Licensing mindset lingers

The industry ministry is piqued with Nokia which, it feels, has misled the government. The global cellphone manufacturer has obtained a trading licence by claiming that there is insufficient demand to justify manufacturing in India.

But it has subsequently painted an extremely rosy picture of emerging cellphone demand, which should make manufacturing quite viable.

The industry ministry, therefore, wants the finance ministry, which through the FIPB approved the trading licence, to terminate it and force Nokia to manufacture cellphones in India.

On the face of it, Nokia appears to be guilty of being a bit too clever. It has not, however, broken any licensing condition and if it has wilfully misled a branch of the government then it is also true that the latter has allowed itself to be misled.

There is no doubt that mobile telephony is galloping in India, though the current pace of growth is a very recent phenomenon and is related to the aggressiveness of a service provider like Reliance and the resulting regulatory changes.

If this scorching pace of growth continues, there is every likelihood that cellphone manufacturing will commence in India soon, even without any prodding from the industry ministry.

If Nokia unduly delays a decision in this regard then some other manufacturer will grab the first mover advantage and the marketplace will extract a price from Nokia.

Thus, what is important is not the immediate issue at stake but the more fundamental one of how best to promote manufacturing in the country.

The industrial development policy followed by Udyog Bhavan up to the eighties has been singularly responsible for the backwardness of India manufacturing, relegating it to a position way behind both the first and second generation of Asian tigers.

It will be unfortunate if even now its operatives do not learn their lessons from this experience. What works is not administrative fiats and controls but creating the right conditions in which foreign manufacturers find it beneficial to come and set up factories in India.

Once this is understood, the industry ministry will not be writing to the finance ministry to revoke licences but to remove the roadblocks in the way of manufacturing coming to India.

The first and foremost among them, as far as the electronics industry is concerned, is customs delays. Import and export consignments should clear customs in a couple of hours, and not take days.

Then come the infrastructure facilities like ports and roads. Logistical delays have also resulted from continuing inadequacies in these, despite recent improvements.

In this age of 'just in time' manufacturing, if a country cannot ensure that goods can come in and get out quickly, electronics assembling will not come to it. Yet another inadequacy is the power situation.

To attract semi-conductor manufacturing, for example, a country needs to provide plentiful power of very high quality.

If automotive component manufacturing and car assembling can come to India, there is no reason why it cannot happen in electronics, provided conditions specific to the industry are met.