Context: Make in India week was organised in Mumbai.
Q. What’s the significance of such events?
- 1. Such events are very important as they put together under one roof major investors and entrepreneurs from developed and developing world with Indian investors and policymakers.
- 2. It provides opportunity for collaboration between Indian and foreign investors.
- 3. Policymakers can directly address their concerns and present India as a prime investment destination
Q. Capital goods policy was announced in the event. Tell us it’s salient features.
Copy Pasting from our news card
- News: The government introduced a National Capital Goods Policy
- Purpose: To spur capital goods sector and the Make in India initiative. It aims to turn the country into a world class hub for capital goods
- Objective: To increase production of capital goods from Rs. 2.30 lakh crore in 2014-15 to Rs. 7.50 lakh crore in 2025
- To raise direct and indirect employment from the current 8.4 million to 30 million by 2025
- Key Elements: Availability of finance, raw material, innovation and technology, productivity, quality and environment-friendly manufacturing practices, increasing skill availability, promoting exports and creating domestic demand
Target is also to increase share of capital goods in manufacturing from 12% at present to 20% by 2025. It will hugely benefit MSME sector.
Q. Intentions to invest are all great but what are the steps needed to realize intention to invest into actual on the ground investment?
Government need to improve ease of doing business in India.
- 1. Skills building
- 2. Infrastructure investment
- 3. Labour reform
- 4. Finance i.e. banking reform, resolve the NPA mess
- 5. Tax reforms, Tax department is sending contradictory signals
Q. What are some of the steps that govt has already taken to ease doing business in India?
Ease of doing business ranking has improved from 142 to 130 and it is expected to improve further as government has already taken following maesures
- Establishment of commercial courts
- insolvency and bankruptcy code is in parliamentary
- arbitration act amendment
- GST bill
But it requires smooth functioning of parliament to finally pass these legislative proposals. All the political parties should come on board for the sake of Indian economy and it’s youth who need jobs.
Q. Even if this wish list is delivered, how can industrial sector grow in such a gloomy global economic environment?
- Strength of Indian economy is domestic demand. Jobs to 65% population which is under 35 will create further demand.
- We should not wait for global economy to pick up as our major export markets are unlikely to recover any time soon. Our exports are down for 13 consecutive months.
- That’s why we need more reforms so that FDI come in. In the 1st half of 2015, we received highest FDI in the world and in 2016, we are expected to receive over 40% more FDI.
- PM Modi has added another D called deregulation to his 3Ds of democracy, demography and demand to encourage FDI inflows.
Q. So what are the expectations from the budget?
- 1. House functions smoothly and major bills mentioned above are passed.
- 2. Very importantly, government has to correct inverted duty structure which leads to reverse tariff escalation.
Inverted duty structure is an anomalous situation in which prices of raw material is costlier than prices of finished products. For instance, to protect steel manufacturers, govt has imposed minimum import price on steel but cycle made from steel in China now becomes cheaper than Indian made cycle as Chinese manufacturers are using cheaper steel.
Govt has to decide who it wants to protect, a handful of raw material manufacturers or finished product manufacturers who actually create so many jobs, many of them in MSME.
