Government and Industries should work together then & then manufacturers in India can be competitive in both national and international market. Firstly, would like to put forth some of the examples on the subject of why Government before bring any new policy/ law and implement it, should make sure the tier 1 and 2 levels of the local manufacturing ecosystem are ready with the changing policies.
In 2000, we were planning to reform the Electricity act, and finally, somewhere in 2003 it got approved and the government announced its implementation. But even with the time we had around three years, there was no available supplier base ready to cater to the demand. Even there were manufacturers available in the country, but they failed to be part of the implementation on a larger role. Finally, the required products were sourced from countries out of India, which reduced possible investments to the country. Local manufacturing activities failed which should have happened in the initial phase.
Later when the majority of the investment happened, the demand for power plants was already met by the global manufacturers, and as a result, those who invested were not able to recover their returns. As a result, manufacturers like Thermax has to finally close down the unit for Ultra Supercritical boilers, not the sufficient number of units for L&T, BHEL, Doosan as per the available capacity.
Checking another example, after power reforms, we entered an agreement to reduce carbon emission. For this, discussions were held for a very long time, maybe for around 6 to 7 years and finally decided to establish Flue Gas Desulfurization (FGD) plants which will help us to reduce air pollutant from the Power plant. The deadline was announced without even ensuring our domestic capacity to cater to upcoming requirements.
As a result, once again the majority of the raw material, components, bricks and various other systems were imported to India. The opportunity of establishing our own manufacturing ecosystem for this requirement got failed. And this cycle will continue and India may not able to establish or become a manufacturing base in the true sense.
Both Government & Industry should Identify which product baskets/ categories will have the natural advantage if manufactured in the state and which can be competitive in the world market. Welcome incoming investment, and at the same time would like to see India focusing on getting the know-how and technology as well. Then identify the bottlenecks in physical infrastructure (logistics, available utilities, movement of goods inwards/ outwards) and software infrastructure (process and systems, approval etc).
Minimum Technology Cost with Lock in Time
India is one of the largest manufacturing economies globally, our government should have a department that should take hold of bringing and developing advanced technology, which will help the country while finalising any new technology partners for the implementation of any new projects. This department/ institution should have all data with regards to the technology/ design/ process and system in manufacturing of the particular product/ item.
Foreign partners should share technology after a certain lock-in time may be from 5 to 12 years of operation. After the locking period is over, they should pass on the technology at minimum cost to the investors who are capable and have strength in manufacturing. There should be plans by Government to encourage youth to become an entrepreneur, through skill development institutes.
Financial Incentives & Economic Protection to Critical Sectors
Financial credits like the current Production Linked Incentive (PLI) scheme should be launched for sectors, which can benefit the countries manufacturing ecosystem. Give protection to selected industries till they mature and become self-sufficient. In the sectors where CAPEX is very high, but not economical for the private investor, public sectors companies should invest without thinking about immediate ROI, but an investment for the future.
Government need to start promoting the manufacturing of low-risk high-value products initially, and gradually with a focused timeline upgrade to high technology items. There can be a selection of top five sectors, invite companies to invest in manufacturing, and provide what they need to get to the top-to be the number one company in the world in their respective sector. That is what happened with the mobile phone industry in China. The support provided by the Chinese government helped these industries grow.
If Government & Industries have the focused time-bound plans, it’s very much possible to achieve what the other nations have already achieved.
