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Friday, 26 September 2014 00:00
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Modi’s FDI-prescription is bang on, now to fix this

Call it divine timing, but nothing could have better set off prime minister Narendra Modi’s Make-in-India programme than it coming the day after the stunning success of ISRO’s Mars mission. The fact that the mission cost just $74 million versus Nasa’s $671 million, that India succeeded where China and Japan failed, and that ISRO succeeded in its very first attempt ... all of this showcased not just India’s superb intellectual talent, it showcased the ability to convert this into world-class hardware as well. If ever there was evidence that India is a power to reckon in frugal engineering, Mangalyaan provides it. Indeed, the galaxy of businessmen at the function, from both India and overseas testified to this. Maruti Suzuki’s CEO Kenichi Ayukawa testified to how India had emerged as Suzuki’s low-cost export hub, Aditya Birla Group chief Kumaramangalam Birla spoke of how his group had shifted high-end aluminium manufacturing to India from its UK plants and Lockheed Martin India CEO Phil Shaw spoke of how, within a year, the company’s JV with Tata Advanced Systems set up a factory and was manufacturing parts of the company’s Hercules C 132J aircraft. Had the occasion permitted, several more such examples of India’s engineering and software prowess could have been showcased, but the fact remains that while India is a successful global producer in several areas, for the vast part, India’s manufacturing remains globally uncompetitive, and this was the subject of Make-in-India.

As Modi put it in his unique style, Government Social Responsibility required the government to fix various doing-business indices so as to make industry more competitive, India needed to have far better infrastructure and logistics if it aspired to be part of any global supply chain, its workers needed to be a lot more productive and that is where the skilling initiative came in ... the list is a long one, and just looking at India’s relative tax levels or productivity levels makes it clear that it will be a long time before investors flock to India the way they did to China. Fixing India’s infrastructure or doing-business indicators will take time and investors are willing to give Modi that time—on Wednesday, Vodafone Group Plc CEO Vittorio Colao said it wasn’t the first 100 days that mattered, it was the first 1,000. But Modi needs to gain investors trust. The scrapping of the coal licences, coinciding with the Mangalyaan victory, underscores this best—how is Modi going to deal with investor fears if 20-year-old licenses are to be scrapped? If this occasion is used to fully reform and open up the coal sector—there is little sign of that as yet—investors will be more than placated. If the various problems on M&As and spectrum availability highlighted by Colao and Vodafone India CEO Marten Pieters are addressed, and there is no sign as yet that they are—indeed, there is some backsliding on 3G roaming—investors will come to invest. None of this, it has to be said, affects just Vodafone, it affects all Indian telecom players just as the coal issue affects only domestic players. As Modi said, if you have to attract FDI, first develop India.

 

 
 

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