How to Make in India

Prime Minister Narendra Modi is known to take constant feedback from industrialists and bankers to shape his vision for the country in the next five years. But what shocked him most after he took office three months back was not just that Indian businessmen wanted to hold their business plans in India; they wanted to leave the country and invest elsewhere.Some of the instances in the last few years vouch for this. In 2010, biotech firm Biocon began building a factory in Malaysia for Rs 1,200 crore, since, in its CMD Kiram Mazumdar Shaw’s words, “We (India) don’t have power, we don’t have water.”

In July last year, Lakshmi Mittal walked out of a Rs 40,000 crore steel plant in Odisha citing delays in acquiring land and allotting captive iron ore blocks. South Korea's Posco too scrapped its Rs 30,000 crore steel plant in Karnataka for similar reasons.

Modi’s "Make in India" campaign is a call to stem this flight of capital, and attract new investment. The intent has been spelt out, and 25 sectors that are prime investment areas identified. Now comes the difficult part of getting this done.

ICICI MD Chanda Kochhar stated clearly at the campaign launch the four key elements of its implementation - rules and regulations, infrastructure, policies and skill training. Foreign investors are looking for ease of doing business, but few policies in the past three years proved helpful. Rather, the Vodafone tax case and the subsequent retrospective amendment turned out to be anti-business and scared investors away. Starting a business, especially in manufacturing, is cumbersome, just as getting out of it.

The CEO of a budget hotel chain told me recently that setting up a hotel even in his segment needed some 100 clearances. The industry is still seen as a milch cow that can fund social programmes, which explains high tariffs on the power they use and multiple taxes.

Modi’s new campaign should help change that outlook. But it needs supporters, not just in the ruling party and allies. No campaign can be successful without the cooperation of the states, especially the non-BJP ruled ones. That is going to be a major challenge. Voters are becoming more concerned about development issues, which no state government can ignore. ‘Make in India’ would be a good platform for the states to charge up their industry, and provide more jobs. Even if it helps revive investors’ confidence, both Indian and foreign, half the job is done. The biggest hurdle today is the psychological barrier to invest. Solutions to the physical hurdles, including infrastructure, will come by once confidence is revived.