Now, for a manufacturing revival

India’s overwhelming vote for political stability and economic change has infused the country with a new optimism that is spreading beyond our borders.

We are seeing an unprecedented level of interest from our international clients. They have the funds, they have the risk appetite and they want to be part of India’s economic future: all we need to provide are the right opportunities.

Our primary sectors, principally agriculture, can provide jobs but not growth; our tertiary sector, services like information technology, can provide growth but not enough jobs. If we are to provide jobs and growth, we must encourage foreign direct investment into the secondary sector, which means manufacturing.

It will take substantial investment to generate the necessary levels of manufacturing growth: over the past four years manufacturing has been losing GDP share.

Foreign investors can help by providing both cash and expertise, but if we have to receive guests, we must clean up our home and make it inviting. We must prepare the ground.

The country languishes at number 134 of the 189 nations ranked in the World Bank’s Ease of Doing Business Index, slightly better than Ecuador, but not quite as good as Yemen or Bangladesh, and 24 places below Pakistan.

We must streamline the lengthy and complicated procedures for various approvals and environmental clearances. Some ₹15 lakh crore worth of projects are currently stuck. The country should focus on bringing down capital costs and rationalise taxes. Companies in India are subject to some 33 taxes compared to five to seven in developed countries.

A relatively large proportion of India’s population is of working age, but if we are to benefit from the so-called ‘demographic dividend’ we need to reform our outdated labour laws to make the workforce more flexible and cost-efficient. We also need to address a looming and potentially critical skills shortfall. The National Skill Development Corporation estimates the skill gap will widen to 90 million people over the next 10 years.

We also need to get the hardware of development right. In India, logistics accounts for 20 per cent of the final cost of a product, four to five times the proportion found in developed countries. The primary reason is poor infrastructure: bad roads, poor warehousing facilities and inadequate cargo loading and unloading facilities. Turn-around time at Indian ports is twice that of ports in Sri Lanka and Singapore.

Finally, manufacturers need access to consistent and competitively priced power, land with clear title and reliable supplies of water. India is currently one of the most expensive countries in the world when it comes to supplying electricity to manufacturers; and in its current form, the new land acquisition Bill will make industry less rather than more efficient.

The two Budgets have spoken of creating “smart” cities and a network of bullet trains.

The Government has signalled its intent to double the country’s power generation capacity and roads network over the next five years; developing ports and logistic parks; extending insurance coverage to every individual against accidental death and permanent disability; irrigating 1.6 million hectares of land; and creating more than 3 million new jobs in the industrial and service sectors.

International investors want India to succeed, and they want to be part of that success. If we can create an environment conducive to business , we can win.

The writer is the head of Global Banking, HSBC India