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Manufacturing for Growth : India

A rising star

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Over the last quarter century, India has moved away from its traditional socialist system and accelerated efforts to liberalize economic reforms. As a result, India today is recognized as one of the most competitive nations in the world, providing a strong talent pool in the areas of science, technology and research, as well as some of the lowest labour costs in the world. However, key challenges loom if India is to build on its achievements over the past 25 years. Namely, the country's healthcare systems, under-developed physical infrastructure, and policy and regulatory environment still create significant concern

To improve its policy and regulatory environment and spur economic growth, India in 1950 established the Planning Commission, which is charged with formulating a strategy for the most effective use of the country's resources to improve the standard of living for Indian citizens. In support of its objectives, the Planning Commission has since its establishment implemented 11 Five-Year Plans, and implemented its 12th plan in March 2012 to target faster, sustainable and more inclusive growth.

Manufacturing for growth volume 1

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Manufacturing for growth volume 3

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Manufacturing growth summary

 

 

CEO Policy Recommendations

Executives believed that the following set of recommendations would enable India's pursuit of more advanced manufacturing capabilities

 

 

  1. Build skills among the large population of minimally educated workforce
  2. Establish industry training institutes in the form of public-private sector partnerships to provide relevant vocational and skill training
  3. Create additional polytechnic institutes focused on delivering higher education in vocational or technical subjects
  4. Develop targeted training and development for the general management and technical supervisory level
  • Design effective ways to scale quality training for the workforce of the future
  1. Executives participating in the discussions said that labour laws in India are "fairly rigid and cumbersome", making it difficult for companies to hire and lay off workers according to seasonality and volatility in demand
  2. To improve in this area, executives said policy changes need to be enacted that focus on improving workforce relations and allowing greater flexibility for companies to react to changes in demand
  • Develop less restrictive labour laws
  1. Develop infrastructure to bring industry, not vice versa
  2. Create industrial clusters that result in integrated industrial townships with state-of-the art infrastructure
  3. Support the creation of industrial clusters by enacting regulatory improvements that remove complexity and uncertainty in areas that include land acquisition improvements, labour laws and taxation
  4. Develop showcase clusters to immediately demonstrate the benefits through such initiatives
  • Invest in globally competitive infrastructure
  1. Review and reform regulatory restrictions on foreign investments in sectors deemed important and strategic to India's growth objectives
  2. Enact basic financial sector and capital market reforms to attract private investments
  • Relax policies defining reasonable levels of foreign direct investment
  1. Implement laws that build trust among stakeholders, rather than laws that reinforce an environment of distrust
  2. Address the basic hurdles and fundamental issues that keep businesses from growing, developing and investing in India
  3. Remove and rationalize regulations to accelerate the pace of decision-making and approvals
  • Remove uncertainty from India's regulatory and legal environment
  1. Executives participating in our discussions consistently called for a need to improve tax policy in India – both in terms of facilitating more consistent interpretation and in terms of proving greater tax incentives and benefits related to priority areas that support competitive manufacturing
  2. Vocational training, infrastructure, and R&D were cited as specific areas that would benefit from such tax incentives
  • Develop a more liberal and simplified tax structure with a greater level of transparency to improve consistency of interpretation
  1. Improve the intellectual property filing process and create an environment that results in an increase in the number of filings
  2. Develop industry-led standards and create activities that result in global acceptance of those standards
  3. Encourage and fund risk taking to create an environment which rewards efforts that drive and support activities that move technological innovations from R& D, through applied research to full commercialization
  4. Create inspirational science and technology goals and make attainment of requisite skills needed to attain those goals an aspiration
  5. Build India's Department of Science & Technology into a world-class organization to encourage greater collaboration with industry
  6. Share and apply best practices and knowledge across states to encourage innovation
  • Create a sustained competitive advantage by encouraging technological innovation and movement up the value chain
  1. Provide access to the basics beyond access to adequate and timely financing, to include availability of suitable technology, marketing resources and skilled workers
  • Provide government incentives for small and medium-sized enterprise manufacturers
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