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CII Policy Watch: Manufacturing

The Indian Manufacturing sector is at an important juncture today. Of late, the sector has been witnessing a boost with the launch of the “Make in India Campaign” that aims at promoting India as an important investment destination and a global hub for manufacturing. Since the last one year, there has been much activity, both at center and state levels, in the form of policy amendments, procedural simplifications and promotional measures to revive manufacturing growth.
Over the next decade, the performance of the manufacturing sector will be critical for achieving India’s overall aspirations of growth and employment. Achieving these aspirations would not be easy and will require coordinated efforts to develop necessary enabling infrastructure, tap new avenues for growth and improve labour and capital productivity. It will also require to take a holistic and systemic view to bring in some fresh thinking and alignment between different stakeholders. CII has been strongly advocating for creating an enabling policy and regulatory framework for taking India’s manufacturing story forward.

This issue of Policy Watch takes an in-depth look at the sectoral issues and has outlined some specific recommendations to reinvigorate the growth momentum in the Manufacturing sector.

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CII Policy Watch: Manufacturing

  1. 1. 1policy watch this IssueInside Message From the Director General............ 1 Chandrajit Banerjee, Director General, CII Industry Voices������������������������������������������������� 26 Factfile������������������������������������������������������������� 28 CEO Speak...........................................................2 Policy Barometer................................................20 CII ASCON Survey...............................................24 August 2015, Volume 4, Issue 3 Policy T he manufacturing sector is centre stage in the Government of India’s economic agenda. A number of initiatives in the form of policy amendments, procedural simplifications and promotional measures have been taken in recent months. As a result, manufacturing growth seems to be gaining momentum. While some traction has been observed in the implementation of manufacturing projects, there has been growth in industrial activity also. Since April 2014, IIP growth has been negative only once, compared to six times in FY 2014, indicating a pickup in demand following lower interest rates. The ’Make in India‘ campaign launched by the Prime Minister in September 2014 is one of the most powerful and visionary initiatives launched. A notable aspect of the mission is the thrust on ‘Ease of Doing Business’ and creating a ‘Liberal Investment Regime’. To take this forward, a Joint Task Force has been constituted between the Department of Industrial Policy Promotion (DIPP), Ministry of Commerce Industry and CII. The Task Force would develop an action plan for manufacturing, work closely with the Central and the State Governments for creating a conducive environment for manufacturing; prepare an integrated policy roadmap for the critical subsectors of manufacturing; and create a success model by building a framework for manufacturing competitiveness. CII is deeply engaged with the ‘Make in India’ campaign and is supporting the Government’s reform agenda to attract investments in the manufacturing sector. A detailed State report has been prepared for each State, containing the status of its manufacturing sector, emerging areas and potential and an action plan with specific reference to ease of doing business. CII has formed a Task Force on Ease of Doing Business to specifically help catalyse this. In addition, DIPP has partnered with CII for organizing workshops on ‘Make in India’ across different States in India to create awareness about the new initiative. 23 workshops will be organized covering 7 States from Northern Region, 5 States from Southern Region, 4 States from Western Region and 6 States from Eastern North East Region. As we strive to converge our work-plan around CII’s theme for the year – ‘Build India - Invest in Development, A Shared Responsibility’ - a major focus would be on building manufacturing competitiveness. We would articulate a framework which serves as a  template for the success of manufacturing companies in India. This will entail identifying individual building blocks for achieving manufacturing competitiveness and identifying relevant levers and interventions. For this, CII, through its Centres of Excellence, aims to impact at least 5000 companies in the next two years across various dimensions of manufacturing excellence. CII had pioneered the Quality Movement in the 1980s, and is committed to drive the second competitiveness movement under ZED (Zero Effect, Zero Defect) to support the ‘Make in India’ campaign. The CII Institute of Quality has launched a national ZED campaign. This will serve as a basis for capacity building as well as a guide for progression towards world class for MSME and large companies. Other than the above initiatives, CII has an ongoing focused policy advocacy agenda for the overall manufacturing sector along with sector specific issues and recommendations which will help in enhancing the share of manufacturing. As the ‘Make in India’ campaign gains momentum, we are hopeful that manufacturing in India will undergo a transformation. Measures taken to improve ease of doing business and attract investment in manufacturing and infrastructure will facilitate revival of the capex cycle and accelerate economic activity. A thrust on innovation will spur new products and perhaps even new industries. Indian industry will steadily integrate much deeper with global supply chains. The manufacturing sector will become an employer of choice and regain its position as the engine of economic growth for the country. n Chandrajit Banerjee Director General Confederation of Indian Industry Focus: Manufacturing
  2. 2. 2 policy watch CEOSpeak The manufacturing sector in India has received a huge boost with the launch of the seminal ‘Make in India’ campaign of the Government. This one vision has created a unifying aspiration across the country and 25 sectors have been identified as catalysts for making this a reality. The 230-odd specific recommendations for the immediate, short and medium terms that have been identified as part of the initiative, along with a strategy for improving the ease of doing business and enhancing skills will serve as foundation stones for a robust framework to accelerate growth for Indian manufacturing as well as for the Indian economy as a whole. To realize the ‘Make in India’ vision of taking manufacturing growth to 25 per cent of GDP by 2022, the sector will need to grow at 14 per cent year-on-year (YoY) for the next 7 years. Therefore, it is imperative for India to address the issue of manufacturing competitiveness and attract higher investments in the sector. So the root question is, what strategy should be followed to promote rapid manufacturing led growth? The CII Manufacturing Council is committed towards undertaking the initiatives that will help the manufacturing industry claim its rightful place in the global arena. As part of the work programme, we are in the process of evolving a recipe for success that aims to build manufacturing competitiveness and take manufacturing growth to the next level. This would require specific interventions to be undertaken at three levels: the domestic eco-system, the global eco-system and at the level of the firm. The Domestic Eco-system The Government has done much in the past 15 months to create an enabling environment for business and reviving investment in manufacturing. After the launch of the ‘Make in India’ initiative in September 2014, there was a 48 per cent increase in FDI equity inflows during October 2014 to April 2015 over the corresponding period last year. A positive response has been received from within the country and globally for the ‘Make in India’ initiative. Several countries such as Japan, China, France and South Korea have announced their intention to make huge investments in India in various industrial and infrastructure projects. The slew of measures taken as part of ease of doing business has resulted in significant policy and procedural streamlining. These include initiatives such as the eBiz Portal, integrating 14 Central Government services, simplifying the process of starting a business, making the process of obtaining environment and forest clearances online,  simplifying labour laws by streamlining the cumbersome compliance process by launching the Shram Suvidha portal. Along with pushing for the pending reform agenda, the progress on some 230-odd specific recommendations across sectors, for the immediate, short and medium terms that were identified in December 2014 are constantly being monitored to keep the ‘Make in India’ mission on track. The Government has promised to make rapid Creating A Recipe For Success For ’Make in India’ Anant J Talaulicar Chairman, CII Manufacturing Council and Vice President, Cummins Inc. and Chairman Managing Director, Cummins India Group Source: Dusitshutterstock.com
  3. 3. 3policy watch CEOSpeak strides towards announcing sectoral policies for steel, chemicals and textiles which are much-awaited. As the action moves to the State-level, percolation of policies and procedural simplification will need to be accelerated. CII will play a central role in facilitating this progress. In our view, the ‘Make in India’ strategy needs to comprise a policy mix that not only encourages large scale manufacturing but takes along the Medium, Small and Micro Enterprises (MSMEs) in the process of development. This would require defining a strong manufacturing vision/roadmap for strategically championing focus industries and creating requisite enablers to spur India’s manufacturing growth both for advanced manufacturing (auto, defence, electronic manufacturing etc) along with labour intensive industries (textiles, leather, etc).This would make our progress inclusive. CII is actively engaging with nodal Ministries for seeking support in clearing the issues that have been affecting the growth in the various identified sectors. To give focused policy steer, a joint task force has been constituted between DIPP and CII to support the realization of ‘Make in India’. Betting on Innovation and Technology: Developing innovation and technology has been identified as an important strategic step for Indian manufacturing. This would require increasing RD spend by providing incentives for RD (including design and procurement of IP) that would help industry translate research outputs to commercial production; incentivizing patent application and commercialization; defining clear guidelines which enable manufacturing companies to match world class standards and ensuring conformity of Indian standards with global norms, to name a few. Skills and Employment: A skilled workforce is a critical factor for the success of ‘Make in India’.While CII has been delighted to see the focus on the entire spectrum of the talent pipeline unleashed through the recently launched ‘Skill India’ mission, the new Ministry of Skill Development and Entrepreneurship as well as by giving a fillip to the network of IITs and IIMs, there is a need for deeper understanding of the nature of ’skills constraints’ on the growth of manufacturing.This will be key to reaping our demographic dividend. Source: supergenijalacshutterstock.com
  4. 4. 4 policy watch CEOSpeak Building A Conducive Export And Global Eco-system For India to become a preferred manufacturing hub, urgent attention is required on integrating India with global supply chains. Increasing our share of manufactured exports will be a critical aspect of this. To pitch for a larger share in global exports we will need to leverage FTAs and other agreements by strategically negotiating tariff lines where we want market access. New trade agreements will need to be more strategically negotiated taking into account the interests of India and Indian industry and create level playing fields of international trade. Moving forward, India’s focus should be to ensure the efficient implementation of the initiated and defined industrial zones (SEZ, NIMZ and industrial parks), smart cities and industrial corridors projects by fostering greater alignment across the Centre, State and local bodies and addressing the current impediments to project execution such as land acquisition, faster clearances and providing ready infrastructure for business to be conducted. Drastic improvement in road and railways connectivity to ports should be a top priority for improving India’s competitiveness. Policy reforms for simplification of taxes and promotion of exports would further boost growth. Brand India also needs to be strengthened across the globe for an increased acceptance and preference for ’Make in India’ products. Firm-Level Competitiveness In the long term, however, the one critical differentiator that will be central to the recipe for success for ‘Make in India’ will be the ability of individual companies to be competitive and many of these factors are under our control. CII has always been at the forefront in helping guide companies in their quest for manufacturing competitiveness, best embodied through the nine Centres of Excellence around the country. Building on this wealth of knowledge and the bank of case studies, the CII Manufacturing Council has identified parameters of excellence - both functional and in the ways of working (WOW) – that create the secret sauce for manufacturing competitiveness. While the functional dimensions – marketing, technology, supply chain, operations, finance, human resources, information technology ­­- are intrinsic to all companies, it is our belief that the WOW factors – whether they be product, process or governance standards related, they will act as genuine accelerators to competitiveness and give companies a clearly discernible edge amongst their peers. In conclusion, a good start has been made and it’s an amazing window of opportunity that has been presented to all of us in India. Going forward, the recently announced measures, once implemented, will prove to be highly beneficial in pushing manufacturing growth in the country. Given that India enjoys favorable demographics, availability of natural resources, huge domestic market and is increasingly becoming the cynosure of global investment attention, this is one of the best of times to bring about a manufacturing revolution in the country. I would request that each one of us actively engage with our teams as well as CII and the Government to drive India in becoming a vibrant, growing, fair, inclusive, market oriented economy that creates wealth for all its citizens and those around the world. n Source: dotshockshutterstock.com Source: Bachoshutterstock.com
  5. 5. 5policy watch CEOSpeak About 50 years ago,the manufacturing sector’s share of global GDP was roughly 50 per cent more than what it is today. As an engine of growth, manufacturing was more of an afterthought, as countries and economies shift employment from manufacturing to services and beyond. Yet a major transformation is under way, as ‘the fourth industrial revolution’ is about to begin. The concept of Smart Manufacturing isn’t entirely new to the industry (e.g., machine- to-machine), but certainly recent technology advances allow us to bring together data capture, connectivity, remote control and most importantly, analytics to deliver on the promise of a cyber-physical manufacturing sooner than we may anticipate. The vision of Smart Manufacturing or‘Industry 4.0’ is for ‘cyber-physical production systems’ in which sensor-laden ‘smart products’ tell machines how they should be processed. Processes would govern themselves in a decentralized, modular system. Smart Innovation funding is one of the core priorities of India’s Five-Year Plan (2012‑2017) which provides for an increase in public and private RD investment to two per cent of GDP. In 2011, the ’cyber-physical systems innovation hub’ project was launched under the auspices of the Ministry of Communications and Information Technology to conduct research into a variety of areas, including humanoid robotics. Both the Fraunhofer- phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing base in the country. The Government’s impetus on developing industrial corridors and smart cities aims to ensure holistic development of the nation.The corridors would further assist in integrating, monitoring and developing a conducive environment for industrial development and will promote advance practices in manufacturing. A range of technological changes, including advanced robotics, large-scale factory digitization, 3D printing, etc are going to shift the manufacturing paradigm in times to come. Digital factory is no longer a fantasy and the focus should not just be on smarter and efficient production, but also creating policies on development for the skills and capacities of the workforce to handle increasingly complex products and individualized demand. Even today, according to a study by the Zebra Tech Company, Indian businesses are world leaders in terms of take-up and use of IoT technology. Smart Manufacturing:A Revolution In The Making Jayant Davar Co-Chairman, CII Manufacturing Council and Co-Chairman Managing Director, Sandhar Technologies Limited Source: a-imageshutterstock.com Gesellschaft and several top Indian research centres are participating in this project in an advisory capacity. With the launch of the‘Make in India’ initiative, Narendra Modi, the Prime Minister of India, aims to give global recognition to the Indian economy and also place India on the world map as a manufacturing hub. Several mobile Indian manufacturing industry should seek to maintain its global market leadership by consistently integrating information and communication technology into its traditional high-tech strategies so that it can become the leading supplier of smart manufacturing technologies. Social machines, thinking factories, global facilities, smart products and virtual production shall advance productivity by making us agile and responsive to market needs. This intelligence also preempts and mitigates safety risks – key, if world-class businesses wish to make in India. The challenge, apart from the expensive infrastructure improvements, is that the smart factories will only become a reality when everyone works together; if different factories create their own proprietary systems we, as a nation, will not succeed. n embedded devices start working together wirelessly either directly or via the internet ‘cloud’ – the Internet of Things (IoT) - to once again revolutionize production. By combining components of the cyber and physical world, industry is moving towards making manufacturing systems flexible and integrated, with an increased focus on collaboration. New technology applications will give us the ability to access and understand every measurable parameter in our plants and their interactions. In Germany this impending revolution is known as 'Industry 4.0', with the Government shoveling close to €500 million (£357 million) into developing the technology. In China, Japan, South Korea and the USA, big steps are being made to create global standards and systems that will make factories smarter.
  6. 6. 6 policy watch CEOSpeak Steel demand in India in FY 2015 was 76 million tonnes (MT). It is projected that in a business as usual scenario, the demand will increase to 155-170 MT by 2025 at a CAGR of a little over 7 per cent. With the ‘Make in India’ push, steel demand can touch 250 MT per annum (p.a.). The Government has therefore embarked on an ambitious project to ensure 300 MT p.a. installed capacity in India versus the existing capacity of 100 MT p.a. Creating A Level Playing Field For Indian Steel Industry Globally, there is an excess capacity of 580 MT over nameplate capacity and 240 MT over effective capacity. In addition to this, several steel exporting countries have had the relative comparative advantage of their domestic currencies depreciating rapidly in the recent past. The Indian Rupee has been relatively stable. In response to this, exports have jumped, prices have dropped and many countries have put up trade barriers in one form or another. While we pride ourselves as being the fourth largest steel producer in the world, China produced more than ten times what we did and last year exported more steel than we produced! Besides dropping prices, India has seen a significant increase in imports. Imports in Q4 FY 2015, have increased by 96 per cent over Q4 FY 2014. This increasing trend has continued in the current quarter too. Further imports from FTA countries are a large percentage of the total. In such a scenario, both industry and Government have to act quickly and significantly. Cost reduction measures have to be pursued even more aggressively. Indian industry has a severe disadvantage in interest rates. It varies from 2 to 6 times compared to that paid by major steel producing and exporting countries. Unfortunately, in the recent past domestic steel demand growth has been negligible - less than 1 per cent in FY 2014 and around 3 per cent in FY 2015. This is much lower than growth rates of around 6 per cent that we saw during the period 2009-2013. While the Government is taking action to increase steel demand through the ‘Make in India’ campaign, this will take time and Government must act in the interim to ensure that India does not become the global market and dumping ground for steel. Surely we do not want the ‘Make in India’ campaign to become ‘Make in India with foreign steel’ campaign. Many countries have restricted imports into their countries and so should we, given the circumstances described above. Restriction of imports, to counteract the un- level playing field, can be done in various ways.The Government has recently increased the import duty marginally from 7.5 per cent to 10 per cent. There is a scope to increase this further without hurting the downstream industries as steel prices have dropped sharply.The Government should also explore and implement safeguard duty, anti- dumping duty and non-tariff barriers. Many countries have done this. Anti-dumping and Countervailing duty in the US for hot rolled plates is 54 per cent; it is 40 per cent for hot rolled coils in Indonesia and 22 per cent for non-alloyed flat products in Thailand.The time has come for us to act in this direction. Raw Material Pricing In the recent past the Indian steel industry has had the serious disadvantage in that while Indian steel prices fell in line with international steel prices, the iron ore prices did not follow the same trend. This was due to several factors including supply shortage due to Supreme Court restrictions in iron ore mining. Steel export prices from China fell by 70 $/T from January 2014 to Dec 2014 and Indian steel prices fell by 64 $/T during the same period. While iron ore fine prices in CFR China fell by 61 $/T, Odisha A Shared Vision Essential For Realizing The Ambitions Of The Steel Sector Firdose Vandrevala Co-Chairman, CII National Committee on Steel and Executive Vice Chairman, Essar Steel India Limited Source: Antonio Chaginshutterstock.com
  7. 7. 7policy watch CEOSpeak After much deliberation and delay the Mines and Minerals (Development and Regulation) Act, 1957 has been revised and passed by the parliament. The new Mines and Mineral Development and Regulation (Amendment) Act, 2015  aims to legalize the system of auction of mines to enhance transparency in mineral allocations by removing discretion. The passing of this Act has been considered a welcome change in the sector and it is expected to bring an increased share of revenues to the Government from the mining sector. Under the Act, the tenure of the mineral concession has been increased from the existing 30 years to 50 years, thereafter the mining lease would be put up for auction. Addressing the issue of second and subsequent renewals which has led to closure of a large number of mines, the Act has provided that the mining leases would be deemed to be extended from the date of their last renewal to 31  March, 2030 (for the captive miners) and till 31 March, 2020 (for the merchant miners) or till the completion of the renewal already granted, if any, whichever is later. It is expected that this would immediately permit such closed mines to start their operations. There are a few crucial additions/exceptions which have been added with the expectation of improving the mining laws of India and iron ore fines remained almost constant. Since then there has been some reductions in the Indian prices. We are short on coking coal. It is, therefore, most surprising and disappointing that the Government has imposed import duty on Coking Coal. There are already serious disadvantages to the Indian steel industry and this has further compounded the problem on cost competitiveness. Raw Material Availability The output of iron ore has still not picked up. It fell 38 per cent between FY 2010 to FY 2013 and rose 9 per cent (Base FY 2010) between FY 2013 and FY 2015. While the new Mines and Minerals (Development and Regulation) Act has been promulgated, there are still concerns over clarity on some issues. The Government should expedite the same and ensure that production ramps up and exceeds levels achieved 5 years ago. Another raw material that is often out of sight is natural gas. Based on commitments given by the Government, approximately 10 MT of gas based iron production has been put up in the country. Due to several factors like lower than expected production from new gas fields, preference given to city gas distribution system and other industrial Mining Sector Has The Potential To Create 10 Million New Jobs By 2025 Narendra Kothari Chairman, CII National Committee on Mining and Chairman Managing Director, NMDC Limited segments, the steel industry could operate only 25 per cent of the installed gas-based capacity. Treating gas based steel industries at par with power sector and allocating gas to both these sector from a universal pool is an option Government should consider. Infrastructure Support For every tonne of steel produced, approximately four metric tonnes of material needs to be transported. The freight yield (USD/Tonne-KM) for Indian railways is approximately 40 per cent higher than that in China.This extra cost ultimately translates to higher cost of steel production. India needs to achieve the economies of scale and efficiencies achieved in developed countries in the logistics sector. Alternate transport solutions like iron ore fines transport through slurry pipelines can provide transportation at 80 per cent lower cost than current railway freight. Such technologies need to be encouraged by the Government by way of speedier regulatory clearances. Improving Long Term Sustainability Steel industry is a capital intensive industry with long gestation periods, hence long term sustainability should be given due consideration. It is estimated that around 20 per cent EBIDTA margin is required to ensure long term sustainability of the industry so that adequate funding is available for innovation and capital expenditures. Unfortunately only a handful of companies worldwide, mostly established companies with linkages to raw materials, are operating with such margins. With severe squeeze in margins and interest payments on borrowed capital starting in, the debt to EBIDTA ratio of the steel industry has almost tripled to 18 per cent between FY 2010 and FY 2015. RBI has tried to address the issue of high debt cost for industries with long gestation period through the refinancing policy guideline which is being popularly termed as the ‘5/25’ structure. Industry now requires active support of banks and financial institutions to implement this policy quickly. Conclusion Steel industry is considered a core sector industry. No nation can grow if it is dependent on other countries for this basic material. Unfortunately the scenario today does not give any confidence to investors or to lenders for investing in steel business. Joint action by all stakeholders is urgently required to ensure the health of existing investments and encourage new capacity building. n
  8. 8. 8 policy watch CEOSpeak putting a check on illegal mining license and improving the lifestyle of the communities in and around mining lands. The Act has given considerable rights to State Governments in granting mining lease and at the same time provided for relevant interference and approval from the Central Government on selected matters. Along with regularizing mining auction, the Act also aims at developing the backward areas of the country through mining projects and bringing those areas into the mainstream society. There is a provision to establish District Mineral Foundation (DMF) in the districts where mining takes place. There is a separate provision for contribution to the DMF not exceeding the royalty rate in the respective minerals. To promote explorations, the Ordinance proposes to set up a National Mineral Exploration Trust (NMET) which will be financed by an amount equivalent to 2 per cent of the royalty paid by leaseholders. This would allow the Government to have a dedicated fund for undertaking exploration. In addition, the transferability provision (in respect of mining leases to be granted through auction) would permit flow of greater investment to the sector and increase efficiency in mining. In respect of ten minerals in Part C of the First Schedule, the Amendment removes the need for such ‘prior approval’ from the Central Government, thereby making the process quicker and simpler. In order to bring a check on illegal mining, the penal provisions have been made further stringent. Further, a provision has been made for constitution of special courts by the State Government for fast track trial of cases related to illegal mining. Concerns / Contention of The Indian Mining Industry Mining sector has the potential to increase its share in GDP to as much as 5-6 per cent in the next 5 years, and create 10 million additional jobs by 2025 under the ‘Business As Usual’ (BAU) scenario (total of 16 million jobs in 2025) under a favorable policy environment. While the recent MMDR Amendment 2015 has introduced some clarity, it has not initiated mining activity in the country. Given the sector’s immense potential in reviving growth and generating employment, CII would like to recommend the following for reviving the mining sector in the country: Address the concern of India’s lack of• exploration Provide clear guidelines and review–– mechanism to ensure effective implementation. Provide a platform for improved–– access of data and mentorship from PSEs to private sector. Incentivize exploration as a viable–– activity as only 5 per cent of India has been explored. Exploration by private sector can be facilitated through an Exploration Fund for scarce minerals. Develop robust implementation• framework for auction Study 4-5 cases for end-to-end–– implementation from auction to production for allocation of new mines, based on current MMDR Act for identification of best practices. Undertake progressive steps for–– implementation of MMDR at State level to overcome delays in extension of leases. Protection of sustainable margin• High taxation on mining: Rationalize–– taxation that can get as high as 80 per cent in some cases. Increase royalty and imposition of–– additional DMF (District Mineral Foundation), NMET (National Mineral Exploration Trust), and CSR (Corporate Social Responsibility). Improve logistics carrying capacities• mainly in railways Long term plan of creating a–– multimodal logistics network for optimizing freight cost for bulk industry needs to be developed. Schemes to attract non-rail companies–– to create lines has been announced by IR, but there is a need to promote it, for it to gain traction. n Source: raifushutterstock.com
  9. 9. 9policy watch CEOSpeak What is the present status of the Indian capital goods and engineering sector? What are the growth prospects in your perspective? The capital goods sector serves as a strong base for its engagement across sectors such as engineering, construction, infrastructure and consumer goods. For the past few years, the sector has witnessed a significant slowdown in production. Poor demand from infrastructure and industrial sectors and a lack of fresh investments continued to weigh down on the capital goods sector’s performance.According to the Index of Industrial Production (IIP) data, after witnessing a contraction for three consecutive years from FY 2012 to FY 2014, the capital goods sector has registered a positive growth of 6.2 per cent in the FY 2015. Going forward, on the back of the astute policy reforms and the strong commitment on ‘Make in India’ by the present Government, the industry is hopeful that a springboard for renewed growth is well in place and the capital goods industry is optimistic about witnessing a revival in growth momentum in equipment, plastic processing machinery, printing and packaging equipment which has usage across varied industries such as oil and gas, power, defence, railways, infrastructure and textiles.These sub-sectors deploy different technologies and face different challenges. As per the 12th five year plan projections, the capital goods industry production is projected to reach USD 113.5 billion by 2017. However, at present, the production of capital goods industry in India is USD 32 billion and the capacity utilization varies between 40-60 per cent depending upon the sub-sector. On one hand, there is excess capacity and on the other hand, India imports almost 35-40 per cent requirement of capital goods. Several other factors such as lack of demand, issues of inverted duty structure, market access, increase in imports due to FTAs and other agreements, import of second hand machinery, high interest rates, lack of technology availability, upgradation and modernization etc, have made it difficult for the industry to function within the current economic environment. Lack of support infrastructure in the form of a Capital Goods And Engineering: Key For ’Make in India’ Vipin Sondhi Chairman, CII National Committee on Capital Goods Engineering and MD CEO, JCB India Limited railways etc are expected to have a positive cascading impact for the domestic capital goods sector. What, in your view, is making the capital goods and engineering sector more complex and challenging? What are the key issues faced by the sector? The capital goods sector comprises seven different sub-sectors:heavy electrical and power equipment, textile machinery, construction equipment, machine tools, process plant Source: sergeisimonovshutterstock.com the sector in the next half of 2015. The recent announcements of the Government, such as the Plug and Play projects in core infrastructure sectors and to start with 5 Ultra Mega Power projects (UMPP) will be good for the capital goods industry which has been hurt by subdued order finalization in the domestic market. Projects such as ‘Electricity to all households by 2022’ is expected to increase investment in the power sector which will translate into increased opportunity for the domestic capital goods sector. Also various initiatives in infrastructure such as ‘Housing for all by 2020’ and announcement of projects such as 100 Smart Cities, Bharat Mala, Sagar Mala, Industrial Corridors, Make in India for defence and strong indigenous supply chain is another key barrier. How are initiatives like ‘Make in India’ taken by the Government helping the sector? Do you think the campaign will help the sector grow? The ‘Make in India’ campaign underscores a strong commitment on the part of the Government to revive and accelerate manufacturing growth in the country. As the capital goods sector serves, in many ways,as the engine of India’s industrial growth, a strong capital goods sector is critical to achieving the aspiration of the ‘Make in India’ campaign.
  10. 10. 10 policy watch CEOSpeak The Department of Heavy Industry is partnering with industry leaders for seeking remedial measures that need to be adopted to ensure the success of ‘Make in India’.As part of their commitment, the Ministry of Heavy Industries and Public Enterprises has constituted a ‘Joint Task Force’ between the Department of Heavy Industry (DHI) and CII which aims to evolve a roadmap for the capital goods sector. The Ministry is also actively participating and is pushing for fast tracking the formulation of the National Capital Goods policy. The proposed policy aims to increase the share of capital goods contribution from present 12 per cent to 20 per cent of total manufacturing activity by 2022. Such initiatives will surely help creating a framework which will carve the path of growth for the industry in times to come. What steps do we need to take to make ‘Make in India’ possible? The capital goods industry has the potential to be a growth driver of the manufacturing sector in India. It is increasingly being recognized that several initiatives are required for development of demand, both for domestic and export market. At present the industry is facing the issue of underutilization of capacities which were created during the 12th Five Year Plan. Domestic demand needs to be sourced by local industry to address the same. The ‘Make in India’ campaign has come as a big boost to the manufacturing sector and the capital goods sector is at the core for all manufacturing. Following are the key policy support advocated by the CII National Committee on Capital Goods and Engineering: Focused policy framework to facilitate• creation of an enabling environment for the capital goods sector. Fast track implementation of approved• projects announced in infrastructure and power projects. Correction of anomalies due to inverted• duty structure. Preference to domestic capital goods• companies for mega infrastructure projects. Review PSE contract conditions and• introduce purchase preference policy. Regulate import of low-quality second-• hand machinery. Enabling schemes for technology transfer,• upgradation,innovation and development of indigenous technology. The need of the hour is to build a brand of our own in manufacturing, showcase our strengths and send a common message across that, we in India, are ready to manufacture products that are globally at par in order to attract global investors. The industry needs to partner with Government and gear up to position itself as one of the world’s major suppliers by integrating and becoming part of global value chains. n The  chemicals  industry  is vital for  the sustainable development of any national economy. Chemical products are  essential inputs for almost every other field of commercial enterprise. Without a healthy and vibrant chemicals industry everyone else’s success is diminished. India’s  chemicals  sector  has the potential to grow to a USD 290 billion  business by 2017 from its  present  value of  USD 108 billion. It  now  accounts for  3  per cent  of  the global  chemicals  industry. Prime Minister  Modi’s  signature campaign  `Make in India‘, along with the Swachh Bharat (Clean India) and Smart Cities initiatives, can be the perfect catalyst to unlock the industry’s potential. `Make in India‘ has galvanized the interest of in-bound investors in the automotive, pharmaceuticals, energy,  and infrastructure sectors. We know for example that Japan intends to invest in India to boost  automobile manufacturing. This directly translates into opportunities for Indian  chemicals revenues to USD 80 billion in the coming decade. However, the immense potential of the specialty chemicals industry may well remain underutilized for want of appropriate consumption standards. These are essential to enhancement of safety and performance of the world one lives in. CII, through the Sub-Committee on Standards Regulatory Regimes, has been closely working with the concerned stakeholder group on this subject and considerable progress has been made, particularly in the area of flame retardants. Draft standards for flame retardants in technical textiles are already in place and CII is committed towards delivering the objectives of performance and safety contemplated by these standards. The specialty chemicals business will also expand as a result of the implementation of these standards. More areas across multiple sectors need to be reached out though. While the opportunities are great, there are hurdles that impair growth and blight India’s attractiveness as an investment The Indian Chemicals Industry: Enabling Industries To ‘Make in India’ Nadir B Godrej Chairman, CII National Committee on Chemicals and Managing Director, Godrej Industries Limited companies with automotive solutions. Indeed all these sectors will need chemicals. As the supplier of vital feedstock to other manufacturing sectors, the chemicals industry can  drive growth across the spectrum and ensure economic momentum is sustained. Currently a  market of USD 20 billion, India can quadruple its specialty chemicals
  11. 11. 11policy watch CEOSpeak Where does the Indian textiles industry stand today and what are its unique offerings? The Indian textiles industry is one of the largest in the world. It is a USD 100 billion industry. The domestic consumption is estimated at USD 67 billion whereas the exports are about USD 33 billion. The domestic textile and apparel industry in India is estimated to reach USD 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 the export earnings of the country. country after agriculture. The industry provides direct employment to more than 45 million and indirect employment to some 110 million. The textiles industry is a powerful means of inclusive growth. The industry provides the most unique opportunity of gainful employment close to home to the rural population, particularly women. Talking of the rural population, with the increased need for mechanised farming, the garment sector has better wage earning potential for those involved in farming. Across the country, there are innumerable stories of women from deprived backgrounds who have become successful entrepreneurs and Inclusive Growth Driven By An Integrated Value Chain Manikam Ramaswami Co-Chairman, CII National Committee on Textiles and Chairman Managing Director, Loyal Textile Mills Limited The Indian textiles industry is the largest employer in the manufacturing sector and the second largest employer in the destination. On various fora, CII has shared its short-term, medium-term and long-term recommendations for helping the industry to claim its rightful place. India is currently challenged due to inadequate availability of feedstock and building blocks in comparison to the competing countries blessed with oil and gas resources. India imports much of its feedstock, which poses a huge imbalance in ability to sustain growth. In this regard, CII’s Sub-Committee on Feedstock examined ten important raw materials and released specific recommendations in the CII Report on ‘Key Feedstock for Specialty Chemicals’ in 2013. It is encouraging to note that the Ministry of Chemicals Petrochemicals is in the process of reviewing the Petroleum, Chemicals Petrochemicals Investment Regions (PCPIR) policy. Such review, amongst other things, was recommended by the CII Report as well. With this progressive step in place, the industry is hopeful that the Government will consider other recommendations on the subject too including integrating upstream and downstream industries and special pockets for specialty chemical manufacturing. Specific policy directions on encouraging utilization of alternate feedstock  will also be welcome. The industry keenly awaits the release of the National Chemical Policy. CII, through its National Committee on Chemicals, made specific recommendations on key areas including evolution of a comprehensive ‘Chemicals Management Framework’ investment; investment in RD with a focus on sustainability and green technologies; enhancement of the social image of the industry; promotion of human resource development and need based skill sets for the chemical industry and inventorisation of chemicals manufactured and used in the country. The industry continues to suffer on account of inverted duty structure, often emanating from FTAs. While some issues have been considered, most are pending and need quick redressal for ensuring that manufacturing in India remains feasible. There is a need  to bridge the knowledge gap between business and government. CII’s Chemistry Everywhere campaign is one way in which we’re seeking to do that. It brings together experts from business, Government and academia,  and encourages knowledge exchange. Through lectures, conferences and seminars, it provides a platform to highlight the opportunities that lie untapped in India’s chemicals industry.The campaign also seeks to  raise awareness  among those creating value in all other parts of the manufacturing sector and of the innovations taking place in our country. Ultimately it is to the benefit of us all to share our experience and expertise to find solutions for India in India. Chemistry is a branch of science which has seeded  an entire industrial sector. And a sector that is vital to every other sector. Its significance often goes unremarked,  its contributions unsung. Yet it is with us every day,  improving the quality of our lives constantly. Chemistry is everywhere. n Source: Mrs_yashutterstock.com
  12. 12. 12 policy watch CEOSpeak won respect in society and in their families through weaving, garment embroidery and other such skills. They have also motivated other groups of women to achieve social and economic inclusion. Can you elaborate on the ways in which the Indian textiles industry can contribute towards ‘inclusive growth’ of the country? In a predominantly agriculture based country like India, where 30 per cent of the rural population still lives below the poverty line, there is an urgent need to promote activities which help farming families have a second and a steady source of income not dependent on the vagaries of nature. Fortunately, given the huge fabric base available in India and the global competitiveness of Indian textiles, garment industry, if tapped correctly, can prove to be a virtual Kaamadhenu. Garment industry is a non-polluting, non-power intense, easy to learn, easy to work industry where even tiny units can have their own skill development initiatives. Such initiatives are already in place in many units, which are able to create reasonably skilled workforce capable  of producing quality goods at internationally competitive costs within 60 days and without any Government assistance. What are CII’s recommendations for India to claim its rightful place as a Global Textiles Hub? I would like to reiterate CII’s vision of creating a strong and competitive textile and apparel manufacturing value chain with 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. Given the unorganized nature of the textile industry, the ‘hub spoke’ model provides an attractive cost proposition to enterprises while allowing vendors to deliver seamless services. Standalone small units operating in villages when attached to a central unit, which acts as a hub and feeds the spokes, can create a huge value out of the combination. A large company with capability to export/market the finished garments which becomes the hub, will take care of fabric sourcing and selling of garments, perform jobs that need special purpose machines, send the semi-made components to the satellite With a focused effort and with the understanding of the immense potential of this model to create rural jobs for women, this model can be scaled up, combining various Government schemes as it would result in a hugely competitive garment manufacturing supply chain. The total cost of the garment thus made will be hugely competitive and of good quality as the large unit gets involved in improving the training and quality culture of the satellite units. Currently, India has a mere 3 per cent of the global market share in garments in spite of the advantage of availability of cheap fabrics. China, on the other hand, has a gigantic 35 per cent market share. With China becoming an expensive option, we can look at easily increasing our exports. A mere 10 per cent drop in China's exports can provide us with an opportunity to double ours. In order to effectively position India as a Textiles Global Hub, it is essential to: • Proactively develop a location strategy, adapt and standardize operations across locations. For instance, the total cost of the garment would be far lower than today’s cost when factories located in large towns bring migrant workers to live in hostels. Cost of the semi-urban land and factory and workers quarters is 75 per cent of the total investment and in the model proposed it would be hardly 25 per cent as only the hub needs to be located in semiurban area. • Invest in technology and ensure compliance with global regulatory standards. • Work on reducing the relatively higher tariffs. India’s exports suffer when compared to our competitors in most of the consuming geographies like EU, Canada, Australia and China. We can create  a few million more jobs in quick time. Providing jobs to rural women near their home  will create both geographical and gender inclusivity and in the process create an inclusive India with prosperous times for all. n Source: silentwingsshutterstock.com HUB (large company) units to complete the garment assembly, thus making the task of the rural unit easy and help them to stay focused on production and quality. The hub then can get back the finished garment, for the final inspection, ironing, packing and logistics to market place.
  13. 13. 13policy watch CEOSpeak The information communication technology and electronics (ICTE) sector in India is witnessing an uninterrupted growth in consumption, which is presently placed at USD 100 billion. However, over two-third of the consumption is met through import. Electronics production, which accounts for about 10 per cent of the manufacturing GDP, can become the key driver of growth in the manufacturing sector. Recognizing the importance and the need for domestic electronics production, the Government announced the National Policy on Electronics in 2012. The strategies outlined in the Policy are aimed at creating an eco-system for a globally competitive electronics system design and manufacturing (ESDM) sector. The objective is to achieve a turnover of about USD 400 billion by 2020, investments to the tune of about USD 100 billion and create additional employment for around 28 million people. In order to attract investments in the sector, the Government has announced several policies and schemes like the Modified Special Incentive Package Scheme and the Electronic Manufacturing Clusters Scheme, preference for domestically manufactured electronics products (DMEP) in Government purchases,the Electronics and InformationTechnology Goods (Requirements for Compulsory Registration) Order, 2012 to safeguard consumer interest, Electronics Development Fund (EDF). 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. India can become a major player in the global ICTE production market if it seizes the opportunity that the changing global market presents. For achieving the targeted production levels and the vision of zero net imports, the challenges faced by the industry for production and exports would need to be addressed. The key challenge is of making the existing investments competitive. to the disabilities is provided for as a deduction in Profit Before Tax (PBT). Through Indirect Tax: An incentive• equivalent to 20 per cent of the value addition may be given (this presumes the GST rate of atleast 20 per cent. To prevent misuse, the incentive percentage should be lower than or equal to the applicable duty/tax rate). The measure of value addition is the amount of duty/tax payable from PLA. This incentive could be either in the form of deferred payment for 7 years or in cash. Level Playing Field For Taxation There is need for a level 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. Electronics industry may be exempted• from Special Additional Duty (SAD) of 4 per cent. Abolition 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. This places the domestic manufacturers at a disadvantage as compared to imports as there is no equivalent levy on imports. India Can Become A Major Player In The Global ICTE Production Market Vinod Sharma Chairman, CII National Committee on ICTE Manufacturing and Managing Director, Deki Electronics Limited Compensation Of Disabilities The ICTE sector suffers from disability on account of high cost of finance, power and transportation/logistics which is estimated to be about 10 per cent for 50 per cent value addition. The disability increases with value addition in step with increasing exposure to domestic resources and impacts competitiveness. ICTE manufacturing as a result is limited to the confines of low value addition. To compensate for the disabilities, incentives based on value addition should be introduced. Following two approaches are suggested in line with value addition: Through Direct Tax: In this methodology,• weighted deduction in respect of interest paid, power cost and freight in proportion Source: Smart7shutterstock.com
  14. 14. 14 policy watch CEOSpeak Reducing Transactions Cost Compliance to stipulated procedures for import of Goods at Concessional Duty (IGCD) for manufacture of excisable products leads to delays, disruption of production schedules and blocked capital. This contributes to a higher end-product cost and erosion of competitiveness.All import clearances should be on self declaration basis. Encouraging Electronics Exports The reward rates on electronics export for categories-A,B C countries as available under Focus Product Scheme/ Market Linked Focus Product Scheme (FPS/MLFPS) to the new Merchandise Exports from India Scheme (MEIS) (FTP 2015-20) be restored.This would be a step moving towards realizing the vision of ‘Zero Net Import’ for the sector. Tax Refund For Suppliers To Domestic Manufacturers The policy provision of Domestic Tariff Area (DTA) sales of ITA-1/zero duty (ICTE products) being given the same benefits as for physical export (Paragraph 2.1(b) of NPE 2012) needs to be implemented. With implementation of this provision, all suppliers to domestic manufacturers of zero duty ICTE products would be eligible for duty/tax refunds and eliminate the inverted duty structure at Tier-2 industries which is considered important for supply chain development. Parity of Taxation in the DTA and export oriented schemes for sales in DTA In order to encourage domestic• manufacturing, attract investments and create jobs, ‘basic custom duty’ has been raised on several electronics items. Manufacturing of these products is also being undertaken by a manufacturer operating from an Electronic Hardware Technology Park Scheme/ Export oriented Units/ Special Economic Zone (EHTP/ EOU/SEZ) in India. The sales in DTA from these units as a result is uncompetitive as compared to the manufacturers located in DTA. Products manufactured in EHTP/EOU/• SEZs should be considered at par with DTA manufacturers in as much as levy of duties/taxes on domestic sales is concerned. Charging Duty/Taxes on Domestic Sales• from EHTP/EOU/SEZs on taxes/duty may be on duty/tax foregone basis.This would bring parity in taxation with the units manufacturing in DTA and support the Government’s ’Make in India’ initiative. Preferential Market Access (PMA) in• Government purchases as per notification shouldbeimplementedforpurchasebyboth the Central and State Governments. Electronics industry to be given priority• status for financing by banks. Notifying the revised Modified Special• Incentive Package Scheme (MSIPS) and extending it beyond 26 July, 2015 for atleast 2 years In recent years, China has been losing its appeal as a manufacturing hub because of issues related to wages and finance costs and investors are seeking alternative investment destinations.Also, globally manufacturers are looking at locating manufacturing closer to the large markets. India can be positioned as a premier electronics system design and manufacturing (ESDM) hub. n How would you describe the current status of the leather and footwear industry? The leather industry occupies a place of prominence in the Indian economy in view of its huge consumption potential with a population base of 125 crore, 20 per cent CAGR foreseen for the next two decades, massive potential for employment and substantial export earnings. The Indian leather industry is now infused with new enthusiasm - thanks to the Prime Minister’s ‘Make in India’ programme under which it has been declared a focused sector. Under the leather sector, footwear segment is very significant, rather, it is the engine of growth for the entire Indian leather industry. India is the second largest global producer of footwear after China. The Indian footwear industry has a potential to create about 20 lakh new blue collar jobs, attract investments of Rs. 10,000 crore and increase excise revenue by Rs. 400 crore p.a. (even with reduced rates, owing to increased compliance, higher production and footwear industry. Footwear is subject to among the highest excise duty and other taxes  across any product category (about 26-28 per cent of ex-factory price).While the excise duty rate has been reduced to 6 per cent for just one of the segment i.e. leather footwear with MRP exceeding Rs. 1,000 per pair (in the Union Budget for 2014-15), the industry is of the view that the limited concession introduced will not subserve the objective of promoting manufacturing in the domestic sector, attracting investments, generating employment and ensuring growth of the industry as most footwear (including all leather footwear) will continue to be charged an exorbitant excise duty rate. This is due to the fact that non-leather footwear in India and globally also constitutes 80-90 per cent of the footwear market. CII has requested the Government to review the excise duty on footwear and extend the rationalized rate of 6 per cent to all kinds of footwear without any artificial MRP ceiling. Issue of abatement from 35 per cent to 25 per cent needs to be rolled back immediately to avoid further damage to the domestic manufacturing sector. Making India A Footwear Manufacturing Hub Adesh Gupta Chairman, CII National Committee on Leather and Chief Executive Officer, Liberty Shoes Limited integration of unorganized into organized sector) over the next 4 years. What support would you seek from the Government on behalf of the leather and footwear Industry? To realise the ‘Make in India’ vision for the sector, urgent attention is required towards addressing some pressing issues impacting the competitiveness of the leather and
  15. 15. 15policy watch CEOSpeak What is the vision of the cement industry in India? The cement industry is a classic example of how license de-control helped its complete transformation. The industry was partially de-controlled in 1982, and fully decontrolled in 1989. While the industry took almost 84 years to touch 100 million tonnes capacity, the next 100 million tonnes capacity was added in only 10 years, and the next 100 million tonnes took only 4 years. Such has been the growth of the industry that today it claims the 2nd spot in the world in terms of total capacity.The transformation in the industry has also been in terms of technological evolution. Today, Indian plants are some of the most technologically advanced globally. India will soon become a USD 3 trillion etc. are the way forward. The Government is also focused on streamlining policies (coal block auctions, automatic renewals of mining leases, etc). In addition, State Governments are attracting investments from companies, both domestic and foreign. All these initiatives will definitely help bridge the demand-supply gap. What is the export and growth potential of the industry? The Indian cement sector is largely localized. More than 97 per cent production is used domestically. Largely, coastal plants (those lying around Gujarat coast South India) export cement and clinker to neighboring countries (Sri Lanka, Bangladesh, Nepal) and to Gulf countries. However, the quantum of export is very limited.A couple of key factors Cost Efficiency And Sustainability Will Pave The Way For The Cement Industry Ajay Kapur Chairman, CII Cement Industry Division and MD CEO, Ambuja Cements Ltd economy, and cement will be an integral part of this growth. Recent initiatives such as ‘Make in India’, ‘Smart Cities’, ‘Housing for All’, concrete roads, rail and freight corridors, To project India's manufacturing capabilities in the footwear and leather products sector both in domestic and international markets, the CII National Committee on Leather has advocated initiatives like the formation of a Domestic Council exclusively for footwear and leather products, developing a framework for quality benchmarking and certification to enable creating an Indian brand, creating an Indian leather mark and improving the  image of the sector in capital and stock markets, with banks and financial institutions. The CII National Committee on Leather has also been highlighting the issue of high taxes that are further marring the growth of domestic leather and footwear manufacturing and giving an undue advantage to cheap imports from South Asian countries such as China, Vietnam, etc. India suffers a cost disadvantage in footwear manufacture vis- à-vis China to the tune of 32-34 per cent. Indian companies today are relying heavily on imports to leverage the disadvantage suffered by India in manufacturing, which has led to a surge of imports from China in the last few years to the tune of 200 million pairs / year alone. Further, footwear companies are increasingly preferring to manufacture in China and import into India, instead of setting up new capacities in India. This is in contrast to the very tenets of the ‘Make in India’ campaign which focuses on making India a manufacturing hub. Countering the influx of Chinese goods into India would require forging a free-trade pact with USA, UK, EU, Middle East under which duty barriers are brought down in those countries so that quality goods that are price-competitive could find free entry in both countries. What are you recommendations for leveraging the opportunities for the sector and boosting exports from the sector? While the Government has already defined various short to medium term initiatives under ‘Make in India’ to boost the sector there is further need for a more purposeful and useful policy intervention on several fronts including provision of raw materials at affordable cost, flexible labour policy and an enabling environment for hassle-free conduct of trade, both in the domestic and overseas markets among others. As the country holds a minuscule share of 3.05 per cent in the global leather trade of USD 160 billion, more needs to be done by the authorities to enable the industry leave its footprints across the global market by process and product improvements. More attention is required to augment raw material base through modernization and technology upgradation of leather units, addressing ecological concerns, human resource development, bolstering traditional leather artisans and infrastructure constraints and putting in place institutional facilities. n Source: Olaf Speiershutterstock.com
  16. 16. 16 policy watch CEOSpeak limit the export potential. Firstly, the logistics costs involved in exporting cement / clinker beyond a certain distance make exports unviable. Secondly, the countries mentioned above, which have seen exports from India have had new capacities in the recent past. This has reduced their dependence on India, and further limited the export potential. What are the issues and challenges that are hampering growth? What role can the Government play in alleviating some of the challenges? The cement sector is poised for a high growth era. However, there are some issues which need to be addressed so that the industry can achieve the expected growth. One of the major issues faced is low demand. The Government’s initiatives will generate substantial cement demand required for building the necessary infrastructure. In addition, all these measures will also help increase the country’s GDP, which will increase disposable incomes of people and generate additional demand potential from individuals.To add to this are high taxes as compared to other sectors. For example, both cement and steel are an integral part of the infrastructure sector, but steel attracts a low VAT rate of 4 per cent, as compared to the 12-15 per cent for cement. Availability of rakes for transportation of cement and clinker is another issue the industry is facing. Cement industry is the 2nd largest revenue source for Railways. Despite this, rake availability is always an issue. The Government is taking steps to make rail operations more efficient and resolve the challenges, which is a welcome step. However, there is an urgent need to increase rake availability immediately. Authorities should also consider mechanization of railway sidings, yards and dumps. They should relook the entire process to remove inefficiencies and provide for faster turnaround.As railways are a more environmentally friendly mode of transport than roads, the authorities should encourage higher railway usage. What are the recommendations to the Government on behalf of the cement sector? Indian cement industry being one of the major player in the global market faces some issues which need to be addressed for making it more sustainable and competitive. Following are few of the key recommendations: Inclusion of Cement Kiln Co-Processing• Technology under the Draft Hazardous Waste Management (HWM) Rules 2015. This simple step would take the Indian cement industry on the course to achieving the ‘Thermal Substitution Rate’ closer to the target of 5 per cent by 2017 rather than the current rate of just 1 per cent. Relaxation of current emission norms.• Rationalization of tax structures for cement• and other raw materials for making the cement industry more cost competitive. Improve the quality of present logistics• infrastructure. Strengthen the railway infrastructure in key cement-producing and consuming belts. Ensure wagon availability by increasing the supply of wagons and modernizing the railway sidings, taking industry requirements into account. Establish faster linkage of new plants and mines to state and national highways to facilitate speedier movement of materials and product. Expedite clearance of stalled cement• projects where investments have already been made. Help industry remove bottleneck input• resources to enable growth. Streamline land acquisition process for greenfield expansion. Reduce minimum no-objection requirements to ensure smooth approval. Ease the supply of limestone and• gypsum. Fast track allocation of new limestone mining licenses and renew existing licenses by streamlining the administrative procedures. Support the industry’s efforts in increasing• the adoption of alternate fuels in cement manufacturing. Develop robust guidelines to shorten the permitting process and set up minimum pre-qualification criteria for cement plants utilizing waste considering environment, safety and cement quality parameters. Allow free import and use of tyre waste• as an alternate fuel till the market gets developed. How can the ‘Make in India’ campaign contribute to the cement industry in India? The ‘Make in India’ campaign consolidates all efforts on enhancing India’s business potential. Specifically for the cement sector, the campaign is very beneficial. Firstly, establishment of manufacturing hubs as well as Special Economic Zones (SEZs) to promote manufacturing activity ensures higher consumption of cement required to build the infrastructure (buildings, roads, warehouses, etc.). The campaign also lays thrust on skill development and increasing the skill capital of India. By promoting development of technical training institutes, the ‘Make in India’ campaign benefits the cement sector, among the other sectors, by providing skilled manpower in adequate numbers. What is the way forward? The industry is currently seeing a slight slowdown in demand.The immediate task at hand will be to ensure sustainable demand generation. It will be imperative to identify demand pockets and work on servicing these in the most optimum manner. With the Government focusing significantly on infrastructure development, the cement consumption is bound to increase. With the country’s growing economic potential, cement consumption from the retail segment (e.g. individual home builders), which form a large chunk of the cement demand today, will also see a spike. Also, the industry should continue towards cost efficiency and sustainability. We should promote use of alternative fuels, industry rejects, as well as increase proportion of blended cements.These measures will help the cement industry (which is inherently carbon intensive), to reduce its carbon footprint. How can the CII Cement Industry Division promote the cement industry? The CII Cement Industry Division is an ideal platform for all cement industry stakeholders to interact on the various issues and resolve challenges by pooling together the combined expertise. CII’s understanding of the overall Indian industry as well as easy access to multiple stakeholders in the country becomes an important element in conveying the view points of the industry to various authorities and regulators. Bringing together the sector expertise onto one platform also ensures sharing of global best practices, as well as resolving certain challenges through adequate brainstorming. At the same time, by ensuring adequate interactions with other divisions of CII, there can be cross-pollination of knowledge across the various verticals of CII. The division can be an integral part of various Government initiatives in the areas of housing, infrastructure development, skill development, sustainability, and many more. n
  17. 17. 17policy watch CEOSpeak What is the present status and growth potential of the Indian transmission industry? The Indian power transmission industry has witnessed reasonable progress over the years. Planned generation capacity enhancements have led to the expansion of transmission network across India. However, the current transmission and distribution (TD) infrastructure in the country is highly inadequate/ imbalanced which manifests into massive growth prospects for the industry. Presently, in value terms, the size of the Indian TD industry is estimated at Rs. 1,10,000 to 1,20,000 crore. The industry is mature and caters not only to domestic demand but also international demand. Performance wise, while the overall electrical equipment industry has grown by 10 per cent YoY in FY 2015, transmission line industry in particular has witnessed a nominal decline of around 0.7 per cent. However, during the last 2 quarters of FY  2015, a pickup in growth was witnessed mainly backed by increase in orders from Power Grid Corporation of India Limited/ State Electricity Board (PGCIL/ SEBs). Thrust on overall infrastructure development by the Indian Government would also culminate into high growth prospects for this sector. Focused emphasis on development of solar energy, green energy corridors, inter and intra-state transmission lines, initiatives pertaining to strengthening of transmission and distribution system in the Northeastern region, doubling of existing capacities, refurbishment demand etc. entails additional transmission infrastructure development. In addition, the proposed development of smart cities is also expected to generate good opportunities for the industry. On ground level, we are also seeing a revival in stalled projects, a move necessary for expediting the growth of this sector. Globally also, demand from under-developed and developing nations as well as overall demand from developed countries is expected to ensure a long term positive outlook for the Indian transmission line players who are well placed and have the capacity to cater to increase in domestic as well as global demand. What are the factors affecting the growth motion? I would say progress is largely hampered due to difficulties in land acquisition and getting Right of Way (RoW) and forest clearances, approvals for which continue to be highly time consuming. Delay on account of this creates uncertainties, disrupts the targeted completion time of the projects and also leads to cost overruns. Another critical issue is that transmission line industry is not treated as part of infrastructure industry. Transmission lines being an important part of overall infrastructure development should be covered under the infrastructure sector and should be granted infrastructure industry status.The CII Transmission Line Division has taken up this issue with the Government and is proactively working with the Government for resolving the same. Other issues include funding constraints for RD, inadequate testing facilities and lack of enhanced Government support and incentives for exports. What is the way forward for the industry to overcome these challenges? Considering the huge funding requirements, emphasis on public private participation seems to be the apt route. The industry is quite enthusiastic with regard to the Public Private Partnership (PPP) mode. The PPP mode would also pave the way for faster development of new technology/ systems. Speaking of which, I would say companies in the Engineering, Procurement and Construction (EPC) space are also engaging and adapting newer construction technologies. Further, towards the development of the entire electrical equipment sector, the Ministry of Heavy Industries and Public Enterprises, in consultation with the industry and related bodies has already launched a compressive mission plan (2012-2022), which will pave the way for future development and enhance global competitiveness of this sector thereby Opportunities Unfolding In The Indian Power Transmission Space Vimal Kejriwal Chairman of CII Transmission Line Division and Managing Director CEO, KEC International Limited Source: Kagai19927shutterstock.com
  18. 18. 18 policy watch CEOSpeak ensuring achievement of its vision by the year 2022 which is to make India the country of choice for the production of electrical equipment and reach an output of USD 100 billion by balancing exports and imports. The CII Transmission Line Division is an ideal platform for all transmission industry stakeholders to interact on the various issues and resolve challenges by pooling together the combined expertise. CII, through its seminars and conferences, is promoting the mission of the Government to make India the choice of import destination. Going forward, for rapid development, there is a need for sustained, proactive and cohesive efforts by all the stakeholders in the industry including the Government. Steps have to be taken towards building on the strengths of the industry and enhancing exports. There is a need to focus on innovation, technology, RD, developing local talent, logistics management and cost competitiveness. Indian companies must benchmark themselves against global best practices being followed across processes. What support will the CII Transmission Line Division seek from the Government? CII would like to recommend the following to the Government to expedite the progress of the Indian transmission line industry: Remove procedural bottlenecks: First• there is a need to expedite and remove the execution and procedural bottlenecks for which strong Government intervention and support is required. Remedies like the Plug and Play model, creation of a special purpose vehicle which will seek all the approvals etc. are some of the ways which will boost the progress of this sector. Although the Government is taking steps, there is a need to address these issues more expeditiously. Support required on export front:• Indian electrical equipment and project management capabilities are accepted globally as credible and reliable. A large number of Indian companies have successfully executed projects in many underdeveloped, developing and developed nations. However, the overall electrical equipment industry’s share of exports to country’s total exports is marginal, accounting for about 1-1.5 per cent only. Hence, there is a need to enhance exports for which policy level and incentive level support is required from the Government. The Government of India should extend the support to domestic players as is enjoyed by our foreign competitors in their respective countries like China. Also, in the recently announced Foreign Trade Policy (year 2015‑20), the Government has done away with lot of benefits i.e. withdrawn incentive support which is needed in order to facilitate and expedite the growth of exports. Financial Support:Support is also required• towards funding for developmental and RD initiatives, manpower planning and skill upgradation for the transmission line industry. As there is a severe  shortage of skilled technical manpower, more dedicated programs and initiatives specifically pertaining to transmission line industry have to be designed and commenced jointly by the Government in conjunction with the industry and CII. n What is the present status and vision for the valves industry? The global valve industry is estimated to be around USD 60 billion and is expected to grow at a CAGR of 4.3 per cent between 2015 and 2019, whereas the Indian valve industry is around USD 2 billion and is expected to grow at 7.3 per cent during the same period. Currently we export to the tune of around USD 600 million, which is around 1.7 per cent of the global valve market and considering the huge potential for exports, Indian valve industry can aim to double the current level of exports, if not more. Buoyed by technology innovation in valve systems, the market is expected to witness a strong growth in the coming years. CII Valves Actuators Division’s vision is to achieve USD 4 billion by 2020. and working capital. It is a high labour intensive industry and provides employment opportunities across the value chain from raw material to commissioning and after sales service functions. It has the high potential to spur economic growth of the country. Indian valve manufacturers as well as global majors will have tremendous scope to manufacture engineered valves in India, by taking advantage of availability of quality foundries and technical skills available in our country. As mentioned earlier, current valve exports from India is only around 1.7 per cent, leaving a huge scope for increase in exports and profitable growth. How will Merchandise Exports from India Scheme (MEIS) of FTP (2015-20) enhance valves export? Indian Valves Industry: Going Global N V Venkatasubramanian Chairman, CII Valves Actuators Division and Chief Executive, LT Valves What is the investment and export potential of the industry? Today many of the global companies have already set up manufacturing facilities in India and many more are looking to set up. Valve industry is a capital intensive industry both for specialized capital equipment
  19. 19. 19policy watch CEOSpeak To partially offset the inherent infrastructural inefficiencies, MEIS scheme will definitely provide Indian valve manufacturers a level playing ground to compete with the global manufacturers and also help in promoting ’Make In India’. What are the barriers in the growth of the industry? Valve industry is labour intensive and our labour laws require urgent reforms so that we become competitive in the global market. Being a highly fragmented industry, not much work has been done in core RD. Investment in research and development needs to be improved substantially to bring in latest technology. Inability to attract and retain the best talent, especially in foundries is a big challenge. Dependable supply of high quality power, especially to foundries would enable manufacturers to meet the commitments on deliveries made to the international customers. Infrastructure constraints in terms of transport efficiencies as well as procedural delays impact the overall ability of this industry to compete in the global market. What support will the industry seek from the Government? • Innovation: Set up a USD 100 million fund for valve innovation and research. • Incentives: Forge shops for valves, promote setting up supplier base for large valve forgings by giving incentives, so that Indian valve manufacturers can compete on level playing ground with MNCs. • Brand building: To promote Indian valve industries’ strengths, there is a need to conduct powerful campaigns on a global scale. • FTAs: Ensure FTAs benefit the Indian valves industry. • Modernization and Technology Upgradation for the valve industry: Establish a scheme similar to the Technological Upgradation Fund Scheme (TUFS) for the textiles industry. • Taxation: Expedite implementation of GST and correct anomalies related to inverted duty structure. • Ease Labor Laws: Introduce reforms in labour laws for ‘ease of manufacturing’ in India. • Skill development: Set up new ITIs, vocational training institutes and diploma institutes. Encourage new private institutions upto the level of deemed universities. • EXIM Bank sponsored projects: In overseas projects sponsored by EXIM Bank of India, there should be conditions that the Indian manufacturers and suppliers should be given preference for the equipment used in the project. What is the way forward for the industry? Valve industry should focus on value- addition to customers through continuous innovation and breakthrough technology. Consistent quality benchmarking with global majors and adherence to commitments are of paramount importance in this industry. Industry should focus on improving the operational efficiencies in terms of productivity, quality, delivery and reliability which are comparable with global best practices to be competitive in the global markets. What role has the CII Valves and Actuator division played in promoting this sector? On the policy advocacy front, CII Valves and Actuator division has been constantly engaging with the Government and taking up the issues impacting the sector. In order to promote exports, CII pursued with Directorate General of Foreign Trade (DGFT) / Department of Heavy Industries (DHI) / Department of Industrial Policy and Promotion (DIPP) etc for Focus Scheme Product status for valves and has successfully convinced the Government to accord FPS (MEIS) status for valves. Indian standards for valves are outdated. In order to be competent in the global market and gain market share, there is a need to revise the national standards, aligning them globally. The division has also taken up the issue of standards for valve industry with BIS, to revise the standards and specifications for valves. Also, through its various activities i.e. conferences, exposition, interactive sessions, meetings etc., CII Valves and Actuators division provides a platform for its members to showcase their capability, avail networking opportunities with other stakeholders and have a dialogue with the Government. n Source: Photo smileshutterstock.com
  20. 20. 20 policy watch Policy Barometer Key CII Recommendations For The Manufacturing Sector Issues Recommendations Create demand by fast- tracking stalled projects to revive capex cycle Short-term Expedite regulatory clearances for stalled projects to kick-start the capex cycle.• Regular monitoring of clearances and approvals so that they are implemented as quickly as• possible. Address issues which come in the way of obtaining last mile State-level project• permissions. Medium-term Bids should be offered after obtaining sovereign clearances.• FDI should be especially invited to these large projects through intensive marketing and• roadshows. Ensure timely completion of big-ticket projects Short-term Identify and implement 100 must-do infrastructure projects such as high-speed rail, dedicated• freight corridor, Delhi Mumbai Industrial Corridor, Smart Cities etc which are vital for providing a fillip to the manufacturing sector. Review the progress of key infrastructure projects in the railway, road, power, coal, petroleum,• and renewable energy sectors. Create a coordinating body comprising Centre and State Government officials to ensure that• big infrastructure projects like the Delhi Mumbai Industrial Corridor, dedicated freight corridor projects and National Investment Manufacturing Zones (NIMZ) are completed on time. Medium-term Aim to achieve targets in key infrastructure sectors such as coal, power, roads, railways and• ports. This will act as a stimulus to private investments and help achieve faster growth. Incentivize investments Short-term Lower the interest rates which would make more projects financially viable and revive• investments in critical sectors including manufacturing. Medium-term Consider withdrawal of minimum alternate tax (MAT) and Dividend Distribution Tax (DDT) and restore• the SEZ policy to its original form to attract domestic and foreign investment in the SEZ. Withdraw surcharge on domestic companies. While the additional surcharges introduced in• the budget last year were to be limited to FY14, surcharge has been further increased by 2 per cent in the current budget if the total income of domestic companies exceeds Rs. 10 crore. It is suggested to withdraw surcharge on domestic companies. Allow 150 per cent deduction of capital expenditure for infrastructure industries like steel etc.• Deduction u/s 32AC. Keeping in view the intention of the Government to promote investment• in plant and machinery, benefit of investment allowance should be allowed if the new plant and machinery has been acquired and installed during the period beginning from 1 April, 2013 and ending on 31 March, 2017. Rationalize mining taxes and implement DMF with step wise approach.•
  21. 21. 21policy watch Policy Barometer Issues Recommendations Enabling business friendly environment for attracting investments Short-term Effective implementation of single window clearance system for approvals relating to starting• a new business. Stipulate time-bound approvals by introducing ‘deemed approvals’ in case of delays beyond• prescribed limit. Facilitate sharing of best practices amongst States in four areas: land acquisition; starting a• new business; dealing with construction permits; contract enforcement and taxation. Take steps to lower transaction costs for exports.• Medium-term Implement GST.• Apart from GST, custom duty also needs to be rationalized to correct inverted duty structure• that promote imports at the cost of domestic manufacturing. Early passage of LARR (Amendment) Bill, 2015.• Contract Enforcement: Implement electronic case filing system; implementation of e-courts;• creation of alternate dispute resolution system, etc. Sectoral thrust to boost manufacturing National policies for strategic sectors must be devised under the ‘Make In India’ campaign,• such as textiles, chemicals and electronics, along with comprehensive agendas for making India a manufacturing hub for the global markets. Provide special focus to sectors which are of national strategic importance and labour• intensive in nature such as defence, automobiles, chemicals, electronics, textiles, capital goods, steel, etc. Automobiles: Undertake fleet modernization, modernize urban transport across cities and• incentivize truck purchase for a boost to automotives; introduce ‘Scrappage Policy’ for commercial vehicles. Chemicals: Develop standards for key focus areas like flame retardants;  increase attractiveness• of Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs); improve chemical logistics; explore alternate feedstock options such as coal gasification, syngas, pet coke, etc; set up a fund for chemical innovation; build positive image for the industry through effective campaigns; ensure FTAs benefit the industry; establish a scheme similar to the Technological Upgradation Fund Scheme (TUFS) for textiles; examine and correct anomalies related to inverted duty structure. Textiles: Establish textiles clusters and build the entire supply chain in these clusters to• promote competitiveness of the textiles industry; amend relevant statutes of labour laws  to allow flexibility in working hours, women to work in night shifts, overtime for workers to work (if willing) beyond current cap of 50 hours in a calendar quarter, fixed term employment through an administrative order; address duty disadvantage vis-à-vis countries like Bangladesh, Vietnam, Cambodia, Pakistan, Sri Lanka etc.; expedite negotiations with EU on FTA; formulate standards for technical textiles. Capital Goods: Review FTAs on a continuous basis; remove all inverted duty structures;• preference to domestic capital goods companies for mega infrastructure projects; introduce a strong procurement policy; review PSE contract conditions and introduce purchase preference policy and regulate import of low-quality second-hand machinery. Steel: Seek preservation and growth of market share by strategically excluding select steel• tariff lines from the RCEP negotiation; promote steel usage by energizing bodies like INSDAG; undertake/expedite mega infrastructure projects predominantly in railways. CII also called specifically for a National Steel Policy with focus on availability of ores and coal, a reasonable tariff regime, long-term financing and skill development. 
  22. 22. 22 policy watch Policy Barometer Issues Recommendations Mining: Undertake progressive steps for implementation of Mines and Minerals Development• and Regulation (MMDR) at State-level to overcome delays in extension of leases. Exploration by private sector can be facilitated through an Exploration Fund for scarce minerals. Public Sector Enterprises Short-term The board of Public Sector Enterprises (PSEs) should have all functional and independent• directors for efficient functioning and maximum utilization of the powers of board. Orders for Chairman cum Managing Director (CMDs) and Functional Directors to be issued before the superannuation of the present incumbents so that there is a continuity. Medium-term Steps to be taken to enhance autonomy and raise competitiveness of PSEs by implementing• the recommendations of the Roongta Panel report on reforms in Central Public Sector Enterprises (CPSEs). Autonomy to be given to the profitable PSEs to decide on utilization of the surplus funds• with them for maximizing profit on investment. Boost exports Short-term Reduce interest rates and ease constraints on supply of inputs such as power, raw material,• land and infrastructure so that the borrowed capital is able to create value in the system. Require reworking of credit costs and cost effective credit options due to steep decline of• credit off-take to MSMEs. Reintroduce the interest subvention scheme to make exports more competitive.• Reinstate export credit refinance.• Re-consideration of the recommendation of RBI’s Padmanabhan Committee report on• exports. Create a fund to upgrade existing products and services standards, specifically for SME• companies. Introduction of Export Development Fund for aggressive marketing.• Make industry aware of participation in global value chain. Leverage benefits out of FTAs• and mega-regionals by strategically negotiating tariff lines where we want access to global supply chains. Simultaneously new trade agreements should be drafted taking into account the interests of the domestic manufacturer.       To increase export revenue, India has to move towards becoming an expert in specialised• high value production at a lower cost of production across products. Give boost to the labor intensive export oriented sectors in view of high employment• opportunities in such sectors coupled with the fact that many Asian countries particularly China is gradually exiting from such sectors. There is a need for focus on the skilling component of these sectors. Medium to Long-term Lower transaction costs for exports. Drastic improvement in road and railways connectivity to• ports should be a top priority for improving India’s export competitiveness. Develop a capital market for SMEs to raise capital, as sometimes, the risk profile of SME• companies becomes the barrier to receive credit from conventional banking system. Focus more on standards and enhancing their product competitiveness in the global market.• Develop strong standards regime in India as non-tariff based Technical Barrier to Trade (TBT) will define the flow of goods and services across boundaries. Develop appropriate strategies to tap the new and growing markets - Africa, CIS nations,• SAARC nations and Latin America.
  23. 23. 23policy watch Policy Barometer Issues Recommendations Provide additional support to the export oriented sectors so that they can scale up production• in a competitive manner to cater to the overseas market. Competitiveness at firm level must be strengthened while creating awareness among• 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 centres and shared services. Promote RD and innovation Short-term Continue RD incentives and redefine private sector’s RD to include translation of research• outputs to commercial production including design and procurement of IP under 35 (2AA) and (2AB) of Income Tax Act. Reintroduce Section 80-IB (8A) of Income Tax Act, to encourage setting up ’RD Firms‘ and• ’Design Firms’. Medium-term Ease accreditation of private sector’s ’in-house RD‘ by a professional accreditation agency• or self-declaration. Consider ’Intellectual Property‘ as collateral for the finance industry (by banks and financial• institutions) and strengthen Intellectual Property Enforcement. Rationalize public procurement system for products developed by Indian MSME.• Scale up successful PPP vehicles that are strengthening India’s knowledge economy• ecosystem. Enable deeper penetration of information technology tools in India. Facilitate technological• alliances between Indian SMEs and global companies.
  24. 24. 24 policy watch CII Ascon Survey Green Shoots of Recovery Visible Production Trends Improvements in the domestic macro-economic environment along with the steps taken by the Government towards expeditious project clearances, simplification of procedures, removal of critical constraints holding up use of land and natural resources by passing of the MMDR Bill as well as the ‘Make in India’ initiative have contributed in shaping this mild recovery. Of the 93 sectors surveyed, The CII ASCON Industry Survey for Q1 (April-June) FY 2016 reveals a reversal from the earlier trend of slowing growth, with indications of a recovery taking shape in the economy, albeit a slow one. Comparison of Industry Performance (Q1 FY 2016 over Q1 FY 2015) Key Findings of the CII ASCON Survey April-June FY 2016 • The share of sectors that have recorded excellent growth of more than 20 per cent in Q1 FY 2016 has surged up to 16.1 per cent (15 out of 93 respondents) as against 7.1 per cent (8 out of 112) recorded in the year ago period. This is a clear indication of improvement over the last year. • While the share of sectors witnessing a high growth rate of 10 to 20 per cent has reduced significantly to 9.7 per cent (7 out of 93) in Q1 FY 2016 from 14.3 per cent (16 out of 112) during the corresponding period a year ago, the share of sectors reporting moderate growth has declined marginally to 51.7 per cent (47 out of 93) as compared to 51.8 per cent in the year ago period.
  25. 25. 25policy watch CII Ascon Survey • At the same time, the number of sectors recording negative growth has fallen from 26.9 per cent (30 out of 112) in Q1 FY 2015 to 23.6 per cent (21 out of 93) in Q1 FY 2016. • A further analysis of the sectors at the aggregated level with industry being broadly classified into broad segments in terms of performance of production viz excellent and high (above 10 per cent ) on one hand and moderate or negative (below 10 per cent) on the other, reaffirms our perception that there are some improvements on the ground. • This is evident from the fact that the number of sectors showing excellent and high growth has shown some improvement in Q1 FY 2016 registering 25.7 per cent, marginally up from 21.4 per cent in Q1 FY 2015. • This means that only about 25 per cent of the sectors surveyed have reported the output growth of above 10 per cent and 75.3 per cent have grown at less than 10 per cent as compared to 78.6 per cent in the corresponding quarter in the previous year. Concerns On the issues and concerns impacting growth, margin pressure from stiff competition, competition from imports, shortage of power, high regulatory burden, lack of domestic and export demand, shortage of skilled labour and talent and high tax burden have been cited as the most important constraints by more than 50 per cent of the respondents. Industrial relations, transport infrastructure bottlenecks, cost and availability of finance have been quoted as moderately important factors impeding growth. Outlook The Survey’s respondents have expressed their optimism in a further improvement in the near-term growth outlook helped by continued policy actions, implementation and enhanced business and consumer confidence. However, a sustainable recovery would be conditional on improvement in domestic demand and investment revival. Industry Suggestions Respondents have stressed on the need for reviving investments in the economy to boost demand. The Survey has recommended an array of policy measures to boost growth. Some such steps include reduction in interest rates, speedy implementation of infrastructural projects and addressing supply-side constraints on a variety of fronts including infrastructure, energy, agriculture and labour. Progress on reforms such as the GST Bill and LARR (Amendment) Bill, 2015 will impart greater certainty to investors on the policy front. Further, a proactive role by the Government towards creation of employment opportunities in the non-farm segment of the rural sector through food processing, construction etc. enhancing of capital spending by the States, given that they are now recipients of higher resources from the Centre, would support in the creation of demand. Such a mix of policies, if implemented, would go a long way to revive investor sentiment which in turn would reignite growth in industry and the economy. Methodology The Survey tracks the growth of different industrial and services sectors of the economy and is based on the feedback collected from industry associations affiliated to CII. The industry associations encompass wide range of sectors comprising of small, medium and large enterprises. In most of the cases, these account for approximately 70 per cent of the total industry output in the respective sectors. The Survey was conducted from mid-June till end of July 2015 and tracks the estimated growth trends in terms of Production, Sales and Exports for Q1 FY 2016. Responses have been segregated in the following four broad categories: (i) ‘Excellent’ (growth in excess of 20 per cent), (ii) ‘High’ (growth in the range of 10-20 per cent), (iii) ‘Moderate’ (growth in the range of 0-10 per cent) and (iv) ‘Negative’ (growth less than zero per cent).