IICA) Research, 3 IFC Report: MSME Finance in India, 4 Consultation Paper on MSME National Policy, Ministry of MSME, 5 BCG Report: Ahead of the curve
We invite valued inputs from bureaucrats, economists, industry leaders, regulatory agencies and bankers to realise the full growth potential of the Infrastructure sectors in india. Do write to us with your advice.
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Opportunity
31% of Indias population resides in cities during 20012011 urban population grew at a CAGR of 2.8% resulting in a net addition of
3
91 Mn
1
By 2030, India will have 6 megacities (10 Mn+ population) Mumbai and Delhi will be among the 5 largest cities in the world
In addition, cities with 1 Mn + population will increase from 53 to 681 huge potential for job creation and workforce addition
4
As our urban population grows to 590 Mn by 2030 (approximately 40% of total population), critical gaps in healthcare, education,
clean drinking water, sanitation, affordable housing and public transportation need to be addressed
Indias rapid urbanization requires an aggregate capital investment of over R 70 Lakh Cr2 till 2030, mainly in urban roads, affordable
2
housing and transportation entailing annual per capita investment on urban services to grow eightfold from ~R 1000 to ~R 8000
Potential to create huge demand in various core and ancillary sectors multiplier effect through interlinkages between 254
5
industries , including infrastructure, logistics, modern retail and also improved synergy between rural and urban centers
Promotion of social stability and economic equality through sustainable all round development of urban economic centers
Develop basic infrastructure like public transport, flyovers, drainage, sanitation and
waste management
Incentivize REITs and Urban Development Funds to invest in public utility services
like slum rehabilitation, water supply and waste management and sanitation
Deepen egovernance mechanisms for electronic delivery of public services
Establish regulatory authority to monitor work of Urban Local Bodies (ULBs) build
capacity in research, planning, HRD facilitated by State Governments
Strengthen fiscal standing of ULBs through improved revenue collection, expense
management, budgetary allocations and developing Municipal Bond Markets by
providing suitable tax incentives to investors
Rehabilitate slums and create affordable housing inventory and rental housing
facilities for various income groups at city outskirts
Improve quality of life in Tier 1 and Tier 2 cities by maintaining and developing
recreation facilities and public parks
Develop greenfield integrated smart cities along industrial corridors such as DMIC
Upgrade civic amenities, health services, urban transport and intercity connectivity for Tier II cities
Innovation in Public Transport through Intelligent Transportation systems incorporating vehicle
telematics to reduce commuting time
Integrate Disaster Management Systems and a comprehensive Risk Management Framework into
Urban Planning, with periodic audits
Develop suitable framework for People Public Private Partnership (PPPP) in urban infrastructure
projects to enhance efficiency in delivery of urban services
Effectively use Indian Railways' urban land banks to set up Central Business Districts with facilities for
holding conventions and exhibitions, transportation hubs, affordable housing and shopping centers
Develop an Urban Infrastructure Fund with special dispensations such as relaxing KYC provisions
for investors, tax incentives, excluding
investment by Banks into such funds from
SLR/CRR requirements
We invite valued inputs from regulatory agencies, economists, industry leaders and bankers for inclusion in the policy submission to the Government of India by ASSOCHAM. Do write in to us with your advice.
Corporate Office: 5, S. P. Marg, Chanakyapuri, New Delhi 110021 | Ph: +91 11 4655 0555 | Fax: +91 11 2301 7008 | Email: believeinindia@assocham.com | www.assocham.org
1
Indias Urban Awakening McKinsey Global Institute 2 Reserve Bank of India Financing Strategies for Urban Infrastructure Trends & Challenges 3 Census 2011 4 World Resources Institute (http://www.wri.org/blog/2013/04/5keyssustainabledevelopmentindiancities)
Planning Commission
An estimated 40-45% of
households earning INR 10,000 25,000 per month live in rented
4
accommodation
Infrastructure status for sector to attract greater capital and investment formation
Improve credit availability and implement interest subvention schemes for the sector
Insurance and Pension funds to be allowed to be invested in the sector
Ease conditions for FDI in real estate and reduce minimum capital requirement from
INR 59 Crore (USD 10 million) to INR 29.5 Crore (USD 5 million) and minimum
tenure before repatriation from 3 years to 1 year
Review Section 43C of the Income Tax Act (taxation at circle rate) and restore 80 IB
(10) (tax exemption on income derived by an undertaking engaged in development
and construction of small dwelling units)
Review RBI norms for project finance; Uniformity in end user income ceiling norms
for Affordable Housing units for EWS/LIG/MIG
Sources: 1Census of India - 2011, 2Report of The Technical Group on Urban Housing Shortage - 2012-17 (MoHUPA), 3From poverty to empowerment:
Indias imperative for jobs, growth, and effective basic services, MGI (2014), 4State of the Low-Income Housing Market (Report by Monitor Deloitte),
5
Real Estate Intelligence Service, Jones Lang LaSalle, 6YES BANK Analysis, 7Bridging the Urban Housing Shortage in India (Report by KPMG)
www.assocham.org
We invite valued inputs from regulatory agencies, bureaucrats, economists, industry leaders and bankers to realise the full growth potential of the Indian Railways. Do write to us with your advice.
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OPPORTUNITIES
Share of renewable energy in total power generation to increase from present 6.5% to 15% by 20191
78.1% of wind energy potential, and 99.6% of solar energy potential still remains untapped1
Solar power capacity target for 2022 to be revised from 20 GW to 100 GW1; tremendous growth potential in Solar Photovoltaic (PV) industry
5th largest wind energy producer2 and capacity to increase from 22.4 GW to 60 GW by 20223
Various Government incentives - tax holidays, Generation Based Incentives (GBIs), capital and interest subsidies, feed-in-tariffs and concessional finance
` 2 Lakh Crore to be invested in solar and wind power projects in wastelands and uninhabited border regions4
100% FDI allowed for renewable energy generation, distribution and manufacturing projects
ASSOCH proud partner of RE-INVEST, congratulates the Government of India on securing over 200 GW of Green Energy Commitments (GECs).
ASSOCHAM Patron Members, Corporate Members and Affiliates have mobilized significant GECs of over 66 GW.
GECs starting as low as 1 MW can be made at www.re-invest.in/greenenergycommitment.aspx
YES BANK patron member of ASSOCHAM, is the Knowledge Partner of RE-INVEST Global Investor Meet
and the 1st Private Sector Bank to provide GEC for financing 5 GW of Renewable Energy projects.
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1. Ministry of New and Renewable Energy
2. Department of Industrial Policy & Promotion (DIPP) 3. RE-INVEST 2015 Investors Guide 4. India Brand Equity Foundation (IBEF)
5. KPMG Report 2011 The Rising Sun: A Point of View on the Solar Energy Sector in India 6. Mckinsey Report 2014 India: Towards Energy Independence 2030 7. Easia 8. Natural Resources Defense Council (NRDC)
We invite valued inputs from regulatory agencies, economists, industry leaders and bankers to realise the full growth potential of the Tourism and Hospitality sector. Do write to us with your advice.
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1. Ministry of External Affairs. 2. World Tourism Organization (UNWTO). 3. investindia.gov.in. 4. Economic Impact on India, 2014 WTTC. 5. Economic Impact on India, 2013 WTTC. 6. Report Of The Working Group On Tourism Planning Commission 7. Cushman & Wakefield.
HEALTHCARE : EXCEPTIONAL
OPPORTUNITIES FOR GROWTH BY 2020
AWARENESS
AVAILABILITY
ACCESSIBILTY
AFFORDABILITY
OPPORTUNITIES
India's total healthcare expenditure is 4% of GDP (compared to 9.3% in a developing country like Brazil)1 Public expenditure to more than double from
current 1.2% of GDP to 3% by 20222
Healthcare Industry to almost treble to ` 16.8 Lakh Crore by 2020 from ` 6.25 Lakh Crore in 20143
Indian Pharma Industry currently ` 1.92 Lakh Crore4 and 10% of global production to grow to ` 3.3 Lakh Crore5 at (9.5% CAGR) and become 2nd largest in
volume terms by 2020
70% of India's Healthcare Infrastructure concentrated in Top 20 Cities6; Bed density of 0.9 per 1000 (WHO guideline: 3.5 beds per 1,000)1
India a preferred destination for medical tourism with significant cost advantage, skilled medical professionals and world-class hospitals, coupled with globally
differentiated offerings like Ayurveda, Yoga, and Unani
We invite valued inputs from doctors, medical fraternity, regulatory agencies, bureaucrats, economists, industry leaders and bankers to realise the full growth potential of the Healthcare sector in india. Do write to us with your advice.
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1. World Health Organization (WHO) 2. Planning Commission 3. IBEF Analysis 4. KPMG 5. McKinsey Indian Pharma 2020 6. PwC The Future of Healthcare 7. McKinsey - India Healthcare: Inspiring possibilities, challenging journey 8. AIMA report - 'India's New Opportunities-2020'
9. PwC - Enhancing access to healthcare through innovation Medical technology in India 10. Corporate Catalyst India Report
E E
India is the world's 3 largest education system with 700 universities, 35,000 colleges and over 2.5 Crore students enrolled
To grow Gross Enrolment Ratio (GER) in Higher Education from 19.4% in 2012-13 to 30% by 2020, investment of ` 9.5 Lakh Crore is required to
establish an additional 10,510 technical institutes, 15,530 colleges and 521 universities2
With 100% FDI allowed through automatic route, Education sector expected to nearly double from ` 3.4 Lakh Crore in 2012 to ` 6 Lakh Crore by 20153
India is fast emerging as a knowledge economy with 67 Crore people in the working age group of 15 - 59 years4
8% year-on-year GDP growth can generate 24 Crore jobs in key sectors such as Manufacturing, Housing & Construction, Retail, IT by 20225; DMIC
alone expected to employ 30 Lakh skilled workers6
India has the 3rd largest higher education system in the world
and the 3rd largest scientific and technical manpower globally. Yet
our public expenditure on higher education is a miniscule 0.6%
of GDP. Existing challenges in Indias higher education access,
equity and quality will only intensify, unless we transform our
education and skill development model.
We will be the youngest nation in the world by 2030 - hence
high quality education and skilling of 50 Crore Indians over the
next 10 years is a gigantic but critical mission. Seamless
integration of Academia, Research and Industry is critical to
leverage Indias Demographic Dividend. We need to mobilize
existing resources and expand education infrastructure with
support from the Industry, leverage our nations potential to
build outstanding academic and research institutions.
We invite valued inputs from academicians, educationists, bureaucrats, regulatory agencies, economists, industry leaders and bankers to realise the full growth potential of the Education sector. Do write to us with your advice.
Corporate Office: 5, S. P. Marg, Chanakyapuri, New Delhi 110021 | Ph: +91 11 4655 0555 | Fax: +91 11 2301 7008 | E-mail: believeinindia@assocham.com | www.assocham.org
1. Annual Status of Higher Education of States and UTs in India - Deloitte 2. International Journal of Social Science & Interdisciplinary Research 3. India Brand Equity Foundation (IBEF) 4. Consolidated Working Group Report - 12 Five Year Plan 5. Forbes India (July 10, 2013) 6. Ministry of Commerce and Industry, GoI
7. Journal of International Academic Research - The Impact of Education Expenditure on India's Economic Growth 8. NSDC 9. The National University of Educational Planning and Administration (NUEPA)
47%1 of India's workforce is employed in agriculture, however contribution to GDP is a meagre 14%, compared to Industry (26%) and
2
Services (60%) rational policies, required technologies and efficient utilization of farm resources are essential
Total global agriexports are USD 1.7 trillion India's present contribution is only 2.6%3
2
Attracted only 2.3% of total FDI in 201213
Over 400 million MT of perishables produced in India but less than 15% currently processed3 scope to substantially enhance value
addition in fruits and vegetables, dairy and poultry/meat
Agri output will more than double from R 13 Lakh Crore in 2011 to R 30 Lakh Crore by 20304 4% growth in Agriculture will ensure
8%5 overall GDP growth 8% growth in agriculture as in Gujarat, Madhya Pradesh and Chattisgarh can get India to 10% GDP growth
4
Food consumption will increase by 4% p.a. to R 22.5 Lakh Crore by 2030, from R 11 Lakh Crore in 2010
4
Per capita consumption will increase from R 9,360 per year to R 15,390 , primarily driven by high value foods indirect multiplier
impact on growth in manufacturing and services sectors
3
Increased processing levels (CAGR of 10 % p.a.Vs. current 8% ) will help Processed Food GDP contribution grow to over USD 250
billion and create over 10 Lakh new jobs by 2020
Implement Model APMC Act in all states to boost agrimarketing and supply chain
efficiencies
Replace input based subsidies to farmers with low cost credit, direct cash transfers
and investment subsidies link MGNREGA to agriculture for asset creation
Develop effective communication systems between farmers and research institutes
by setting up broadband connections and regional Kisan TV channels to disseminate
real time data
100% FDI allowed in Food Processing Industries encourage private and foreign
capital and grant priority sector status for all food processing credit requirements
Adopt scientific approach to roll out biotech applications for better yield and
nutrition
Encourage high value agriculture like horticulture, floriculture, fisheries, poultry and
dairy to enhance job creation and anchor an inclusive growth model
Setup dedicated GAF (Geographical Appellation Fund) to promote Geographical
Appellations of various Indian brands Darjeeling Tea, Nagpur Oranges, Ratnagiri
Alphonso which have the potential to become global food brands, akin to Kiwi fruit
Facilitate further investments in agri infra and PDS storage, logistics and distribution through PPPP allow greater role
of States under Decentralized Procurement Scheme and build regional focus centred around storage deficit with fullest
involvement of States
Demarcate Agri Zones and have better policies and technologies to increase pulses and oilseeds production will
contain inflation and curb imports (over 60% of current Agriimport bill3)
Promote alternate usages of noncultivable land to boost job creation soil and seed testing labs in villages, processing
units, mega food parks
Reduce postharvest loss develop crosscountry rail network, promote clusterbased storage systems for different
crops, set up Food Processing Industries, include pulses and perishables in public distribution and mid day meal schemes
Revamp agriexports through consistent and stable trade policies and focus on integrated food processing clusters for
high value exports
Develop robust water supply network promote optimum utilization through microirrigation, rain water harvesting,
linking of waterways and rivers
Focus on dairy as a key high value segment integrated
dairy farms, breed improvement, fodder management
and quality enhancement of milk
Focus exclusively on fisheries, poultry and meat for
domestic and exports growth
We invite valued inputs from regulatory agencies, economists, industry leaders and bankers for inclusion in the policy submission to the Government of India by ASSOCHAM. Do write in to us with your advice.
Corporate Office: 5, S. P. Marg, Chanakyapuri, New Delhi 110021 | Ph: +91 11 4655 0555 | Fax: +91 11 2301 7008 | Email: believeinindia@assocham.com | www.assocham.org
1. World Bank 2. Central Statistical Organization, MoSPI 3. MoFPI, Ministry of Agriculture 4. Food and Agriculture Integrated Development Action III McKinsey Global Institute 5. Planning Commission 12th Five Year Plan
6. Summary of
Key Recommendations
Key Recommendations
I.
Tax Reforms
II.
The execution of Goods and Service Tax (GST) is expected to improve profitability of the manufacturing sector by providing full-input tax credit at each stage of the
supply chain and henceforth reducing the cost of production. It is estimated that overall cost of indigenous manufacture will reduce by 10% to 15% on replacement of
existing multiple tax regime with GST
GST would metamorphose India in a single unified market which would enhance the realization of economies of scale
Cost of export production will reduce due to zero rating of all taxes, increasing export competitiveness. Currently only some of the central taxes are partially
neutralized in the form of refund
Tax sops for MSMEs to reduce dependence on imports and thereby encourage local sourcing. Sectors such as defence, telecom, petrochemicals and steel could get
considered for such incentives
Rationalize excise duty on consumer durables which compete against international producers. Auto sector specifically has been grappling with higher costs amidst
weak demand post the expiry of tax holiday in December 2014
Allowing issuance of long-term bonds by sectors to raise investment funds; establishment of finance windows / investment funds; special incentives to start-ups;
incentives to MSMEs and SEZs for manufacturing, possibly on the lines of lower Minimum Alternate Tax (MAT)
Issuance of infrastructure bonds, further easing of entry of private sector and service tax benefits to key sectors could be other measures that can support a
manufacturing revival
Amendment to Industrial Disputes Act: On the lines of labour reforms in Rajasthan, companies can now employ up to 300 workers and will not need the approval of the
State Government if they want to retrench staff. Previously, the limit was capped at 100 employees
52
This will provide relief to a large number of companies to realign their businesses. Because of the old norms, even though the promoters wanted to exit lossmaking businesses or lay off workers due to tough market conditions, the lengthy process to get permission only added to their woes
Amending labour union membership: Replicating new laws in Rajasthan where labour unions would require a membership of 30% of the workforce against the 15%
earlier. The lower limit allowed several unions to emerge often increasing inter-union conflicts and multiplicity
To cater to manufacturing sector growth and to be able to effectively utilize Indias demographic dividend, training labour force is critical. Focus on both quantum and quality of
skills when accompanied by talent management would be a huge step forward in bridging the job market asymmetries. Towards this -
III.
Promotion of sector-specific training for manufacturing: Initiatives to inform prospective employers about skill development courses and to encourage them to recruit
from skill institutes and investments by employers for imparting job-specific skills to the employees to cater to sectors such as textiles, food processing and defence
Vocational training to give fillip to labour intensive high value added exports
Focus on higher level education to catapult high skill intensity sectors such as pharma, bio-technology and electrical equipments
Enabling collateral free, small-ticket bank loans: With regard to funding, Government Subsidies have a legitimate place in the scheme of things, but the best way to
create an efficient ecosystem is to enable collateral free, small-ticket bank loans that cater exclusively to skill development
Encouragement of entrepreneurship
Via Angel investors, venture capital funds, and impact investors which are still at a nascent stage compared to global peers
Government funds through grants and seed funding programs such as Technopreneur Promotion Program, Technology Development Board, among others
A push to Infrastructure: The Government had earlier estimated that the country needs to spend at least USD 1 tn on infrastructure. In line with this goal, a
renewed focus on infrastructure in order to stir both domestic and international investments is warranted. The passage to build world-class infrastructure must
focus on:
Typically, urbanization happens in one of three ways - suburbanization, corridors and sleeper towns. By this principle, the model of Smart Cities in India should adopt
the concept of anchorage
History provides evidence of new cities generally getting created around an anchor, like Detroit in US (anchor: auto industry), Jamshedpur in India (anchor: steel
plant). Government must identify similar anchors (industry, university) to create brown field smart cities
Allow floating of Smart City Bonds, within the infrastructure bonds category to help finance infrastructure development in the proposed cities. Municipalities backed
by respective State Governments could act as issuers while the subscription could be open to domestic investors, FIIs, and multilateral institutions.
53
Reduce public direct spending such that Government expenditure is channelized to other priority areas
To give an impetus to private sector investments, PPP models need to be modified such that development risks or construction risks of the project rest with the
Government. Development risks such as environment and forest clearances are best resolved by Governments. In such a case, execution risk will be lower. After
construction, the asset created can be sold to private sector with better valuations
Port-led development
Despite the fact that India has 12 major and 187 minor ports, data shows that almost every sea-based cargo coming and going from India is trans-shipped first to
mega hubs like Colombo or Singapore
54
Trans-shipment of such nature, adds to the overall cost of shipping from India, making India lose its competitive advantage
In addition to modernizing existing ports and developing new ones, Government should:
Relax the 25-30% tax on fuels used by trans-shipment Indian ships. Official estimates show that the immediate impact of such a move will lead to an annual
revenue loss of just US 10 mn but its potential in driving the use of Indian sea route is seen at an additional USD 166 mn
India imports about 185 mn tonnes of crude annually, but only 13% of it is carried by Indian ships. The Shipping Ministry should take this up, under the
proposed hydrocarbon transportation policy with the Petroleum Ministry
Improve Ease of Doing Business and focus on Sunrise sectors: The new Government has made a positive beginning to improve the Ease of Doing Business in order
to establish a favorable, flexible, liberalized and a transparent business environment. Smarter regulations towards Ease of Doing Business in high-growth multiplier
sectors (such as Affordable Housing, Tourism) must become the focus, going forward
Set-up a National Resource Policy: India needs a simple and transparent policy for natural resources. A clear outline of auctioning natural resources via a revenue-sharing
model can be a win-win situation for Government, industry as well as the people
IV.
st
The Land Acquisition Rehabilitation & Resettlement Act that came into force on 1 January 2014, by repealing the Land Acquisition Act, 1894 mandates
70% consent of affected families for PPP projects and 80% for private players
After much deliberation and debate, the Land Bill was recently passed in the Lok Sabha
Creating a National Infrastructure Planning process: India must define a 6 stage application process for projects - Pre-application stage, Acceptance stage, Preexamination stage, Examination stage, Decision stage and Post-decision stage; along with clearly defining maximum permissible time limit for each stage
This procedure should be applicable to only core infrastructure projects such as thermal and hydro projects, bridges and pipelines. Other linear projects such as
road, rail and power lines where the route is defined could be exempted
Recognizing the need to develop a 'Common Economic Agenda' across all policy decisions, the Government has aligned the Foreign Trade Policy (2015-20) with Make in
India
Reducing export obligation for capital goods purchased from Indian suppliers under the Export Promotion Capital Goods (EPCG) scheme
Granting higher level of rewards under Merchandise Exports from India Scheme (MEIS) towards export for goods with high domestic content and value addition
Promoting Export Oriented Units (EOUs), electronics hardware technology parks, software technology parks and bio-technology parks, via:
EOUs, Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) have been allowed to share infrastructural facilities among
themselves
Inter-unit transfer of goods and services have been allowed among EOUs, EHTPs, STPs, and Bio-technology Parks (BTPs)
EOUs have been allowed facility to set up warehouses near the port of STP units, EHTP units, software EOUs have been allowed the facility to use all duty
free equipment / goods for training purposes
55
EOUs having physical export turnover of USD 1.66 mn and above, have been allowed the facility of fast track clearances of import and domestic
V.
Rationalization of inverted duty structure on manufacturing goods for sectors such as Chemicals, IT products, Metals (Aluminum, Steel), Textiles among
others. In this spirit, FTA provisions with countries such as Japan, South Korea, Malaysia, and Singapore also need to be reassessed
Set up a Trade Facilitation Centre as an integral part of Indian embassies all over the world
Development of the Medium, Small and Micro Enterprise (MSME) sector: In India, the sector accounts for nearly half of domestic manufacturing output and 40%
of total exports; contributing close to 8% to GDP and creating 80 mn jobs. Going forward, key schemes in the sector must entail
Amend MSME definition: Raise cap for small and medium enterprises to USD 3.3 mn versus USD 0.83 - 1.6 mn currently, as this would enable more companies to avail
tax benefits available to the sector. Further, the definition should be in sync with international standards and also include manpower and turnover to reward employment
generation and efficiency besides investment in plant and machinery
Simplification of procedures and formulation of polices to provide safety nets to MSMEs in the form of refinance - facilities and special credit windows
Exclusive Marketing Structure: In order to withstand competition in the era of globalisation, MSMEs need to respond to changing dynamics of marketing and
innovations. In this regard, the Government has initiated various schemes such as MSME Marketing Development Assistance, establishment of Marketing Intelligence
Cell, among others. The scope of these schemes should be enlarged to include
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A comprehensive portal to enable MSME suppliers to interact with service providers, collaborate with B2C (business to customers) and offer competitive deals by
way of e-commerce platform.
7. ASSOCHAM
Global Investors' India Forum
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About ASSOCHAM
Global Investors' India Forum
ASSOCHAM, Indias apex Knowledge Chamber, has been playing a crucial role at
the International business level by working closely with the Government on various
foreign policy issues, expanding business opportunities for foreign investors, and
providing an effective platform for consensus building and networking, through its
focused 14 International Business Promotion Councils (BPC) based in India.
ASSOCHAM also initiated the Globalization campaign in September 2014 to
actualize the vision of 'Make in India', by opening 14 International offices at India's
top trading partner locations including UK, USA, UAE, Germany and Singapore,
amongst others, for inviting Multinational businesses to invest in India and be a part
of our nation's economic transformation.
To further strengthen the Chamber's international footprint by synchronizing the
efforts of its 14 International offices as well as 14 International BPCs and 77 Sector
and Regional Councils in India, ASSOCHAM has institutionalized the Global
Investors' India Forum (GIIF), under Mr. Rana Kapoor's Chairmanship, for
developing vibrant economic, social and cultural bonds between India and its
Strategic Partner nations. The Forum will provide a conducive and enabling platform
to Global investors for engaging and exploring investment opportunities in India to
actualize the vision of 'Make in India'.
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Formation of ASSOCHAM
Global Investors' India Forum in March 2015
ASSOCHAM establishes
GLOBAL INVESTORS' INDIA FORUM
ASSOCHAM congratulates Prime Minister Narendra Modi for his successful visits to France, Germany and Canada
ASSOCHAM, through its 14 new International Offices (launched in September 2014), 14 International Business Promotion Councils, and 77 Sectoral and Regional Councils, under the
chairmanship of Rana Kapoor, is committed to contribute significantly to policy frameworks, vital reforms in business regulations, along with knowledge interventions, to improve
EASE OF DOING BUSINESS in India and attract and mobilize leading global investors, business leaders and Indian policy-makers to address investor appetite and concerns, and facilitate capital flows.
Our strategy for 'Make in India' requires urgent creation of new infrastructure.
The substantial enhancement in financing in the federal budget for highways, railways and
energy is a step in this direction. Work has begun on the development of Delhi-Mumbai
Industrial Corridor. My Government has pledged a stable and transparent tax regime,
reducing corporate taxes and implementing a single Goods & Services Tax in 2016.
Narendra Modi
Rana Kapoor
ASSOCHAM Global Investors' India Forum: Network of International Business Promotion Councils and International Offices
Strategic
Collaborations
Initiate strategic collaborations with
bilateral and multilateral development
organisations, International Capital
Markets, Government agencies, and
international chambers of commerce
NUMBER ONE
INVESTMENT DESTINATION
GLOBALLY
INDIA: International
Business Promotion Councils
AMERICAS:
India-North America
India-Latin American Countries
EUROPE:
India-EU
India-Russia and CIS
Policy
Advocacy
AFRICA:
India-Africa
ASIA PACIFIC:
India-Gulf and Arab Nations
India-China
India-ASEAN
India-SAARC
For more information, please contact ASSOCHAM Global Investors' India Forum secretariat at giif@assocham.com
Corporate Office: 5, Sardar Patel Marg, Chanakyapuri, New Delhi - 110021 Ph: +91 11 4655 0555 Fax: +91 11 2301 7008 E-mail: believeinindia@assocham.com www.assocham.org
Advertisement published in The Times of India, Hindustan Times and Hindu Business Line on April 21, 2015 and the Indian Express & Financial Express and MINT on April 22, 2015
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About ASSOCHAM
ASSOCHAM, acknowledged as the apex Knowledge Chamber of India, has emerged as a forceful, pro-active, effective and forward looking institution playing its role as a
catalyst between the Government and Industry. Established in 1920, the Chamber has been successful in influencing the Government in shaping India's economic, trade,
fiscal and social policies which will be of benefit to trade and industry. ASSOCHAM renders its services to over 4,00,000 members which include multinational companies,
India's top corporates, medium and small scale units and associations representing the interest of more than 400 Chambers and Trade Associations from all over India
encompassing all sectors.
ASSOCHAM has over 100 National Committees covering the entire gamut of economic activities in India. It has been acknowledged as a significant voice of the Indian
industry especially in the fields of Corporate Social Responsibility, Environment & Safety, Corporate Governance, Information Technology, Agriculture, Nanotechnology,
Biotechnology, Pharmaceuticals, Telecom, Banking & Finance, Company Law, Corporate Finance, Economic and International Affairs, Tourism, Civil Aviation, Infrastructure,
Energy Power, Education, Legal Reforms, Real Estate, Rural Development etc. The Chamber has its international offices in China, Sharjah, Moscow, UK and USA.
ASSOCHAM has also signed MoUs to set up partnerships with Business Chambers in more than 75 countries.
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Patel