Tough reforms needed to make India a manufacturing hub: CEOs

Say country can make an impact on global manufacturing sector through innovation and lower costs

Prime Minister Narendra Modi's plan to launch a new manufacturing policy could transform India into an international manufacturing hub, giving tough competition to China.

However, to realise this goal, reforms in labour laws, special economic zone policy, foreign direct investment rules, taxation policy, and land acquisition policy are very crucial, say CEOs. Though India has missed the bus, the country can still make an impact on the global manufacturing sector through innovation and reducing costs, they say.

A M Naik, chairman, Larsen & Toubro (L&T), says India has virtually killed the manufacturing sector and to revive it is a multi-year task. "Modi has given his wish and vision and we hope he will simplify procedures. The government has been there for two months; give him at least a year. The whole sector has gone down badly, as today our manufacturing is less than 17 per cent of GDP (gross domestic product), while in China, it is 50 per cent, and in Malaysia, it is 40 per cent."

Sunil Sikka, president of Havells India, says the labour arbitrage between India and China is gone. Chinese labourers are 50 to 60 per cent more productive than Indians but the wages are also higher by almost 70 per cent. "You cannot replace China as manufacturing hub, but India can certainly be an alternative in industries where application of skill is higher than assembling competencies."

CEOs say the Chinese and Indian economy were almost similar during the 1980s. But China took a giant step forward by making its manufacturing sector the main engine of its economy.

M S Unnikrishnan, MD and CEO, Thermax, says Modi's intention is very good but there should be action now. "Indian companies have inherent advantages against the rest of the world. We will have one of the largest workforces by 2025 and also the biggest market after China. With the consumption base for market place, it has the advantage of becoming an export hub for exports as well," he adds.

Harshpati Singhania, director, JK Organisation and MD of JK Paper, was all praise for the prime minister's Independence Day speech. He says "An inspiring speech. Encouraging to see that the prime minister wants to involve all citizens, including the corporate sector in nation building. We promise to do our best."

The Confederation of Indian Industry (CII) says issues related to taxation, including introduction of a goods and services tax, easy land acquisition, faster approvals and trade policy need to be addressed to boost the manufacturing sector. "CII is happy to see high importance attached to manufacturing and investment. As PM said manufacturing is necessary for employment and for trade expansion," says Chandrajit Banerjee, director-general, CII.

Sidharth Birla, president of the Federation of Indian Chambers of Commerce and Industry (Ficci), says, "He (PM) gave importance to job-creation and tried to bring attention to all topics, such as cleanliness, women's security."