Make In India? Please Wait, You’re In A Queue…
When I first heard the ‘Make In India’ slogan, I was reminded of those brilliant lectures on ‘Swadeshi’ in my History classes at Loyola College. However, pride in your country’s potential must never be allowed to eclipse fact and reason. That’s what distinguishes patriotism from jingoism. Now before a section flies off the handle, let me clarify that I’m neither a cheer leader not a baiter but a rational citizen with an equal amount of Indian DNA than anyone else. A journalist asks questions. A lawyer questions the answers. With a journalist and a lawyer, brace yourself up for ‘Nothing But The Truth’.
Although well intentioned, I do believe that the ‘Make In India’ campaign inevitably invites cynicism and skepticism. And it has nothing to do with any particular leader or party. Our obsession with most things foreign, dates back many decades. Don’t forget that it took a Vincent Smith to write a chronological history of India, a Lord Curzon to draft the Ancient Monuments Act, a Richard Attenborough to make a film on the Father of our Nation, a Ben Kingsley to play Gandhiji, foreign coaches for our sports teams and even a German Formula in our detergents.
Why are we so obsessed with manufacturing that accounts for a little over 15% of our GDP? Why are we not nurturing the services sector that contributes about 57%? Why do we penalise instead of incentivising job creators in this sector with a Shylockian 14% levy called Service Tax? The last time the basic exemption limit was raised to 10 lakh was 7 years ago. Back to manufacturing. Can you do a real estate transaction in India without a ‘black’ component? Can you get a licence or permit or some approval or sanction without greasing palms? Corruption is shooting up like the proverbial Jack’s beanstalk that would make Steven Spielberg contemplate making a film ‘Swindlers List’ in India! We need speedy clearances. We have speed money. We need a red carpet for investors. We have redtapism. We need to catch investment. We are catching headlines.
If you don’t take my word, how about the World Bank’s ‘Ease Of Doing Business’ ranking? India was at the unenviable 130th position out of 189 countries. The ranking is based on parameters like permits, licences, clearances, land registration, service connections and so on. Predictably, we are behind China which is at the 90th position. The Central Govt alone is not to be blamed. Many clearances fall in the domain of the state governments. Given our Centre-State relations characterised by blame games and one-upmanship, the stated goal of improving our ranking by 85 rungs seems remote.
Now, some of you may even question World Bank documents. So how about a classic real life case study? Not of some babe in the woods but of a former Professor from the Entrepreneurial Development Institute of India. Prof. Umesh Menon wanted to start a business in India. The oppressive tax regime and corruption forced him to shelve his plan. Instead he went to Uganda and invested fifty thousand dollars in a cold storage facility. In 24 hours, he received a business welcome kit with all clearances, licences, tax number & even a driving licence! In 2010, he set up Mozambique’s first private hospital. There is no count of the number of Umesh Menons India has lost.
The JJ Irani Committee Report, way back in 2005, had underlined the need to deregulate private companies. However, the new Companies Act has done the opposite by subjecting private companies to restrictions on lending, restrictions on dealing with related parties. It takes a minimum of 18 months to get a trademark registered in India. Our warranties on manufactured goods are a joke as they are based on the Sale of Goods Act which operates on the principle of ‘Caveat Emptor’ or ‘Buyer Beware’ unlike the West which believes in ‘Caveat Venditor’ or ‘Seller Beware’. Here, ‘Goods once sold cannot be exchanged or taken back’. There, they promise you 100% Satisfaction or your money back’. In other countries, power failure is an exception. In India, no newspaper is complete without a Power Shutdown section every single day. The Industrial Disputes Act doesn’t allow a company to directly close down a loss making unit. Despite assurances, tax terrorism has still not ended. A flip flop on the alternate tax demand from foreign companies has not helped.
Is it any surprise that after the IT Dept sent notices to about 90 foreign portfolio investors, they sold Indian shares and bonds of around $630 million on May 6, 2015 marking it as biggest single-day sale since January 2014? Is it any surprise that Exports have reduced to$23.88 billion in 2015 from $26.89 billion a year earlier. Is it any surprise that Growth in eight core industrial sectors like coal, crude oil, natural gas, refinery, fertiliser, electricity, steel is down to 3.5 percent in 2014-15. Is it any surprise that manufacturing growth slowed down from 10% in 2005-10 to 4.2 % in the last 4 years? Is it any surprise that, according to the Ministry of Corporate Affairs, between April-December, 2014, new companies incorporated have dropped by over 40%.? Is it any surprise that there is many a slip between A Letter of Intent & Actual Conversion and that actual realisation is only about 5%?
The tax demand on NOKIA’s Chennai plant was cited as a reason for its closure, depriving eight thousand direct employees and many others of their livelihood. Vodafone’s legal battle over retrospective tax is still fresh in the minds of investors. Walmart had to do a rethink on its partnership with an Indian company. Apple started selling iPhones from 2007 but 8 years on, analysts suggest that they still they seem unsure of how to capture the 900 million cell phone market. P&G’s Gillette is reported to have spent three thousand hours and employed MIT graduates to design a razor called Vector for India and still it didn’t take off in 2002. They probably didn’t realise that many Indian men used a mug instead of running water to clean the razor, which would get clogged after a single use!
The Indian brain has been exploited by foreign countries and companies. Our human resources constitute our biggest strength. But the monster of corruption is forcing us to do a fox trot – one step forward, two steps backward. So untill we address the ‘Bribe in India’ syndrome, let’s go easy on the ‘Make in India’ fanfare.
(Sanjay Pinto is a Lawyer, Columnist, Author, Public Speaker & Former Resident Editor – NDTV 24×7)