Transforming India: From ‘The World’s Back Office’ To ‘The World’s Factory’

The recent World Bank report ‘Ease of Doing Business’ placed India at the 134th position in a list of 189 economies. The report, which evaluated countries on various parameters relating to business and regulatory environment, amply reflected how the country is perceived across the globe when it comes to regulatory and infrastructural ambience for setting up companies and doing business.

While Singapore, Hong Kong, New Zealand, the US and Denmark bagged the top five positions, India even lagged countries that have hitherto been considered ‘less civilised’ for enabling business environment due to autocratic and repressive regimes, debilitating internal strife and haunting hunger and famines like Uganda, Ethiopia, Honduras, Mongolia and Nepal. Despite tall claims of being a counterforce to a resurgent China and one among the world’s top economies, being ranked behind some of the most impoverished African nations in terms of business ambience is a tag that will mar the country’s image among global peers for years to come.

Why India is perceived so unfriendly when it comes to facilitating business and attracting companies? The country inherited a huge colonial baggage of red-tapism that got entrenched in its social fabric during the socialist era under Jawaharlal Nehru. Over the years, a litany of harsh regulations, niggling rules and serpentine reporting structure meant that doing business in India is a humongous challenge. Consider these: companies need to get dozens of clearances to operate; complying with labour law requires employers to maintain 16 separate types of worker registries; starting a business requires an entrepreneur to follow 12 procedures which would take at least 30 days. This is in addition to the need for lavishly greasing the palms of politicians and bureaucrats to get things done in a system that is neck deep in corruption. The existing land law that makes acquiring land for industrial purposes virtually impossible adds to the can of worms. The unsurpassable clout of labour unions that can any time throw a spanner in companies’ operations is another thorny hurdle that entrepreneurs have to live with.

Prime Minister Narendra Modi’s vision of cutting the red tape assumes importance against this backdrop. His recent visit to Japan is remembered—among other things like the $33 billion investment he managed to elicit—for the clarion call ‘come make in India’ he made to Japanese companies and investors. It was an extension of his Independence Day speech when he exhorted global firms to come and manufacture anything from electronic items to chemicals, satellites and submarines in India.

The ‘make in India’ campaign, which is expected to do for investment sentiment what the ‘Incredible India’ campaign has done for tourism, is aimed at reviving the manufacturing sector and taking the economy on a sustainable high growth path. As part of the campaign, which is expected to lift manufacturing growth to 10 per cent over the long term, thousands of global companies from across the globe including the US, the UK, Japan, Korea, Sweden, Poland, Australia, China, Italy, Germany and France, are expected to be invited to explore investment possibilities in India and set up manufacturing units in the country to supply to the rest of the world. An eight-member panel under the Department of Industrial Policy and Promotion will help redress grievances and handle queries of global and domestic investors within 24 hours. In addition to interacting with investors, the panel is also given a mandate to coordinate with central and states departments to resolve infrastructural bottlenecks and issues related to policy. Indian embassies around the world too are expected to join the campaign, which is reminiscent of Modi's ‘Vibrant Gujarat’ summits each of which resulted in investments worth billions of dollars in Modi’s home state.

The campaign is seen as the first step to reform the bureaucratic and policy-related machinery to revive the job-generating manufacturing sector by attracting huge investments. But to extend it to a fruitful level, the government has to tackle a host of issues including reforming land laws, revamping infrastructure including constructing bigger ports and better roads, ensuring uninterrupted power for industrial activities and doing away with an uncertain tax regime.

Going by the way ISRO scientists succeeded in putting the fully home-grown Mangalyaan into Mars' orbit, making India the first country to be successful on its maiden Mars mission, the Modi government is on the right path to transform ‘the world’s back office’ to ‘the world’s factory’ too.