Presentation on #MakeInIndia for Indian School of Business, Mohali

Federation of Indian Chambers of Commerce & Industry
Presentation by
Dr A Didar Singh
Secretary General, FICCI
Indian School of Business, Mohali March 6, 2016

Federation of Indian Chambers of Commerce & IndustryFederation of Indian Chambers of Commerce & Industry
India: The Big Picture
Policy reforms that turned the Indian Economy
India’s Manufacturing Sector
Key Policy Initiatives
Make in India
Governance and Ease of Doing Business
Policy Suggestions
1
2
3
4
5
6
7

2nd
Largest pool of
scientists &engineers
3rd
Largest economy
in PPP terms
(behind US and China)
USD 350 bn
FX reserves (US$2
bn in 1947)
7.2%
growth in 2014-15
7.6%
estimated growth
rate in 2015-16
650 mn
India’s labor force by
2030, fastest growth in
the world.
1.3 bn
Population in 2014. (360 mn
in 1947; 1.65 bn by 2050)
$1.8 tn
GDP in 2014 (21 times
increase since 1947)
USD 32.6 bn
FDI in 2014-15
Indian Economy: Snapshot
3
Last two decades have seen India emerge as an important economy on the global map

Indian economy: 3rd largest in the world
Percentage Share in Global GNI (PPP) - 2014
Others
44.0
China
16.5%
United States
16.4%
India
6.7%
Japan
4.4
Russia
3.3
Brazil
3.0
Indonesia
2.4
South Korea
1.6
Thailand
0.9
(USD 7.3 trillion)

India vs other emerging economies
Composition of GDP (% value added)
5.6
23.4
71.0
Brazil*
4.2
35.8
60
Russia*
16.1
31.4
52.5
India#
Agriculture
Industry
Services
*Data for the year 2014
#Data for the year 2014-15
9.2
42.6
48.2
China*
2.5
29.5
68.0
South Africa*

India embarked on an all round economic reforms
programme in the year 1991 that continues…

Trade and
Fiscal reforms
Industrial
reforms
Financial
reforms
Infrastructure
reforms
Social sector
reforms
1991 2015
Fiscal policy
reforms
•Direct Taxes:
Corporate and
income tax rates
brought down;
list of exemptions
pruned
•Indirect Taxes:
Customs rate
lowered, central
excise and state
sales tax regimes
progressively
modified towards
value added tax
(VAT)
Industrial policy
reforms
•Industrial
licensing
abolished
•Public sector
policy reformed
(reduction in
number of
industrial sectors
under Public
sector, etc.)
•MRTP Act
amended
Financial sector
reforms
•Interest rates
deregulated
•Limits on
government
borrowing from
RBI imposed
•More freedom to
banks allowed
External sector
reforms
•Import licensing
abolished; tariff
rates brought
down
•SEZs formed
•Market
determined
exchange rate
introduced, rupee
convertibility
introduced
•FDI policies
liberalized
Infrastructure and
Social sector
reforms
•PPP encouraged
•Private sector
given a larger role
to play in sectors
like telecom
• Steps taken to
leverage on
private sector’s
efficiency in
service delivery in
sectors like
education and
health
Steady reforms over last two decades

India’s growth performance since 1991
Trend in India’s GDP growth (at market prices)
• Economy grew at an average rate of 5.7% during the nineties.
• Impact of reform measures became more visible during 2000s. Between 2004 and 2008 - average 8.8% growth.
• After witnessing a slowdown in growth during 2012-13 and 2013-14, the economy is now recovering.
• Projected growth of 7.6 percent for 2015-16.
9
1.1
5.5
4.8
6.7
7.6 7.6
4.1
6.2
8.5
4.0
4.9
3.9
7.9 7.9
9.3 9.3 9.8
3.9
8.5
10.3
5.5 5.6
6.6 7.2 7.6
0
2
4
6
8
10
12
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
GDPMP Growth (%)

4.9
6.1
10.1
15.8
17.5
17.4
18.1
9.2
7.9
11.5
23.2
27.9
28.4
25.9
0.0 10.0 20.0 30.0
1980-81
1990-91
2000-01
2010-11
2011-12
2012-13
2013-14
Imports (% of GDP) Exports (% of GDP)
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12
2012-
13
2013-
14
2014-
15
USD Bn Exports
0.0
100.0
200.0
300.0
400.0
500.0
600.0
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
USD Bn Imports
Significant rise in External Trade since Liberalisation

Foreign investment surged with liberalisation
5.1 6.1
2.4
6.8 6.0
13.0 14.8
8.3
41.6
46.7
73.6
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
Foreign Direct Investment Portfolio Investments Foreign Investment InflowUSD billion
• India’s attractiveness as a prime investment destination has increased manifold.
• In 1991-92, foreign direct investment flows were US$ 129 mn and portfolio investment flows US$ 4 mn.
• In 2014-15, the foreign investment inflows have seen a tremendous growth, rising to US$ 73.6 billion.
• Today, most of the Fortune 500 companies have a presence in India.
Impact on Foreign Investments
11

India today: Bright spot in the global economy
12
India’s ranking across various indicators has improved
Transparency International’s
Corruption Index
WEF’s Global Competitiveness
Index
India scales up 9 ranks to 85th in 2014 from 94th in 2013
India has moved up by 16 positions to Rank 55th in 2015-
16 from 71st in 2014-15.
Financial Times’ fDi Markets India becomes number one FDI destination during the
first half of 2015 from 5th position during first half of 2014
EY’s Investment Attractiveness
Survey
India ranks first in 2015 survey as against 4th in 2014
survey
World Bank’s Doing Business India moves to rank 130 in DB2016 as against 142 in DB 2015

Long term trend - Manufacturing share in GDP
Share of Manufacturing in India’s GDP
15.1
14.2
16.6
15.5
15.0
15.4
16.0
15.8
16.3
15.0
12.5
13.0
13.5
14.0
14.5
15.0
15.5
16.0
16.5
17.0
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
Manufacturing Share (’90s) – 15.3% Manufacturing Share (’00s) – 15.6%
• Share of Manufacturing in India’s GDP has remained stagnant for nearly three decades
Source: CMIE

Where do we stand globally?
Source: World Bank and International Trade Statistics
* China and Hungary 2010 data, US and Japan 2011
12
13*
13
14
17
19*
21
21
22
23*
24
24
31
32*
34
0 10 20 30 40
South Africa
United States
Brazil
India
Vietnam
Japan
Singapore
Philippines
Germany
Hungary
Malaysia
Indonesia
Korea
China
Thailand
2012
Manufacturing (value added) as % of GDP Manufactured exports as % of world exports
0.3
0.4
0.6
0.7
0.7
0.8
1.2
1.4
1.6
2.5
4.0
6.2
9.6
10.4
16.8
0.0 5.0 10.0 15.0 20.0
South Africa
Philippines
Indonesia
Viet Nam
Brazil
Hungary
Malaysia
Thailand
India
Singapore
Korea, Republic of
Japan
United States
Germany
China
2012

Manufacturing Competitiveness
Source: Global Manufacturing Competitiveness Index, 2013, Deloitte & Council of Competitiveness
• India is less competitive on most competitiveness drivers
 Except labour cost

Why Manufacturing Matters?
Manufacturing – A lost opportunity and a vital link missing in India’s growth story
The sector can immensely contribute to
GDP
Exports
Jobs
Manufacturing Growth at 12-14%
CAGR needed for overall GDP
growth of 8%
India’s Employment requirement –
Need to add one million jobs each
month (~12 million each year)
Export push – through global
competitiveness of Indian
manufacturing
Target Share of manufacturing – 25%
of National GDP by 2022
17

What is holding us from being competitive?
Manufacturing
Competitiveness
Logistics/Infra
Inputs:
Availability &
Cost
Regulatory
Environment
and access to
the national
resources
Procedures
Taxation
18

A beginning made in reforming Factor Markets…(1)
 Amendments proposed in major labour laws, consultations in progress
 Unified Single Web Portal for Labour Law Compliance launched
 Some states like Rajasthan have amended their labour laws, which provides greater flexibility
for employers
 Employment linked incentives introduced in Union Budget 2016-17 (Government to pay EPFO
contribution of 8.33% for all new employees for the first three years of their employment)
20
Labour
 Union Budget 2016-17 proposes digitisation of land records through National Land Record
Modernisation Programme
 Some states like Gujarat and Madhya Pradesh have set up land banks
Land

A beginning made in reforming Factor Markets…(2)
 Amendment to Coal Mines (Provision) bill paves way for competition, efficiency & transparency
 Ujwal Discom Assurance Yojna (UDAY) to provide relief to State power distribution firms
 Free Natural gas pricing under the Marginal Fields Policy
 Thrust laid on renewable energy
21
Power sector
 Micro Units Development Refinance Agency (MUDRA) bank launched
 Indradhanush reforms announced to revamp Public Sector Banks
 Allocation of Rs. 25,000 crores towards recapitalization of Public Sector Banks
 Relaxation of ECB guidelines
 Insolvency and Bankruptcy Bill tabled in Parliament
 Small Savings Interest Rate Framework being reviewed
Capital and Finance

Ease of Doing Business – Work in Progress
 Target to improve India’s rank in Doing Business (to 50)
 Regulatory procedures being simplified
 Digitisation underway for application of industrial licenses, filing of returns, seeking
approvals and clearances related to environment, construction permits, etc.
 Launch of E-Biz Portal
 Various announcements made under “Start-Up India” campaign to facilitate ease of
doing Business for Start-ups
 Encouraging States to implement best practices on ease of doing business
22

Make in India
24
Mega campaign of the government to boost manufacturing sector

25

New Infrastructure
• Industrial Corridors
• Industrial Clusters
• Smart Cities
New Sectors — Liberalized FDI Policy
• Opening of Rail infrastructure sector
• FDI cap raised in Defence and insurance
• Simpler norms of FDI in Construction
• Opening of medical devices sector
New Processes
• Ease of Doing Business
• De-licensing & Deregulation
New Mindset
• Dedicated team for assistance and handholding
• Focused targeting of companies across sectors
Make in India vision:
 Facilitate Investment
 Foster Innovation
 Protect IP
 Build Infrastructure
Make in India: 4 pillars of development
26

Opening up Foreign Direct Investment in key sectors
DEFENCE
Composite cap in
manufacturing
increased to 49%
from 26%, with full
Indian management
and control;
FDI beyond 49%
allowed on case to
case basis
RAILWAYS
100% FDI under
automatic route
permitted in
construction, operation
and maintenance in Rail
Infrastructure projects
CONSTRUCTION
100% FDI allowed
through automatic route;
Minimum floor area
reduced to 20,000 sq mt;
Minimum capital
requirement reduced to
USD 5m;
Easing of exit norms
49% FDI permitted in
Insurance
100% FDI permitted in
Medical devices
100% FDI under
automatic route in
single-brand retail

Infrastructure Push
Thrust on infrastructure in two consecutive Union Budgets
Budget 2015-16
 Additional Rs. 70000 crore spend in physical infrastructure
 Rs 8.6 trillion (~ US$ 132 billion) in railways over 5 yrs; Rs 70,000 cr (~ US$ 11 billion) on Sagarmala
ports project
 National Investment and Infrastructure Fund introduced
 ‘Plug and play’ approach in case of UMPPs adopted
Budget 2016-17 announcements
 Total outlay for infrastructure – Rs. 2,21,246 crores (22.5 percent higher over the previous fiscal)
 A Public Utility (Resolution of Disputes) Bill will be introduced during 2016-17 for resolution of
disputes in infrastructure related construction contracts, PPP and public utility contracts
 Guidelines for renegotiation of PPP Concession Agreements to be issued
 New credit rating system for infrastructure projects to be introduced
28

Industrial Corridors

Delhi Mumbai Industrial Corridor Project

Delhi-Mumbai Industrial Corridor:
work on 5 smart cities in progress:
Dholera, Shendra-Bidkin, Greater
Noida , Ujjain and Gurgaon
Impetus on developing Industrial Corridors and Smart Cities
‘National Industrial Corridor Development
Authority’ being created to coordinate,
integrate, monitor and supervise
development of all Industrial Corridors.
Chennai-Bengaluru Industrial Corridor:
Master Planning for 3 new Industrial
Nodes [Ponneri (TN), Krishnapatnam
(AP), Tumkur (Karnataka)] in progress.
Amritsar-Kolkata Industrial Corridor:
DMICDC selected as Nodal Agency
for doing Feasibility Study, which is
being conducted at fast pace.
Chennai-Vizag Industrial Corridor:
Feasibility Study commissioned
by ADB.
Bengaluru –
Mumbai
Economic
Corridor
North-East Link to
Myanmar with
Industrial
Corridors
Enabling Manufacturing through Industrial Clusters

Doing Business in India – Efforts toward Target of Rank 50
India ranks 130 out of 189 in 2016
142
114
120
90
62
39
29
0 50 100 150
India
Indonesia
Brazil
China
Russian Federation
Mexico
Japan
Ease of Doing Business Ranking 2015
130
116
109
84
51
38
34
0 20 40 60 80 100 120 140
India *
Brazil *
Indonesia *
China *
Russian Federation *
Mexico *
Japan *
Ease of Doing Business Ranking 2016

Doing Business 2016 – India’s Rank across Parameters
India’s Rank in 10 parameters of Doing Business 2016
Centre of this Circle indicates 1st Rank (overall)
Sub-Topic
Ranking for indicator
DB2015 DB2016 Change
Starting a business 164 155 + 9 
Dealing with construction
permits
184 183 +1 
Getting electricity 99 70 + 29 
Registering property 138 138
No
change
Getting credit 36 42 (-) 6 
Protecting minority investors 8 8
No
change
Paying taxes 156 157 (-) 1 
Trading across borders 133 133
No
change
Enforcing contracts 178 178
No
change
Resolving insolvency 136 136
No
change

Ease of Doing Business Improvement in States
Reform Area Measures Undertaken
Single window Punjab - Unified single window for all State Regulatory and Fiscal Incentive Approvals.
Andhra Pradesh - Online single window system for filing, payment, status tracking,
online scrutiny and approval of applications.
Land Madhya Pradesh and Gujarat - published details on the available land banks in the
state.
Gujarat implementing a robust GIS system - information on land earmarked for
industrial use.
Construction
Permits
Madhya Pradesh - implemented Comprehensive Automated Building Plan Approval
System (ABPAS)
Environmental
Clearances
Gujarat - implemented an end-to-end online system for consents and authorizations
Gujarat Pollution Control Board (GPCB) uses eXtended Green Node (XGN) - an IT
solution for various pollution control board clearances.

Reform Area Measures Undertaken
Labour Jharkhand’s key initiatives:
 comprehensive online workflow based portal
 Self-Certification for renewal and returns
 Single joint inspection in 5 years for compliance with the 14 Labour Laws
Infrastructure Maharashtra offers detailed information on procedure and timelines for obtaining
various infrastructure connections.
Taxation Andhra Pradesh - implemented online system for registrations and return filing under
VAT and other State taxes.
Karnataka - online platform for registration, filing and payment under various State
taxes .
Enforcing
Contracts
High Court in Maharashtra has constituted and prescribed 7 commercial benches
exclusively for resolving commercial disputes.
Ease of Doing Business Improvements in States…(2)

While India has achieved success in implementing
first generation reforms…
…Factor Market Reforms have only just begun
A lot more action is required…

Land
• Put in place a stable and balanced land policy that provides certainty
• Encourage digitisation of land records
• Encourage creation of Land Bank Corporations by all States
Capital Availability
• Promote consolidation amongst banks
• NAMCO to address NPA and stressed assets challenge
Desired Reforms in Key Areas
Labour
• Consider grandfathering existing laws for existing workforce, amended
contemporary laws for new entrants
• Consolidate multiple labour laws in two or three categories
Energy Security
•Attract foreign capital in upstream oil and gas segment
•Rationalize energy pricing mechanism
•Encourage States to introduce reforms in distribution, grid discipline

Infrastructure
• Leverage ‘annuity model
•Under ‘National Investment and Infrastructure Fund’, consider earmarking certain
sectors as ‘focus sectors’ on an annual basis
• Initiate Privatization of public sector ports
Taxation
• Introduce binding statutory timelines for adjudication of matters relating to
indirect taxes.
• Proactively clarification of contentious tax related issues
Desired Reforms in Key Areas
External Trade
• Curb imports of natural resources that are available in abundance domestically
• Review of FTAs
Governance
• Ensure clarity in policy formulation, greater certainty in legislative interpretation
• Universalize best practices across all areas of approvals and clearances
• Strengthen legal and judicial infrastructure

Executive Actions needed to enable Make-in-India
41
Reform Area Required Executive Actions
Labour Inspection Place a cap on the time duration of records summoned by the Inspector
Factory Licensing Factory licence once granted should remain valid for a period of 5 years.
Provisions related
to lay-offs
Appropriate guidelines should be added to the provisions of the Industrial
Disputes Act 1947, regarding the parameters and circumstances under which the
appropriate Government should grant or withhold permission with respect to lay-
offs.

Reform Area Required Executive Actions
Government procurement Need for a holistic procurement policy to leverage Government
Procurement as the instrument for encouraging domestic
manufacturing.
Tax related disputes Introducing binding statutory timelines for adjudication of matters
relating to indirect taxes to bring clarity on the tax related disputes.
Simplification of trade
procedures
Simplification of the Complex procedures and criteria for major trade
facilitating mechanisms for high-performing manufacturers and service
exports.
42
Executive Actions needed to enable Make-in-India…(2)

THANK YOU

Presentation on #MakeInIndia for Indian School of Business, Mohali

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