Manufacturing sector, the key driver of the Indian economy, after a prolonged period of declining growth and slowdown in industrial output has seen signs of revival. Manufacturing for the month of May grew at 4.8% after two years of near stagnation providing a boost to the overall economic growth, which, for the first quarter of this financial year (April-June 2014) has witnessed a GDP growth of 5.7%. However challenges pertaining to structural issues such as poor infrastructure and lack of labour reforms, skills deficit, along with demand volatility, low investments, high interest rates, etc. still persist in the industry and CII therefore continues to advocate with government at highest levels to take steps for overcoming these challenges and creating an enabling environment for reviving and re-igniting manufacturing growth. The August issue of Policy Watch takes an in-depth look at the agenda for reviving Manufacturing Sector and has outlined some specific recommendations, which would help the sector to reclaim its rightful place in India’s growth story.

1. 1
policy watch
this Issue
Inside
Message From the
Director General............1
Chandrajit Banerjee,
Director General, CII
ASCON Survey......18
I
ndustry Voices...........19
C
EO Speak............................................................................................2
P
olicy Barometer.................................................................................15
August 2014, Volume 3, Issue 3
Policy
T he deceleration of the
manufacturing sector in the
last three years has been of high concern, given that the sector is expected to act as a pillar of growth, employment creation and export engagement. The National Manufacturing Policy (NMP) of 2011 had set a target of taking the contribution of manufacturing to GDP from 15 per cent to 25 per cent and creating 100 million additional jobs by 2022.
I
n recent months, there has been a marked positive change in business sentiments and industry is hoping for a quick revival of the manufacturing sector. Manufacturing IIP expanded at 4.8 per cent in May 2014 after two years of near-stagnation. Likewise, the CII ASCON survey for April- June 2014, covering 112 sectors, further reveals that 24 sectors are now on a high growth trajectory as compared to 15 sectors in the last quarter.
W
hile there are positive sentiments, much needs to be done to bring back and sustain the growth momentum. Issues such as high interest rates, complex business regulations, delayed environmental and land clearances, inflexible labour laws, sluggish implementation of industrial reforms, high compliance costs and inadequate infrastructure continue to pose challenges for the manufacturing sector. These, coupled with the pressures on mining, are especially hurting activities in core sectors such as steel, cement and aluminum.
T
he new Government has accorded high priority to reviving the manufacturing sector. Excise duty stimulus for certain sectors has been extended to 31 December 2014, and Budget 2014-15 took several steps in taxation, customs duties, industrial parks, etc to boost manufacturing investments. Extension of investment allowance to investments over Rs 25 crore and incentives for MSMEs would also assist in the effort.
CII
’s Manufacturing Council, along with specialized sectoral committees, has submitted an action agenda for the manufacturing sector to the Government, outlining immediate steps and also measures for the medium term. Under taxation, CII has called for rationalization of taxation structure, early introduction of GST, and 25 per cent accelerated depreciation for investments in plant and machinery.
CII
submitted a list of delayed projects for consideration of the Project Monitoring Group (PMG) for according them speedy clearances and approvals. Also, we requested the PMG to reduce the threshold limit of these projects to INR 500 crores. In addition, CII’s Task Force on Ease of Doing Business has made presentations to the Government for simplifying administrative procedures and identifying good practices amongst states.
W
e strongly believe that the role of State Governments in the revival of the manufacturing sector is indispensable. CII is proactively working with the State Governments to provide inputs on State Industrial Policies. Andhra Pradesh, Chhattisgarh, Himachal Pradesh, Uttar Pradesh, Uttarakhand and West Bengal have already initiated work in this area, for which CII has provided inputs.
W
hile a strong policy framework is essential, we believe that simultaneously, industry too must strengthen its competiveness and proactively promote quality and efficiency practices at the firm level. The CII Centers of Excellence on Competitiveness, Logistics and Quality act as a fulcrum for value addition at the firm level, providing strong support for manufacturing companies in escalating productivity for global engagement.
CII
has successfully completed 237 cluster competitiveness learning programmes across the country in major manufacturing sectors such as automotives, heavy engineering, light engineering, etc, covering almost 2500 enterprises. The CII Visionary Leaders for Manufacturing Program (VLFM) is another significant step towards developing a pool of future leaders to steer the growth of this dynamic industry. It gives me immense pleasure to state that more than 500 CEOs and senior managers have already benefitted from this programme. A more recently launched CII Global Top Companies (GTC) 100 programme is another unique initiative with the aim of increasing the contribution of manufacturing to GDP. The initiative focuses on developing capabilities of MSMEs and supporting them in their transition to a higher level.
C
omplementing the ongoing initiatives, CII proposes to launch a Sector Skill Council in Manufacturing as well as work with industry members to establish ’Skill Gurukuls’ and skilling centres to ensure availability of a trained and qualified workforce.
A
strong manufacturing sector and its healthy growth is a prerequisite for ensuring high GDP growth, creating additional employment opportunities, reducing income inequalities, and ensuring global competitiveness. A coordinated effort from all stakeholders can restore the importance of manufacturing as an engine of growth for the country. n
Chandrajit Banerjee
Director General
C
onfederation of Indian Industry
Focus: Manufacturing

2. 2
policy watch
CEOSpeak
A
fter a fairly long period of time, a light of hope in manufacturing can be seen. From subdued manufacturing growth during the previous 2-3 years (2011-2014), the industry has seen an expansion in manufacturing growth at 4.8 per cent (IIP) in May 2014. A very good reason for this could be the formation of a new Government at the Centre, with expectations to end the policy logjams and induce necessary actions for reviving manufacturing growth.
T
he tepid growth of the manufacturing industry in the last couple of years has impacted the growth of national GDP which is estimated to grow by a meagre 4-5 per cent in 2014-15, led to stagnation in employment creation, widening CAD, decline in exports, investments and demand creation. It is well known that for the economy to return to double digit growth it is critical to revive manufacturing in the country and it has to grow 2-4 per cent higher than the national GDP.
I
n the last two years, there has been considerable decline in new project announcements which fell from Rs. 5,944 billion crore in 2008-09 to Rs. 1,806 billion crore in 2012-13. This is a result of low business confidence, attributed to a plethora of regulatory issues and policy hurdles. According to the World Bank’s Doing Business indicators, India is at a low rank of 134 out of 189 in terms of overall procedural facilitation and further lower in areas such as starting a business and contract enforcement and taxation. India should aim at addressing each of these issues systematically to move up the ranking rapidly.
Global economic uncertainties, archaic and inflexible labour laws, poor and obsolete infrastructure, delays in obtaining clearances and approvals for mining leases and land for projects, highly graded tax system, etc. have been the key reasons for falling domestic demand and investments. Some of the boiling issues such as the mining conundrum have caused the mining activity in the country to be stalled leading to uncertain raw material linkages. Also with delays in kick starting of infrastructure projects, the derived demand from industries such as steel, cement, aluminum, chemicals, consumer durables, etc. has also decreased.
A
lot of hopes have been pinned on the newly formed majority Government which has placed manufacturing at the top of its political manifesto.
W
hat we need to aspire to is to “Make India the Germany of East rather than the Factory to the West”. With a growing shift from China as a preferred manufacturing destination, it gives India an immense opportunity to emerge as the new manufacturing hub and leverage its competitive wages and cost structure. The National Manufacturing Policy announced by the Government in 2011 will be an important instrument to increase the contribution of manufacturing GDP to 25 per cent from the current 15 per cent and create 100 million additional jobs.
H
ence what the Government needs to do for reviving manufacturing growth is:
C
reate demand and investments by expediting the process of clearances and approvals for projects where funds are already invested. This will immediately churn the derived demand and open employment opportunities. The Centre and the State Governments need to work simultaneously. CII recommends:
Setting up of state level Project 1. Monitoring Groups as they play an important role in fast tracking clearances of delayed projects. Such a mechanism will enable a continuous review and monitoring of delayed projects at the state level and provide expeditious solutions for several areas of concern at the state level itself.
Reviving Manufacturing in India
B Muthuraman
P
ast President, CII; Chairman, CII Manufacturing Council and Vice Chairman, Tata Steel Limited

3. 3
policy watch
CEOSpeak
Expanding the scope of the Cabinet 2. Committee on Investment by reducing the threshold level of projects to Rs. 500 crore, and eventually reduce it further to Rs. 250 crore.
Resolving the mining conundrum which 3. will act as a major investment booster for the industry. The mining conundrum has been an overstretched issue for the industry which has severely impacted the core industries, especially steel. The industry would appreciate setting up of a Task Force which has an objective and reasonable view towards the industry and provide for restarting mining activities in the country, and a re-look at the MMDR Bill to make it more practical and industry friendly. The industry, on its part, needs to focus on sustainable mining.
Resolving issues such as labour, 4. environment, expeditiously within a time-bound manner.
Demand creation alone would not create employment; for that we would need to review our labour regulations as well. There are 44 central labour laws, 150 state labour laws and innumerable standing orders often having divergent definitions of terms such as wages and workers. Rationalization and flexibility in labour norms will be critical to enhance competitiveness of the industry and also keep pace with the global markets.
CII
also proposes a unique concept of Mass Manufacturing Units as an enabler for employment creation. Such a concept has proved fruitful for economies such as China, which established huge industrial clusters and units for mass manufacturing.
T
he Government should also make a quick move towards announcing policies such as the New Steel Policy 2012, Chemicals Policy and the Textile Policy as they will boost industry confidence. An early consultative round with the industry on these policies will provide traction to the respective industries and open up the sectors thus resolving the current stagnation in manufacturing activity. Adding to these the Government should look towards introducing a Scrappage Policy for commercial vehicles. This will have direct bearing on job creation. It is a bellwether sector for the economy and has both direct and indirect linkages to the economy.
T
he Finance Minister's indication that Goods and Service Tax (GST) will be taken up for consideration during the course of this year to find a solution for approval is a breather for the industry. India has the highest levels of taxation for the corporates and GST will ensure rationalisation of the taxation structure in the country and bring it at par with the practices in other emerging, manufacturing nations.
A
nother avenue for growth is to focus on identifying big ticket projects and areas that will boost manufacturing such as promoting sectors of national and strategic importance – defence production, ship building, aircraft component manufacturing, textiles, ICTE Hardware, etc. We need to strategise and build capacities in these areas and at the same time restore investor confidence by allowing FDI in multi-brand retail, etc.
Easing business regulations is a connecting thread for investments and demand. CII, through its Task Force on Ease of Doing Business, has already submitted recommendations to the Government on four parameters of land acquisition, taxation, starting a new business and contract enforcement, etc.
I
nfrastructure development has gained a prominent place in the Budget this year and there has been a focus on development of roads and highways to connect smart cities with ports and cluster parks, establish coal linkages, reforms in railways etc. However, infrastructure deficit is huge in India, and continues to affect competitiveness of the Indian manufacturing sector.
Finally, Foreign Trade Agreements (FTAs) - there is a need to review and revisit the existing FTAs and CEPAs and efforts should be made to make Indian industry use this window better in their favour. Simultaneously new trade agreements should be drafted taking into account the interests of the domestic manufacturer. New markets such as Africa, Latin America, etc should be explored for promoting exports and the “Made in India” brand to further augment manufacturing growth in the country.
O
nce implemented, these measures will prove to be highly beneficial in reviving manufacturing growth in the country. Given that India enjoys favourable demographics, availability of natural resources and a huge domestic market, this is one of the best of times to move up and bring about a manufacturing revolution in the country. n

4. 4 policy watch
CEOSpeak
How do you perceive the role of the capital goods sector in fuelling the growth of the Indian economy?
T
he role of capital goods industry in today’s scenario is changing. The way it contributes to the economy shifts as nations mature: in today’s advanced economies, it promotes innovation, productivity, and trade more than growth and employment. In a constantly shifting global business ecosystem, organizations that can look beyond the immediate horizon and are fast and adept at transitions are the ones that will ultimately be sustainable. Competitiveness is one aspect of ensuring this; the other is infusing technology and innovation into our systems.
T
he capital goods industry today contributes 12 per cent to the total manufacturing activity (which is about 15 per cent of the GDP) and is the backbone of the manufacturing sector making it an important enabler for sustaining economic growth as well as ensuring its inclusiveness.
I
t has a multiplier effect on overall economic growth as it facilitates faster growth for a broad base of user industries by providing critical inputs, i.e. machinery and equipment necessary for manufacturing. Therefore, the development of domestic capabilities in capital goods sector is essential to ensure self reliance, as the sector directly or indirectly influences core infrastructure development within India. Moreover, in today’s scenario of fragile geo political relations, India’s self sufficiency in defence, space and nuclear programme is also dependent to some extent on the self sufficiency of the capital goods sector.
What are the key challenges confronting the capital goods sector in the current scenario and how do you see the prospects going forward?
T
he capital goods component in industrial production has lagged in recent years, following slow growth in the world economy. The IIP Index for capital goods for the year 2013-14 was recorded at -3.7 which has further degraded to -12.5 in March 2014 this year.
Growth of this dominant sector has stagnated due to stalled projects, drop in investments, uncertainities experienced over a prolonged period, low investment sentiment and money blocked in projects leading to capital blockage of the entire supply chain. Some of the other common issues such as Lack of Level Playing Field and Inverted Duty Structure, Free Trade Agreements, Import of Second Hand Machinery, Import of Power Equipment, High Interest Rates, Lack of Technology Availability, Upgradation and Modernization, and Lack of Adequate Infrastructure has adversely impacted this sector.
What are your recommendations to the new Government on behalf of the capital goods sector?
T
he sentiment is encouraging with the new Government in place. A sustained period of prosperity, growth driver and demand and policy framework tailored to foster growth for domestic manufacturing is most awaited.
T
here is a need for a concomitant policy structure to accentuate the ease of doing business and resuscitate manufacturing and create a level playing field for the
Growth in Capital Goods and Engineering Sector : Indispensable for Manufacturing to Claim its Rightful Place in the Economy
Vipin Sondhi
C
hairman, CII National Committee on Capital Goods & Engineering and Managing Director & CEO, JCB India Limited

5. policy watch 5
CEOSpeak
domestic industry. Following are my key recommendations:
1. Create demand by attracting investments and unlocking stalled projects both at the centre and the state level. Push for the execution of 153 mega projects with an investment of around Rs 5.2 lakh crore cleared by the Project Monitoring Group.
2. Expedite Implementation of GST
3. Regulate import of second hand machinery by allowing entry through 2 designated ports and imposing actual user condition.
4. FTAs: The Indian industry is greatly impacted by the agreements signed with South Asian countries. It is suggested to have a review mechanism for existing agreements with countries like Korea, China etc.
5. Rationalization of taxes and correction of anomalies.
a. Impose 14 per cent customs duty on import of power equipment.
b. Levy additional customs duty on Mega Power Projects as well for imported equipment, to ensure competitiveness of Indian equipment manufacturers.
c. Remove provision for zero-duty import of capital goods under “project imports”.
6. Infrastructure support: Improvement of roads, quality of power and connectivity with ports to lower the transaction cost.
7. Promote exports through financial support and soft promotion policies like long term EXIM Funding specially for long gestation period projects. Banking Industry & Exim Bank to be advised to ease financing for the Capital Goods sector.
8. Mandatory technology licensing/JV partnership in nationally important segments.
9. Build Brand India image for capital goods industry to tap captive markets in countries other than India.
T
he Government of India in its Union Budget announced on 10 July 2014 has initiated various measures to create demand and promote investments in the capital goods sector by announcing a decrease in the threshold limit of investment allowance on plant and machinery from Rs 100 crore to Rs 25 crore.
I
nfrastructure investments announced such as development of 16 new port projects, with an allocation of Rs 11,635 crore for port connectivity, development of new airports in Tier 1 and Tier II cities, investment of Rs 37,580 crore in National Highways Authority of India, Ultra Mega Solar Power Projects and additional 15,000 km of gas pipelines via PPP would give a huge boost to capital goods industry. PSU capital investment of sum of Rs 2.47 lakh crore in 2014-15 also fosters demand for capital goods.
T
he Budget also addressed certain tax issues such as :
a. Reduction of Basic Customs Duty from 10 per cent to 5 per cent on forged steel rings for manufacture of bearings of wind operated electricity generators, which will lead to reduction in input cost for bearing manufacturers, used in wind operated electricity generators.
b. Continuation of reduction in excise duty on capital goods from 12 per cent to 10 per cent til December 2014.
T
he above measures will certainly assist the capital goods industry in regaining its growth.
What do you think can be done to encourage the domestic industry?
A
s the era of entrepreneurial innovation and economic expansion arrives, the industry will need to change its approach and focus on value addition to build a strong indigenous industry. Economies that facilitate and incentivise creative thinking and new processes are home to thriving and dynamic manufacturing chains. Such chains extend long and deep into the entire value system, from low-skill manufacturing to advanced high-technology manufacturing.
C
onducive policies would be advantageous in bringing back the growth momentum.
I
t has become imperative to devise a National Policy on Capital Goods and Engineering which will help in protecting the interests of domestic manufacturing companies.
C
ompetitiveness must begin at the level of the SMEs in order to be integral to the Indian capital goods sector as a whole. There is need to infuse competitiveness into the systems and processes of SMEs which make up the backbone of the manufacturing sector. Technology adaptation will play a huge role in building efficient SMEs, along with connectivity, access to finance, and intelligent marketing.
A
t the large enterprise level, competitiveness must extend to innovation, research and design. We must inculcate R&D into our processes, so that Indian companies can stay ahead of the curve.
T
he CII National Committee on Capital Goods and Engineering has made various representations on the issues hurting the industry to various Ministries and will proactively like to work in tandem with the Government in helping resolve the same. n

6. 6 policy watch
CEOSpeak
What is the present state of the Indian steel industry? What is the growth potential of the industry?
I
am of the view that the steel growth story over the medium and long term remains intact notwithstanding the recent dip in growth rate. Even a modest recovery in overall GDP growth of 6 to 7 per cent will increase the finished steel consumption of India close to a band between 200 to 225 million tonnes by 2025 from the current level of around 74 million tonnes. In fact, potential consumption of finished steel in India would be closer to 250 million tonnes, given the demand pull linked to investments in infrastructure, rapid urbanization and growth in manufacturing in India. An indicator of the potential for steel absorption in the economy is per capita steel consumption which is around 58 kg for India, against the global average of 225 kg.
What are the challenges before the industry that may slow down the growth momentum?
I
n a broader sense the challenge for the steel sector is no different than the challenges faced by the industry in general. Land acquisition and rehabilitation is a major bottleneck for Greenfield projects. Another big challenge is ensuring availability of raw material, mainly iron ore for enhanced levels of steel making in the country. There are environment and forest clearance issues which are to be fast tracked. The emphasis of the Government on development of infrastructure such as the golden quadrilateral for railways, roads and manufacturing will give a boost to the Indian economy in general and the steel industry in particular. We have to provide last mile connectivity from ports, develop inland waterways and increase capacity of ports to serve the anticipated requirement of the steel sector.
What are the steps that the industry is taking or needs to take to overcome these challenges?
I
ron ore is one of the most important raw materials for steel production, and globally accounts for more than 15 per cent of the total cost of producing steel. It is therefore important that we use our reserves prudently for domestic steel production.
Some of the measures required for our resource management could be: expanding the reserve base through more intensive exploration, opening large capacity, modern mechanized iron ore mines, extensive beneficiation of low grade ores, maximising utilization of iron ore fines including micro fines through sintering, pelletising, and introducing alternate iron making technologies which can use leaner ores.
O
ther than having an appropriate land acquisition policy, there is a need for a much more compact design for the steel plants than the current ones. This can be achieved by going for bigger units with high productivity, introducing alternate technologies.
A
nother challenge for the steel industry lies in organizing adequate skilled manpower. It is estimated that the country would need at least 15,000 fresh metallurgists in the next ten years for the steel industry itself for expanding capacity to 300 mtpa by 2025. There is an urgent need for increasing the number of seats in Metallurgy in the
Securing Raw Material Supply Chain Must for the Steel Sector to Achieve 330 mtpa
C S Verma
C
hairman, CII National Committee on Steel and Chairman, Steel Authority of India Limited

7. policy watch 7
CEOSpeak
Engineering courses significantly from the current level of around 1800 in the country. As far as the workforce is concerned, it is estimated that more than seven lakh skilled/ semi-skilled workers would be required in the steel sector by 2025. More ITIs and Diploma Engineering colleges are required to meet this demand.
What support will the steel industry seek from the new Government?
First and foremost, we need to have an R&R policy that is fair and just and also doesn’t lead to undue delays. There is a need for huge investments in key infrastructure including railways, ports and roads, where the Indian steel industry would also be a partner in progress.
W
e believe that given the paucity of coking coal in the county, it should be exclusively earmarked for the domestic steel industry.
Research and Development (R&D) would Budget 2014-15 impact the steel industry?
T
he renewed focus on infrastructure viz. development of smart cities, ports, Pradhan Mantri Gram Sadak Yojna, power plants, plan for doubling pipeline grid, metro for tier 2 cities, industrial corridor, incentives for housing, and revival of SEZ etc. will go a long way in giving a fillip to the steel sector which has faced stagnant demand of late.
I
ncrease in the custom duty on imported flat rolled steel for stainless steel from 5 per cent to 7.5 per cent is a welcome step and will protect the domestic stainless steel industry. Other measures such as reduction in customs duty for steel grade limestone and dolomite would also help the industry. However, the proposed increase in customs duty on imported coking coal – an essential input for steel industry – from Nil to 2.5 per cent would impact the bottom line of the steel companies. nplay a significant role in improving the competiveness of the Indian steel industry. Indian steel producers are spending in the range of 0.15-0.25 per cent of their total turnover on R&D. However, the expenditures required and the risks involved are too big for R&D for which the support of Government of India would be required.
I
ncreasing wagon availability and reduction in railway freight will be another enabling support. Present freight rates are high and call for a review for downward revision.
L
astly, I would like to mention three additional areas where Government support would be critical in the coming times. These are exploring possibilities of revisiting FTA with Comprehensive Economic Partnership Agreement (CEPA), according infrastructure status to steel and a financing corporation for steel industry on the lines of PFC.
How do you think would the announcements made in the Union

8. 8 policy watch
CEOSpeak
T
he Indian mining sector’s share in the country’s GDP is about 1.2 per cent, which is certainly not in consonance with the large resource reserve that is available to the nation. The mining sector has the potential to increase its share in GDP to as much as 5-6 per cent in the next 5 years, subject to the timely provision of a conducive policy environment. Apart from this direct contribution, the forward and backward linkages that the sector has with other sectors of the economy ensure that an increase in activity in this sector will set off a favourable growth cycle in the overall economy. The mining sector is second only to the textiles sector in terms of providing employment in India’s industrial sector. With the new Government’s emphasis on reviving economic growth and generating employment, it is imperative that the bottlenecks that hold back the sector are addressed at the earliest.
T
he mining sector is in a very tough place currently, with the operating environment suffering due to poor performance by industry players, policy opacity, procedural issues, long pending reforms and the fallout of judicial injunctions. Recent Supreme Court led injunctions have brought much of the mining activities in the country to a standstill. While illegal operations must be curbed, the framework itself needs to be made more robust, which is outside the judicial processes and is within the domain of the executive arm. Capability development for the framework to evolve would require greater momentum and better coordination between various departments. This will ensure that the approval process becomes more streamlined, predictable and transparent.
O
ne significant metric with which we can get a sense of the impediments in the operating environment of the country is the lack of significant foreign investments in the country even after a decade of opening up the sector to 100 per cent FDI. Global experiences in other resource-rich countries such as Australia, Canada, South Africa provide a blueprint in terms of attenuating policy to the needs of the market players in a manner that creates an environmentally sustainable, responsible, profitable and vibrant mining sector.
CII
would like to recommend the following to the new Government for reviving the mining sector in the country:
Declare mining a strategic sector, critical • for the nation’s manufacturing growth, creating employment, preventing drain of valuable forex and propelling growth in some of the most backward states.
C
ritical steps that can be taken with • almost immediate effect, without requiring legislative changes, and can make a significant improvement in investment sentiment such as:
A
llow for transferability of licenses –– by provisioning for the creation of a market for licenses through adequate price discovery.
C
reate seamlessness in licensing –– from one mining stage to another.
A
uction fully explored ore bodies –– only.
Reduce GSI’s role as an explorer –– and focus their activities in creating an environment which attracts exploration activity.
Reduce delays in renewal of leases: A • lessee is assessed by the Indian Bureau of Mines (IBM) over the entire period of the lease and therefore in case of IBM certifying that it is in the interest of mineral development to renew the lease, the renewal should be automatic. In the event the State Governments do not communicate renewal within one year from the expiry of the lease, then it should be construed as deemed approval.
W
ith regard to the proposed changes in •
Resolve Mining Conundrum and Usher Reforms to Revive Growth
Dr. Nikhlesh Senapati
C
hairman, CII National Committee on Mining and Managing Director - India, Rio Tinto India Private Limited

9. policy watch 9
CEOSpeak
fiscal imposts, CII would like to reiterate that the Indian mining sector is one of the most heavily taxed in the world. Therefore, any attempts to levy further imposts must take that into account. While we understand that Government’s need to contribute funds towards the development of the community, levies, if any, need to be calibrated in a manner that still retains the viability of the mining projects. As an example, levies on top of the royalty rate will be viable only if the royal rate itself is reduced.
I
ntervention with the Ministry • of Environment and Forests to obtain procedural expediency and improvements:
C
onsistency in approval process across –– various agencies of the MoEF
T
ime bound FC for PL and FC –– operating practices. Embrace model sustainable mining practices and create an environment where sustainable mining practices are necessarily adopted by all players.
T
o facilitate the process of sectoral revival, the CII National Committee on Mining is conducting a study to analyze the economic benefits of the mining sector, as well as its multiplier effect on the economy as a whole and highlight the benefits to the society at large, thereby changing the public perception of the sector.
W
e are involved with the Project Monitoring Group of the Cabinet Secretariat in digitizing the approval process flow for all mineral concessionaires where different best practices available at the state levels have been collated and timelines indicated for each stage. nclearance for broken up areas
C
reation of land banks, better land –– records to facilitate compensatory afforestation
I
nitiate a systematic review that ought to • be undertaken before the suspension or closure of mines and not vice-a-versa.
Mining lease should be offered by • competitive bidding only for reserves which are proven as per the internationally accepted UN Framework Classification.
I
mprove coordination on jurisdiction of • Central and State Governments. A clear- cut policy defining the role of State and Central Government in regulation and development of the mining sector in India should be promulgated, followed up with requisite legislative changes.
I
mprove mining efficiency and productivity • through use of technology and superior
How would you describe the current status of the chemical industry?
T
he chemical industry can be described as an industry for industries. Modern chemical industry is vital to sectors including pharmaceuticals, personal and homecare products, textiles, automotives and transportation, healthcare, agriculture, infrastructure and housing, electricals and electronics, paints and coatings, textiles, plastics etc. The Indian chemical industry is a rapidly growing industry and is estimated at ~$110 billion (for FY 13). Specialty chemicals have observed a high growth rate in the past and have grown at ~11.5 per cent per annum since FY 07 when the market size was ~ $13.5 billion. The global chemical market size was estimated at $3.7 trillion in 2012 and is expected to grow at 4-5 per cent per annum over the next decade to reach ~$5.8 trillion by 2021. The demographic dividend that India is enjoying should drive growth across multiple industrial and consumer segments. Chemical companies are increasingly working towards sustainability targets such as reducing energy/water intensity of their operations, minimizing treated effluent discharge, increasing the share of recyclable products in their portfolio and diversifying their raw material base to renewable resources.
According to you, what are the key issues and challenges faced by the industry?
T
he major challenges being faced by this industry include lack of infrastructure; feedstock constraints; higher cost of utilities; negative image; tax related issues and some emerging ones like emergence of trade blocs and Free Trade Agreements (FTAs).
A
s far as talent is concerned, India faces a severe shortfall due to lack of attractiveness of the chemical sector for employment. Further, companies operating in the industry lack the skills for effective market penetration through innovation and new product launches. Much of the portfolio of these companies are ‘me-too’ products that are cheaper copies of well-known brands.
Chemical Industry at a Crossroad:
A Huge Opportunity for Growth
Nadir Godrej
C
hairman, CII National Committee on
Chemicals and Managing Director,
Godrej Industries Limited

10. 10 policy watch
CEOSpeak
As the new Government is on board, what would be your recommendations to the Government on behalf of the chemical industry?
W
e would recommend a few key areas for overall growth and improvement. These recommendations were also proposed by CII towards the formulation of the National Chemical Policy.
FTAs: FTAs signed so far (e.g. ASEAN FTA) 1. have not resulted in any advantage to the Indian chemical industry. It is suggested that a detailed study be conducted to examine the impact of FTAs and they may be reviewed as required.
A
vailability and pricing of key raw 2. materials: The speciality chemicals industry will grow manifold if key raw materials – mainly derived from petrochemical sources – are available in the right quantities and the right prices. In its absence, investments will only flow to alternate destinations and the Indian markets are increasingly being serviced by imports. Detailed recommendations in this regard were shared with the concerned Department by CII through its Report on “Key Feedstock for Speciality Chemicals”.
Evolution of consumption standards: The 3. CII Report titled “Building a Global Scale Specialty Chemical Industry in India”, which was released in 2011, identifies the evolution of consumption standards as one of the key drivers for the growth of the sector. Some of the key focus areas in this regard are Energy Efficient Buildings, Use of Flame Retardants and Tyre Labelling.
Skill Development: New ITIs, vocational 4. training institutes and diploma institutes would need to be set up.
T
echnological Upgradation: The 5. application of TUFS scheme should be broad based to include chapters 28 (inorganic chemicals), 30 (pharmaceutical products), 32 (dyes), 33 (essential oils and resinoids), 34 (soap and surface active agents), 35
T
he Railway Budget seems to be aimed at bringing a new life to railways as well as industries dependent on it. Special emphasis on the development of logistics will not only help movement of fertilisers and large commodities and give flexibility to EXIM trade which are crucial for the industry but also create jobs in the export sector.
What is the key role played by the CII National Committee and division in the development of the chemical sector?
T
hrough the CII National Committee on Chemicals, CII is committed towards undertaking initiatives that will help the industry in claiming its rightful place in the economy. With a view to the immense growth potential of the speciality chemicals industry, CII commissioned McKinsey & Company to develop the report titled “Building a Global Scale Specialty Chemical Industry in India”. With regard to the availability of key raw materials for speciality chemicals at competitive prices, CII commissioned Chemical Weekly to study ten such key raw materials with regard to their availability and pricing. Subsequently, a “Seminar on the India Speciality Chemical Industry: Feedstock & Standards” was organised on 13 September 2013 at Mumbai to facilitate deliberations by potential manufacturers and consumers of these raw materials along with the policy makers. At the behest of the Department of Chemicals & Petrochemicals, CII also organised a “Workshop on Green Technology in the Chemical Industry” on 27 November 2013 at Mumbai to bring forth industrial case studies on successful adoption of green technology in chemical manufacturing.
CII
’s unique campaign “Chemistry & You” was launched by Ms Ranjana Kale, Economic Advisor, Department of Chemicals & Petrochemicals, Ministry of Chemicals & Fertilizers, on 28 January 2014 at Mumbai. Through this campaign, CII aims to highlight the benevolent side of chemistry and its significance in everyday life through a mix of conventional and new tools. n(modified starches) besides chapter 29 (organic chemicals). The duty structured should be reduced to 0.1 per cent (not 1 per cent); additional duty on imports and a corresponding amount has to be contributed by the Government as a corpus. A similar scheme is in place for the textile industry.
I
mage of the industry: Chemistry touches 6. the lives of billions everyday, but few fully understand the level of impact it has on the economy and our daily lives. The industry is geared up to support growth, encourage innovation, be sustainable, evolve safety standards and create jobs. The 12th Five Year Plan recognizes the negative image of the industry as one of the challenges. Steps should, therefore, be taken to improve the image of the industry. CII has voluntarily initiated a unique “Chemistry & You” campaign. Such programmes must be supported and similar programmes must be initiated.
I
t is encouraging to note how the new Government, in the Union Budget as well as the Railway Budget, has attempted to address some of the challenges of the industry. The reduction in customs duty is welcomed as it helps address the demand for correcting the inverted duty structure and will also help boost domestic manufacturing. The Budget also proposes to introduce a new urea policy, increase connectivity with ports and setting up of new IITs, IIMs with a view to promote talent; all these proposals are steps in the right direction.

11. policy watch 11
CEOSpeak
What is CII’s vision for the Indian textiles industry?
CII
envisions the creation of a strong and competitive textile and apparel manufacturing value chain with creation of employment and value addition in focus. It aims to create a platform for sharing, nurturing and disseminating information on industry best practices and assisting industry and Government in making India a preferred destination for textile manufacturing.
What is the current status of the textile industry in India and how does it stack up in comparison?
T
oday, the Indian textiles industry is one of the largest in the world. It is a US$ 100 billion industry. Domestic consumption is estimated at US$ 67 billion whereas exports are about US$ 33 billion. The domestic textile and apparel industry in India is estimated to reach US$ 141 billion by 2021. In addition to providing one of the basic necessities of life, the textiles industry in India plays a vital role through its contribution to industrial output, employment generation, and export earnings of the country.
I
t is the second largest sector after agriculture in terms of employment and provides direct employment to over 45 million. Besides, another 60 million people are engaged in its allied activities. During April-September 2013, textile exports from India reached US$ 16 billion, which is 8 per cent higher than the exports during the same period the year before.
T
he industry also accounts for about 14 per cent of industrial production, 5 per cent of the country’s GDP, 11 per cent of export earnings, 23 per cent of the world’s spindle capacity, 4 per cent of the global textile and apparel trade and 12 per cent of the world’s production of textile fibers. The global demand of textile and apparel products is on the rise and within India the demand growth is still faster.
O
ver last 10 years, some interesting progress has happened in the Indian textile industry. New investment in spinning and shuttle-less weaving machines have resulted in higher efficiency. This is because ~ 40 per cent of India’s spinning capacity and almost entire shuttle-less weaving capacity is now less than 10 years old.
A
lso, India is becoming competitive in factor cost, particularly in power and wage cost, though there exists a huge potential to improve productivity per unit of factor cost.
What, according to you, are the key opportunities and challenges being faced by this industry today?
W
hile India is the country with the second largest production infrastructure, it lags far behind China in terms of scale and technology level. It also faces competition from several other countries which have carved a niche for themselves e.g. Bangladesh, Vietnam, Turkey, etc. The Indian textile industry faces several challenges like low value addition, higher power and financial cost, gaps in skill level at all levels, fragmentation, smaller capacities, etc. Since the industry’s growth is directly linked with its huge employment generation capability and export potential, focused initiatives to uplift the industry will
Textiles: Pivotal in Increasing the Share of Manufacturing in GDP
Thomas Varghese
C
hairman, CII National Committee on Textiles and CEO – Textiles Business, Aditya Birla Group

12. 12 policy watch
CEOSpeak
result in significant growth for the overall economy as well.
Some of the key challenges are:
L
ack of infrastructural support, especially • in power, road and ports, enabling faster lead time to consumption centers.
L
ack of long term policy regime which • otherwise would have attracted investors to put long term investment without fear of policy changes.
T
o maintain raw material security at • competitive price.
I
f we are able to tackle these challenges India can become a formidable force in the global textile value chain.
What are your recommendations for leveraging the opportunities and combating the challenges detailed above?
T
o achieve a competitive edge within the domestic industry as well as in the global arena, a few policy reforms and amendments are required. In order to tap the opportunity for growth and role in global textiles at this important juncture, CII recommends efforts in four broad areas for the overall growth and improvement in competitiveness of the industry.
A
ttracting Investments: establishing 1. Textile Mega Parks, special incentives for value-added textile and apparel manufacturing, attracting FDIs, attracting investment in the machinery manufacturing segment.
Enhancing Manufacturing 2. Competitiveness: Amendment in Labour Laws, promoting skill development, rationalization of taxation, revising power tariffs and improving availability and supporting technical textile manufacturing.
Market Development: Expediting 3. negotiations with regard to Free Trade Agreements, particularly India-EU FTA and creating “Brand India” through exhibitions and region-specific Textile Parks.
Support services: Custom Clearance 4. Process and setting up of Centres of Excellence.
A
part from this, the focus on higher value addition and developing niche sectors should be a priority. One of the areas to focus on can be supporting manufacturing of technical textiles.
T
echnical textiles are among the most promising and fastest growing areas of the Indian textiles industry. The technical textile sector has demonstrated encouraging growth trends in India with a CAGR of 8 per cent for the last few years and it has reached a size of $13 billion. The sector is expected to show a CAGR of 16 per cent to reach $31 billion by 2016-17. Globally, these textiles account for more than one third of all textile consumption. Currently, India accounts for only 8.6 per cent of global technical textiles consumption.
T
echnical textiles are bound to play an important role as our economy grows. Increasing disposable income and the growth of various end user segments like healthcare, roads and highways, agriculture, automobiles etc. are expected to drive the demand for these products at a much higher rate in India. n
T
he production of Information Communication Technology & Electronics (ICTE) which presently accounts for about 10 per cent of the manufacturing GDP can grow to 33 per cent by 2022 and become the key driver for achieving the growth of the manufacturing sector. Over 60 per cent of the demand is being met through imports. The import bill on account of ICTE imports by 2020 may exceed the oil import bill.
T
he ICTE industry has the potential for faster growth which in turn presents a large manufacturing opportunity, and providing employment to about 30 million by 2020.
P
ersistent advocacy during the last few years by CII and other Associations with the Government has resulted in the Government announcing the National Policy on Electronics 2012.
CII
, through its National Committee on Information Communication Technology and Electronics (ICTE) Manufacturing is privileged to be associated with several of the initiatives aimed at developing India as a global manufacturing hub. The year ahead is a defining one for the ICTE manufacturing sector as these policies are now being taken up for implementation.
I
ndia can become a major player in the global ICTE production market if it seizes the opportunity that the changing global market presents.
T
he initiatives outlined in the policy like setting up of semiconductor Fab, facilitating creation of Electronic Manufacturing Clusters, M-SIPS and Research and Development
ICTE Manufacturing – The Game Changer
Vinod Sharma
C
hairman, CII National Committee on ICTE Manufacturing and Managing Director, Deki Electronics Limited

13. policy watch 13
CEOSpeak
(R&D) support for IP creation have long gestation periods, typically 3-5 years. We need to address the key challenge of making the existing investments competitive in the Zero-Duty regime, ushered in on account of India signing the Information Technology Agreement (ITA-1) of WTO, under which the duties on 217 tariff lines were phased out over a seven year period (1998-2005).
A
key overarching issue is of market expansion. Proactive actions are required in the development of the demand through lowering of the total impact of duties/taxes to 12 per cent. Government buying plays an important role in demand development. The Government requirements need to be aggregated and shared with the industry to spur investments.
Some of the issues which need to be addressed for making the existing investments competitive and supporting growth to ICTE Manufacturing are:
Short Term
Simplification of procedures whereby • import of inputs required by the ICTE Industry (manufacturing items importable In a number of instances levy of SAD results in CENVAT overflow leading to blockage of funds.
A
bolition of Central Sales Tax (CST) of • 2 per cent for Electronics Industry. The total incidence of CST could cascade to over 6.5 per cent over the entire value chain. This places the domestic manufacturers at a disadvantage as compared to imports as there is no equivalent levy on imports.
C
ompensation of the disabilities related • to high cost of power, finance and infrastructure.
Electronics industry to be given priority • status for financing by Banks.
T
o compensate for high cost of finance, • interest subvention @5 per cent on the fixed and working capital.
T
he term telecommunication used in • the section 8, 3(b) of CST Rule 13 be interpreted to include “cable, telegraph, telephone or broadcasting”.
Medium Term
T
o encourage Value Added (VA) • manufacturing incentives in terms of relief in VAT proportionate to Value Addition be considered.
For safeguarding the consumer interest • and discouraging import of poor quality products, Government has mandated conformance to safety standards for specified 15 electronic products.The list should be enlarged to progressively cover the entire electronics industry.
Long Term
T
here is a need to review FTAs especially • in the context of permitting market access of products of having significant domestic manufacturing, at the same time providing market access to Indian products in the African and Middle East Countries.
Direct funding of R&D by the Government • in the private sector. nat zero duty) should be free from all taxes and duties. However, on output, duties and taxes be charged only when the goods are sold in the domestic market.
I
mplement the policy provision of DTA • sales of ITA-1/zero duty (ICTE products) being given the same benefits as for physical exports. Extending this status to all suppliers to domestic manufacturers of zero duty ICTE products would also eliminate the inverted duty structure at Tier-2 industries which is considered important.
T
o encourage value added manufacturing • and exports under the Focus Product Scheme ICTE Industry be given Duty Credit Scrip @ 10 per cent of the value addition.
L
evel playing field with respect to • taxation on locally manufactured products vis‑à‑vis imports (for institutional imports, in addition, a duty equivalent to the applicable VAT should be levied on imports.)
Special Additional Duty (SAD) of 4 per • cent to be abolished on ICTE industry.

14. 14 policy watch
CEOSpeak
What is the current status and vision for the valves industry?
T
he valves and controls industry plays a very important role in the growth of core industries namely power, oil and gas (upstream exploration, downstream refining and gas pipe lines, LNG plants etc.), metals and mining, water (transportation, treatment, desalination etc.), food and beverage, drug and pharma etc. The large size of plants being built across these industries like super critical power plants, nuclear power plants or large petrochemical complexes linked with downstream refining require complex valves and controls in large volumes.
T
he industry is estimated to have a turnover of more than USD 1500 million of which nearly half the production is exported. The exports are projected to grow at a CAGR of around 25 per cent from 2014-2020.
CII
envisions positioning India as a preferred global source of industrial valves, by increasing exports from the current level of USD 650 million to USD 2000 million by the year 2020.
W
ith the new Government in place, the industry hopes for speedy approval of power and mining projects withheld for the last two years. This will give a significant boost to the industry.
What is the investment and export potential of the industry?
T
he global valves market is estimated to be over USD 60 billion of which the exports from India is only about USD 800 million. The industry is also becoming very competitive and complex - valves are now being made in the country and therefore the exports of products will also grow manifold and with the acceptance of ‘Made in India’ products in neighbouring countries and even in ME/ Europe/USA, the industry will get a further boost. It is worth mentioning here that the world’s leading players in the valves industry have set up a manufacturing base in the country. All major multinational corporations have set up a local base for manufacturing, supply chain for exports, global procurement offices, global engineering and design centres, back up application engineering, test labs etc. and this investment has helped the Indian valves Industry come of age and make its presence felt in the global scenario.
What are the issues and challenges that have plagued the industry?
T
he slowdown in new construction of power, mining, oil exploration etc. led to erratic demand from new projects in addition to half-finished projects by Independent Power Producers (IPPs). This led to building up of inventory and cancellation of orders, which created hardship for manufacturers. Several thousands of valves are lying in stocks due to stoppage of work at various power/mining sites across the country. Further, increases in prices of inputs such as power and labour have adversely impacted the global competitiveness of the Indian valves industry. In order to improve the export potential of the industry certain types of valves should be included in the Focus Product Scheme. As far as this industry is concerned, most standards have not been updated in a long time. This calls for updating of standards for valves as Indian users have stopped referring to the Indian Standards.
According to you, what is the way forward for the industry?
T
he faster clearances of projects across all verticals can give a big push to new construction and demand. Consistent demand and supply can remove uncertainties in growth on long terms basis and thereby make the valves industry more efficient and competitive.
What role has the CII Valves and Actuator division played in promoting this sector?
CII
provides a solid platform for the sector to showcase capability, facilitate dialogue with the Government and other stakeholders for upgradation in technology, benefits for export promotion and many more. In order to promote exports, CII has submitted recommendations to the MoC/ DGFT/DHI etc., to include few types of valves HS codes under the Focus Product Scheme in Appendix 37D of Export Import Policy. This will provide an impetus to this sector as well as generate more employment opportunities. Since imports by the valves industry are low, export promotion will also lead to high net foreign exchange inflow. As the Indian standards for valves industry are outdated and domestic manufacturers as well as users adhere to international standards, CII Valves and Actuators Division had taken up the issue with BIS, particularly in view of increasing export of valves. The approach of the Division is to actively participate in TC 153 (Technical committee responsible for valves standards), so that Indian industry is involved in the formulation of international standards. n
Positioning India as a Preferred Global Source of Industrial Valves
I S Malhotra
C
hairman, CII Valves & Actuators Division and Managing Director, Pentair Valves and Controls

15. 15
policy watch
Policy Barometer
CII Recommendations for Manufacturing
Short Term
Create Demand by Fast-Tracking Stalled Projects:•
 Expedite the process of approvals and clearances to unlock invested funds.
 Create State Level Project Monitoring Groups (PMG). The list of delayed projects should be divided state-wise, and a strong coordination mechanism between Centre and States should be put in place to ensure speedy disposal.
 Expand the scope of Cabinet Committee on Investment by bringing down the threshold level of projects that could be considered by PMG from Rs.1000 crore to Rs.500 crore.
Continue with Excise Duty Rebate and Extend it to other Sectors.•
Timely Implementation of Big-Ticket Projects :•
 Monitor and ensure timely implementation of big-ticket projects such as Delhi- Mumbai Industrial Corridor (DMIC), Dedicated Freight Corridor (DFC) and Manufacturing Zones (NIMZs) which are vital to provide a fillip to overall manufacturing.
Role of PSEs: • Many PSEs enjoy surplus funds that can be deployed to add capacity and expansion plans. In sync with the procurement policies, PSEs should work with vendors and suppliers to boost their competitiveness while ensuring timely payments to them to keep the business cycle running smoothly.
Sectoral Policy to boost Manufacturing:• Announcement of sectoral policies such as National Textile Policy, National Chemicals Policy, National Steel Policy and Mining Sector Reforms at an early date is expected to accelerate the momentum of manufacturing in the country. Separate Policies should be initiated for Sectors such as Aircraft Component Manufacturing, Ship-building etc.
C
reate an Effective Industry-Government Forum for to resolve issues and constraints in • implementation.
Exports:•
 Better infrastructure & port connectivity along with efficient processes and taxation would help integrate India into global supply chains.
 Competitiveness at firm level must be strengthened while creating awareness amongst manufacturers about opportunities of enhancing trade emerging from Trade Agreements with various countries.
 Examples of exporting clusters like Tirupur, Moradabad etc. need to be replicated. Within a cluster, it is important to launch schemes for upgrading competitiveness through dedicated centers and shared services.
 Create Export Development Fund for MSME.
 Develop appropriate strategies to tap the new and growing markets - Africa and Latin America.
 Undertake study on impact of FTAs on India’s export.
Reduce interest rates:• This will immediately catalyse demand for consumer durables and boost production. Interest rate subventions can be offered for low-cost housing projects which would re- energise demand for related goods in steel, cement, etc.

16. 16
policy watch
Policy Barometer
P
rovide special focus to sectors which are of National Strategic Importance and Labor intensive in • nature such as Defence, Auto, Chemicals, Electronics, Textiles, Capital goods, Steel, etc.
a. Auto: Undertake fleet modernization, modernize urban transport across cities and incentivize truck purchase for a boost to automotives; introduce Scrappage Policy for Commercial Vehicles.
b. Textiles : Establish textiles clusters and build the entire supply chain in these clusters to promote competitiveness of the textiles industry.
c. Capital Goods: Review FTA’s on a continuous basis; remove all inverted duty structures; regulate import of second hand machinery.
d. Steel: Resolve mining issues for iron ore and coal at the earliest. Secure sources of raw materials in the long term through measures such as strategic alliances with Indian and international miners and acquisition of global assets and impose a high export duty on raw ,materials; identify land banks for future projects;
Strengthen the system / mechanism to capture manufacturing data to analyze the emerging trends.•
Medium Term
Mass Manufacturing: • Create an enabling policy for mass manufacturing units which will lead to large scale employment.
Employment Generation:• Set up a Commission on Employment headed by an eminent leader acceptable to different stakeholders to recommend a holistic strategy to generate employment. The commission should address labor reforms and closely monitor trends in job creation.
Ensure continuous availability of power and rationalize cost of power:• Address fuel (coal) and has shortages so that the plant load factor can increase; implement regular tariff revisions and make them cost effective; introduce competition in the retail supply of electricity; implement reforms in the distribution sector (reduction of aggregate technical and commercial losses, transparent system of funding subsidies, etc).
Taxation•
 The goods and service tax (GST) is one of the foremost priorities for the manufacturing sector as it would make India a single market and reduce transaction costs in the movement of goods. It should be simple, universal and stable with a strong IT platform.
 Apart from GST, customs duties also need to be rationalized to correct inverted duty structures that promote imports at the cost of domestic manufacturing.
 Minimum Alternate Tax (MAT) – government should consider withdrawal of MAT and Dividend Distribution Tax (DDT) and restore the SEZ policy to its original form to restore investor confidence and attract domestic and foreign investment in the SEZ.
 Bring corporate taxes in line with practices in other emerging manufacturing nations. India has one of the highest corporate tax rates among developing economies. Indirect taxes are complex and layered, adding up to high total rates.
Ease Business Regulatory Framework:•
 Set up a Task Force to propose and implement a strategy to take India from 134 to 50 in the next 5 years in the World Bank Ease of Doing business ranking.
 Facilitate sharing of best practices amongst states in four areas:
I
. Land Acquisition
II
. Starting a new business
III
. Contract Enforcement
I
V. Taxation

17. policy watch 17
Policy Barometer
 Single Window Clearance: Effective implementation of single window clearances system for approvals relating to starting a new business; time-bound approvals by introducing ‘deemed approvals’ in case of delays beyond prescribed limit; introduce e-governance and technology based initiatives to simplify processes and online monitoring of application forms; Enabling e-filling of all taxes with uninterrupted access to online services
 Contract Enforcement: Implement electronic case filling system; implementation of e-courts; creation of alternate dispute resolution system, etc.
Labor Reforms:•
 Revisit Labor Norms to make them more flexible and up-to-date. The labor laws in the country are archaic and have not kept pace with globalization, competitiveness and market dynamics.
 Rationalize and combine the existing 44 Central Acts and State level labor laws into several major buckets covering- Laws Governing Industrial Relations; Laws Governing Wages; Laws Governing Social Security; Laws Governing Welfare
 Formulate a separate set of labor laws for MSME and the Service Sector. Formulate a special set of laws for mass manufacturing enterprises.
 Amend current laws such as Contract Labor Act, 1970, and Trade Union Act etc. to reduce the multiplicity of Trade Unions.
Land Acquisition and Land Costs:•
 Set up Government owned “Land Bank Company” that buys and leases land to the industry for long term at market rates.
 Review LARR to make it industry friendly; reduce time for land acquisition as well as reduce the costs of acquiring land.
Sustainable/ Green Manufacturing – • Incentivize industry to promote environment friendly manufacturing.
Skill development • is vital to enhance productivity and competitiveness. CII recommends weighted reduction to manufacturing units with skill development facilities
Focus on MSME • and resolve issues relating to labor laws, credit flow, and infrastructure
 Address the issues of delayed payments
 Improve and ease institutional credit flow to MSMEs
 Implement recommendations of the inter ministerial committee report on: Boosting Exports from MSME Sector

18. 18 policy watch
Policy Barometer
CII ASCON Survey
A Glimpse of the Survey
T
he survey mapped 112 sectors for the April-June 2014 quarter and reveals that the industry is picking up growth and showing signs of revival. The performance of sectors in April-June 2014 has been positive as compared to Jan-March 2014.
8 Sub-sectors registered excellent growth rate (more than 20%) in April- June 2014 • compared to 7 sub-sectors in January- March 2014. Sub-Sectors registering excellent growth rate marginally increased.
16 Sub-sectors registered high growth (10-20 percent) in April-June 2014 compared • to 8 sub-sectors in January-March 2014. Sub-Sectors registering high growth rate doubled.
58 sub-sectors registered low growth (0-10 percent) as against 58 sub-sectors in • January-March 2014. Sub-Sectors registering a low growth rate remained stagnant.
The sub-sectors registering negative growth rate decreased from 38 in January-March • 2014 to 30 April-June 2014. n
Positive Industrial Growth Brings a Ray of Hope to Manufacturing Sector
Figure 1: % Distribution of sectors in terms of rates of industrial growth: April - June, 2014 over January - March, 2014
Figure 2: % distribution of growth range across
used-based classification of sectors: April-June 2014
Percentage Distribution of Growth in different Sectors: April-June 2014

19. 19
policy watch
Industry Voices
Delay in addressing key policy issues like feedstock security, end use standards, PCPIRs etc have restricted the growth of the industry over the last few years. With the new Government taking charge and positive sentiment in the economy, the industry expects finalisation of the Draft National Chemical Policy 2012, rationalisation of taxes and import duties, accelerating setting up of PCPIRs to help it achieve growth of 10 per cent - 12 per cent per annum through 2017. The chemical industry, being one of the crucial components for most of the industries, also faces a challenge of limited recognition and understanding of the level of impact chemicals have on the Indian economy and our daily lives.
R Mukundan
Co-Chairman, CII-Institute of Quality Advisory Council and Managing Director, Tata Chemicals Limited
I
t is imperative that the Government re-focus its attention on the manufacturing and infrastructure sectors. Projects which are stuck, awaiting Government approvals, must be expeditiously looked into. Exports are crucial for the economic health of the country and it’s important that the strengthening of the rupee be controlled.
W
hile international competition is important to enhance local calibre, and is therefore welcome, the Government must also look at the genuine issues facing the local manufacturers - issues like import duties on raw material, in some cases, being higher than that on finished goods. Also, in the case of overseas EPC players, there is a need to make a minimum percentage of local sourcing mandatory, and FTAs need to be signed with utmost caution.
Aditya Puri
Managing Director, ISGEC Heavy Engineering Ltd.
Rebuilding global credibility about India as an investment and manufacturing destination should be the first and foremost priority. This initiative requires incentivizing domestic manufacturing to promote major blue collar employment generation. Correction of inverted duty structure and compensation of disabilities will build India as a global manufacturing hub rapidly. India has it all - let us make it happen.
Sanjiv Narayan
Managing Director, SGS Tekniks Manufacturing Pvt. Ltd
W
ith a stable Government at the Centre, we look forward to seeing greater momentum and vibrancy and believe that the Government will take bold steps towards strengthening the manufacturing sector. The major push on investments into infrastructure development would certainly provide ample opportunities. Capital Goods, especially the machine tool industry sector - key enablers of manufacturing competitiveness, is expected to witness increase in domestic consumption and rebound in growth. This is possible by implementation of the policy proposals and schemes suggested by various industry associations and bodies of Capital Goods industries. All these measures would enable high investment and FDI in Capital Goods sector as well as generating employment and accelerating GDP growth of the country.
L Krishnan
President, Indian Machine Tool Manufacturers' Association (IMTMA) and Managing Director, TaeguTec India Private Limited

20. 20
policy watch
Industry Voices
C
opyright © 2014 Confederation of Indian Industry (CII). All rights reserved.
No part of this publication may be reproduced, stored in, or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), in part or full in any manner whatsoever, or translated into any language, without the prior written permission of the copyright owner. CII has made every effort to ensure the accuracy of the information and material presented in this document. Nonetheless, all information, estimates and opinions contained in this publication are subject to change without notice, and do not constitute professional advice in any manner. Neither CII nor any of its office bearers or analysts or employees accept or assume any responsibility or liability in respect of the information provided herein. However, any discrepancy, error, etc. found in this publication may please be brought to the notice of CII for appropriate correction.
P
ublished by Confederation of Indian Industry (CII), The Mantosh Sondhi Centre; 23, Institutional Area, Lodi Road, New Delhi 110003, India
Tel: +91-11-24629994-7, Fax: +91-11-24626149; Email: info@cii.in; Web: www.cii.in
For suggestions please contact Priya Shirali, Corporate Communications at priya.shirali@cii.in
MC&IT has announced key policy initiatives to prepare the domestic industry to step up its ICTE manufacturing output to reduce import dependence and become self reliant in sensitive technologies.
T
hese initiatives have created enough excitement in the industry. Proper and timely policy implementation will witness required investments in this sector both by domestic as well as overseas investors. The first and foremost issue is to eliminate procedural hurdles that plague the manufacturing sector and create a business-friendly environment.
A
big challenge that the electronics manufacturing sector faces is barrier-free imports. Due to several disabilities the domestic manufacturers are unable to compete effectively against imports at zero duty. Apart from the PMA policy, a step initiated in the right direction, the Government should introduce other tariff and non-tariff barriers to prevent cheap, low quality and mass dumping imports.
Amrit Manwani
Chairman & Managing Director, Sahasra Electronics Pvt Ltd
T
he Indian Textile Industry has been working in isolated pockets and it is very fragmented. In the last 20 years or so, most of the composite units have closed down and thereby dependency on each other has increased multifold. While the end customer is looking for a complete package, the manufacturers struggle within themselves to arrange all elements with right quality, consistency and on time delivery.
T
his fragmented model has not helped industry at all and so the time has come to review and develop a new policy keeping in mind specially the growth for this “composite unit including one step ahead of adding stitching unit” against the historical concept of spinning, weaving and processing only. Composite unit with sizeable scale will help the industry to be more competitive and develop enhanced confidence as a reliable supplier in the international market.
Debashis Poddar
Chief Executive Officer – Textile, Bombay Dyeing & Mfg. Co. Ltd