The commerce minister explains the challenges facing India’s manufacturing sector and how the government will tackle them
A little more than a year after it launched Make In India to boost the country’s manufacturing sector and create millions of jobs for its young and skilled, the National Democratic Alliance (NDA) government is celebrating the initiative through a week-long event in Mumbai, which will showcase India’s manufacturing capabilities. Commerce and industry minister Nirmala Sitharaman, who is directly in charge of the programme, explains the challenges facing India’s manufacturing sector and how the government will tackle them. Edited excerpts:
What is Make in India? Is it a scheme, a slogan or a campaign?
It is none of that. It is an initiative. What India has done in last 60 years is confining manufacturing largely to the public sector. I would not say deliberately but as a result of a socialist school of thought that was nurtured by the government of India. Private entrepreneurship was never given encouragement. So, you had a public sector as a major investor and manufacturer, while the big private sector companies, whoever have been there since the British days, they continued. The small enterprise that prevailed all over India was never given its due share. Second Five-Year Plan, of course, spoke of manufacturing, but that looked at large-scale investment in manufacturing… looking at encouraging entrepreneurship, giving them space to grow in manufacturing did not happen in a concerted way. What was needed as a result is to remove the approach that had almost stifled individual entrepreneurship, remove the role of the government as a regulator, remove the need for constantly asking for certification, inspection, licences. We are saying none of that should happen. You self-certify and if there is minimum requirement, then you do it online.
Do we have an estimate as to how many new companies have actually set up shop in India after Make In India was launched and how many additional jobs have been created?
No, not yet. I don’t think we have even started looking at it from that angle.
What is the idea behind the Make In India celebration?
The momentum was never lost since it was launched. That’s why ease of doing business was possible at the initial stages with the state governments participating with us. Now, more such issues have been identified and those issues have already been shared with the state governments. They are working on it to remove hurdles to make it possible. Now that more than a year has been completed, we wanted to make sure that everything which is under Make in India is being showcased. Remember, we had identified 25 sectors for focus and have opened up newer areas (for foreign investment) such as railways and some parts of defence, all these will find a place in the Make in India Week where 18 states and more than 65 countries are participating. So, it will be a major event and the scale of it and the way in which we are presenting it will make India proud and show what India is capable of.
With large-scale automation happening in manufacturing, some experts say using manufacturing to create large-scale jobs may be an outdated concept. Do you agree?
Large-scale automation may happen in very large industries which need robotics for precision. But in India, it has not reached that level, which should worry us. If anything, the government’s focus is on small and medium enterprises and all enterprises that create more jobs than what is scalable for their size and the capital investment they bring in. So, that does not worry me at all. Let automation happen, but it is not happening at the cost of workers.
Experts say India cannot boost its manufacturing without being part of a global value chain. What are the efforts being made towards that direction?
I agree on that aspect and we are working to make sure that linkages as a part of global value chain, which have to be made by Indian manufacturer, is being made. We have opened up a lot of sectors in such a way that the global value chain idea is not lost. Those who are in manufacturing have to see how their focus will have to be for linking with the global value chain. Government can only be a facilitator. We will certainly do that.
“Those who are in manufacturing have to see how their focus will have to be for linking with the global value chain. Government can only be a facilitator. We will certainly do that”– Nirmala Sitharaman, minister for commerce and industry
Many claim that by focusing excessively on manufacturing, the government may be neglecting the services sector where India has a natural advantage. Do you agree?
In fact, I have just been asked the opposite—that we are over-emphasizing on services and ignoring manufacturing. We recognize that services contribute more than 50% to the Indian economy. We also recognize the fact that the national manufacturing policy wanted to increase the contribution of manufacturing from where it is today to 25% by 2022. So, there has to be focus on product manufacturing both for India and for exports, otherwise we will not be able to meet the target set by the manufacturing policy.
One example often cited is your policy towards the retail sector where many claim the current foreign direct investment (FDI) policy hinders growth of the sector by limiting its potential for job creation. Is there a rethink on the FDI policy in retail?
Retail sector already provides a lot of jobs and that is one of the reasons why in order to understand how that will be affected if you open the windows without even preparing that sector, we took a decision that multi-brand retail should be kept aside from FDI (reforms).
Is there any thought of changing that policy?
At the moment, there is not any. If there is any, I will let you know.
In e-commerce also, the same issue is raised that because the FDI policy is not clear, it fails to create large-scale jobs.
I am not sure it is the case. E-commerce is already happening in the country… we will come out with something on it in terms of defining e-commerce because every state has taken its own approach. But to say that will have an impact on job creation, I don’t believe that is true.
So, we are working on definitional issues, not on FDI issues in e-commerce, because there were some reports suggesting government will allow 100% FDI in marketplace e-commerce?
That’s right. We are talking about definitional issues. I don’t respond to reports.
You recently said India may require to undertake structural reforms like it did in the early 1990s to respond to the Trans-Pacific Partnership (TPP). What are these reforms we would need?
The question about the value chains you raised is a very important thing and a lot of activity needs to happen on that front. Second, you have to beat the rules of origin argument. We will now need to see whether we can establish manufacturing facilities in areas where we have a global recognition in countries which are part of the TPP. So, sectors who otherwise think they may lose out their market because of TPP can now hopefully set up units in such countries and manufacture so that they can gain from the rules of origin restrictions. Third, all said and done, we have to work on standards. Once India’s own standards of goods, some of which have global recognition, are able to match up with markets that are now having their pluriliteral understandings, you can reach out to these markets which are otherwise not covered (by our trade deals). So, standards are very demanding, but necessary work.
You have said at the Partnership Summit in Visakhapatnam that India will renegotiate some of the free trade agreements (FTAs) to address the concerns of the industry. How exactly will you do this, given the complications involved?
Well, I am not going to start renegotiating them now; there is always a time for it. Some of them are negotiated for a certain period and when they come for a negotiation or renewal, that is the time when we have to look at it again. Because the experience of a lot of manufacturers and exporters are reaching us. We will have to see how best they have understood the FTAs or is it that many of our exporters fully not utilizing the provisions which are available under the FTAs. So, it’s a constant exercise of looking at how best we can help the situation. I certainly did say that if at all when an FTA comes for review, we will certainly look at it.
After the Nairobi ministerial meeting of the World Trade Organization (WTO), what will be India’s approach at the WTO?
Post-Nairobi, we will have to see those commitments, reiterations which have been made there are carried forward. We ensured that we just didn’t get a reiteration but also a commitment for a work programme for each of them, whether it is for food security or it is for special safeguard mechanism (SSM). So, our first effort will be to get a work plan out. We will also make sure that many of the other unfinished agenda of the Doha round also start getting traction before the next ministerial happens in two years.
But for us, is the Doha round alive or dead, because there was no consensus on it at Nairobi.
There is no consensus means status quo continues.
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