ET 500: Will the 'Make in India' dream turn into reality?

Since the Modi government came to power in 2014, FDI flows have surged substantially. Sectors like auto, aerospace and electronics have begun to attract foreign investments. But critical industries like steel, power and capital goods which are a part of 'Make in India' are languishing.

Below, we list the advantages that India has over others and the challenges that need immediate attention.

WHAT WORKS IN FAVOUR

China losing cost competitiveness Success of 'Make in India' lies in getting a pie of China's share. China accounts for almost one-fourth of the global manufacturing, while India accounts for only 2%. Containing labour cost would be difficult for China.

Protection of Intellectual Property

In a survey by AMR research, a US-based research company, the biggest risk with manufacturing in China is the infringement of intellectual property, which is not the case with India, which has strong IP laws.

Currency

The rupee has weakened against the dollar while the Chinese yuan has appreciated.

Growth opportunity

India is expected to grow at 7.5% to 8%, says the World Bank, higher than Thailand and Indonesia, which are expected to grow at 4-5.5%. China's growth may slip below 7%. Toyota and Siemens recently told ET India remains their most sought after markets.

WHAT CAN GO AGAINST

Bumbling Bureaucracy

The biggest fear of investors, according to the BCG survey, would be the inability of bureaucracy to implement policies appropriately.

Infrastructure gaps

Average turnaround time for ships on Indian ports is over a week, while it is less than two days in China, South Korea and Singapore.

Labour Laws

Udayant Malhoutra, CEO of Dynamatic Technologies - often described as a 'Make in India' company - said, "There are rules that protect poor workers and that all should be treated equally. It cannot be that a useless worker has to be kept and a good one is sitting outside."

Complex tax regime

A company has to deal with 32 types of taxes and 240 tax filings. Tax assessment and appeals take 7 to 8 years against 1-1½ years in most other countries. But India scores on lower tax on profits which will dip to 25% in the next 5 years from 30%, as against 35-40% by most countries.

High Funding cost

Interest rates are in the range of 10- 13% while in China it is 3-4%.