Known as the Industrial Real Estate Entrepreneur, Mr. Prakash Patel, the Founder and Managing Director of Bhumi World is a young and dynamic leader. Mr. Prakash Patel ventured into the business at a rather early age and already has a decade of work experience behind him. This has given him a phenomenal advantage in managing business and implementation of strategies. He has led Bhumi World to new heights with his profound business knowledge and industrious attitude and it is his endeavour that has made Bhumi World the best real estate developer for industrial parks in Maharashtra. He aims to continue building exclusive and well-planned private industrial parks across India, which will cater to increasing demand for quality manufacturing, warehousing and commercial spaces, hospitals and educational institutions and more. It is through these industrial parks that Mr. Prakash Patel envisions to contribute to the economic growth and employment opportunities across the country. Mr. Patel has received the Bharat Gaurav Award for his distinguished services to the nation and outstanding Individual Achievements at the House of Common British Parliament -London. Additionally, the Government of India has also felicitated him for Excellence in MSME growth.
The COVID-19 pandemic has brought global manufacturing and supply chain realignment into sharp focus, with the outbreak accelerating a wide array of established trends. In particular, we’ve seen supply chain vulnerabilities exposed. This is owed to over-dependence and over-centralization causing massive disruptions to the production cycles as we face an unprecedented health crisis. From strategic risk diversification to cost considerations and business continuity concerns, businesses are increasingly looking for alternative global manufacturing destinations, with manufacturing in India set to benefit.
There are a lot of factors here that are working in favour of manufacturing in India. India has the 2nd largest labour pool globally as per the International Labour Organization 2018 statistics and while it is extremely competitive on hourly wages comparison, the regulatory reforms and initiatives that have been undertaken over the past 3-4 years have set the ground for the Indian manufacturing ecosystem going forward.
Factors contributing to the growth of manufacturing in India
India’s rise to 63rd position in the 2019 World Bank’s Ease of doing business rankings from 142nd in 2014, ensured it is one of the most improved nations on the list. Secondly, the push to lower corporate taxes has resulted in India offering one of the lowest corporate tax rates globally, at 15% for new Indian manufacturing firms. This demonstrates the goal of ramping up manufacturing to make greater contributions to GDP. From a comparative perspective, India’s manufacturing sector accounts for around 1/6th of the GDP, compared to China where manufacturing accounts for a 39% share of the country’s GDP.
In particular, India performed exceptionally well in the cost scenario, which includes indicators such as labour, electricity, construction costs, ranking third after China and Vietnam. Although in the risk scenario, which considers economic, corporate, energy, natural disaster risks, India ranked relatively poorly in 30th place, the continued shift up the Ease of Doing Business rankings and the continued regulatory support for manufacturing should do much to assuage concerns.
At the heart of Atmanirbhar Bharat and Vocal for Local is the drive for indigenization of manufacturing, supporting not only the vast domestic demand but also attracting manufacturing firms to the large consumer base that the country offers. In particular, India has identified key industry clusters in which it has been performing well, including hardware and electronics, and rolled out incentive schemes like the PLI (Production Linked incentives). This supports the re-shoring of large-scale electronic manufacturing to India. The move follows the earlier implementation of the 100% FDI in contract manufacturing and the National Electronics Policy 2019.
The results of these policy decisions have been encouraging, with global OEMs and component manufacturers making a beeline to set up shop or expand capacity in India. Global players such as Wistron, Pegatron, Foxconn and Hon Hai from Taiwan, Samsung from South Korea, as well as firms from Germany and Austria have applied for benefits under the PLI scheme so far.
Indeed, from complete assembly to component manufacturing we’ve seen India shift to being considered a key part of global supply chain realignment. Further PLI schemes have been rolled out for medical devices manufacturing and incentives offered for pharmaceutical bulk drug production, automotive, textiles and food processing, all of which have a strong domestic consumption component as well.
Finally, there is also a renewed emphasis on making India self-reliant in defence equipment manufacturing, as well as becoming a global exporter. As a result, FDI under the automatic route in defence manufacturing was eased to 74% from the earlier 49%.
The future of manufacturing in India
There is a need for trunk infrastructure development to power the growth of India’s manufacturing sector. It has been established that investments in infrastructure have the potential to yield multiple results in how private investments chase such large public investments. India has an estimated USD 1.5 trillion expenditure planned for the next five years towards capacity building and augmentation in its infrastructure.
The target of doubling the existing port capacity of 1,500 MT, which has already doubled in the last five years, bodes well. An increasing port haulage, shipbuilding capacity and using the portland for green energy generation will push the manufacturing agenda even further.
The investments in highways, road capacity increase, railways and the setting up of industrial corridors, thus connecting the industrial/manufacturing enclaves to trunk infrastructure, will greatly improve speed to market and support reduction in logistics costs.
The government needs to push ahead some key reforms to attract investments and boost India’s manufacturing sector. Easier land acquisition rules for the industry and labour reforms need urgent attention. The government has moved to consolidate 44 labour laws into four labour codes but, at present, only the Code on Wages has been passed by Parliament. The other three codes – Industrial Relations, Social Security, Health & Working Conditions – are still pending. Implementing a nationwide Investment Clearance Cell and National Logistics Policy, which were announced in Union Budget 2020-21 will create a more favourable investment scenario.
The Central government has made overtures to global firms who are looking to diversify their manufacturing supply chains in the post-COVID-19 world. Certain state governments have taken steps to reduce investment bottlenecks and boost investments. Karnataka has amended its land acquisition law and made it easier for companies to directly purchase land from farmers. Gujarat has announced that it will allot land to companies in 7 days and all necessary approvals will be provided in 15 days. Tamil Nadu, Maharashtra and Telangana are preparing dedicated incentive packages for electronics manufacturers. Despite these state-specific measures, the central government will have to take the lead in key structural reforms and policies for long term manufacturing growth in India.
Tax reduction and related incentives though may not be enough. Becoming tax-friendly and by extension, industry-friendly is more critical. From the simplification of the GST code to improving tax transparency and certainty in taxation policy and procedure are critical factors. While tariff barriers on imports may support the local manufacturing industry, mutually favourable trade agreements with other countries and regions will go a long way in giving a push to India’s manufacturing ambitions.
The window of opportunity is small and agility is needed to translate the efforts being made to woo the world’s global manufacturing giants into the reality of India becoming a prominent manufacturing nursery for the world.