India is now the most competitive tax structure for new manufacturing among MITI-V countries.

Chandranath Dey, Sr. Director, Head - Industrial Operations Business Development & Industrial Consulting, JLL

JLL & Invest India has brought out a report in the form of a whitepaper titled, 'Great Places for Manufacturing in India,' perhaps the only report that drives an investor through the entire investment route to understand the advantages of India, find out which location in India should they consider, what all are the incentives available and how to ground the investments in the country. The report tries to answer three most important questions for any manufacturing investor -Why Make in India is a great proposition?  What is the India Advantage? Where should you be in India to ride its growth story.  Agith G Antony in an exclusive interview with Chandranath Dey, Sr. Director, Head - Industrial Operations, Business Development & Industrial Consulting, JLL, digs out the details.

How do you envision India as the 'engine for global manufacturing' and how matured / developed the entire manufacturing eco-system in India? 

The current pandemic has elevated the importance of supply chain risk mitigation, with a major Covid-19 risks perception survey for the World Economic Forum highlighting a protracted disruption to global supply chains as one of the most likely 'fallouts' for the world.

As a result, building greater supply chain resilience will become an increasing area of focus for companies globally. This will likely result in some reconfiguration of supply chains, including changes in the location of industrial and distribution facilities. The most basic rule is to avoid manufacturing or sourcing everything from one location or from one company. This is not simply about reducing reliance on China or any other single country, but also evaluating the upstream sources to lessen the risk of disruption. A shift from China to Southeast Asia, India or Mexico for example - often referred to 'China + 1' or 'China + 2' - will require companies to re-evaluate their domestic distribution networks to ensure they are aligned. In some cases, taking a regional approach may be appropriate, with goods sourced regionally to supply demand in the same region - that's what we call 'Regionalization' of supply chain.

In this 'Regionalisation' battle, all major countries will fight to get their fair share. The table below gives an idea on some of major attributes that can be considered.

India ranks very high on the list in the 'regionalization' battle and can come out winners in near to medium term given the following India Advantages;

Advantage India

Economy & EoDB

-  GDP of India has expanded by 2.57 times from 2004-05 to 2018-19

-  India EoDB improvement - Jumped 79 positions to 63 in 2019 from 142 in 2015

-  Last five years accounted for over half of the FDI received by India since the liberalization era of early 90s, propelling India to top 3 Greenfield FDI destinations.

-  India ranked amongst the top 10 recipients of overseas investments in 2019, attracting $49 billion in inflows - 16% increase over the previous year

Consumption Powerhouse

-  With 18% of world population, India is among the largest consumer market in the world. By 2030, India will be 3rd largest (currently 6th largest) consumers of the world with US$ 6 Tn. consumption expenditure

Infrastructure

-  World's 2nd largest network of roads & 4th largest rail network

-  7,500 Kms of coastline with 200+ ports in India for EXIM trade.

-  USD 1.4 tn investment in infrastructure in next 5 years - equivalent to total GDP of Indonesia and Thailand combined (2018)

Labour Force

-  With the median age of 29 in 2020, India entered the 37-year period of demographic dividend in 2018. India's working age population is anticipated to expand to almost 1/5th of the global labour force within the next 10 years.

-  Future ready skill force - 14,602 Industrial Training Institutes (ITI) in India.

-  Highest science and engineering graduates in the world - 8 Mn students enrolled in science, technology & engineering

Established Sectoral Dominance

-  Natural Resources: India is home to world's 3rd largest iron ore reserves and world's largest copper and thorium reserves

-  Electronics - 2ndlargest mobile handset manufacturing nation in the world.

-  R&D - Home to 1,140+ R&D centers for MNC (Brain capital of the world)

-  Food Processing - Largest producer of milk, vegetables and fruits in the world. Potential to be the food processing hub of the world.

-  Chemical - India is 3rd largest producer of chemicals in Asia.

-  Automobile - India is the largest manufactures (by volume) of tractors, 3 wheelers and 2 wheelers in the world. 4th largest car manufacturer in the world and 2nd largest bus manufactures globally.

-  Pharma: 1st / largest vaccine producer and largest producers of generic medicines globally.  3rd  largest pharma industry by volume in world

JLL has recently brought out an in-depth report on 'Great Places in Manufacturing in India.' Could you please brief us on the objective of report and how impactful is its findings?

India stands at the pedestal of a new growth curve of rapid industrialisation, driven by technological prowess and inventive disruptions. It today hosts the world's third largest start-up ecosystem and a digital revolution that is powered and driven by government initiatives percolating to every level of the nation's growth story. JLL & Invest India joint venture in the form of a whitepaper titled, “Great Places for Manufacturing in India” is 1st of its kind of investor education kit that tries to answer three most important questions for any manufacturing investor -Why Make in India is a great proposition? What is the India Advantage? Where should you be in India to ride its growth story? This report is perhaps the only report that drives an investor through the entire investment route to understand the advantages of India, find out which location in India should they consider, what all are the incentives available and how to ground the investments in the country.

This is the first in the planned series, which shall be subsequently expanded to include other established and emerging industrial clusters, sectoral performance of India and hubs for high-priority sectors are going to be included in future editions.

The study has showcased nine geographies as best suited for becoming the hub of manufacturing for different verticals. What were the major factors considered while opting for these geographies, and also brief us on the strength and competencies of these hubs? 

This report is a compilation of facts, qualitative trends and analysis of information collected through surveys and interactions with multiple stakeholders active in the industrial ecosystem of India. Competitive locations were identified through trends analysis of enquiries by existing and potential investors pan-India, and interviews with supply-side entities dealing in development and promotion of industrial destinations in India.

An evaluation of identified locations was undertaken in a year-long assessment on multiple aspects such as business environment, human resources, infrastructure availability, social factors and manufacturing ecosystem. Detailed feedback was collected from relevant departments of identified state governments such as Industries Department, Industrial Development Corporations and the Investment Promotion Agencies to understand the key industrial trends in the State, along with the highlights of recent industrial activity, focus areas, developmental vision, key initiatives etc. Additionally, critical evaluation of locations was carried out basis investor experiences and feedback of various multi-nationals operational in these locations.

What are the major constraints in fully developing these hubs as very effective zones - in terms of infrastructure, availability of skilled workforce, investment, mobility etc.?

The JLL & Invest India joint venture has evaluated 44 industrial zones/clusters in the country & done detailed and robust evaluation on a multi-criteria analysis platform including but not limited to business environment, human resources, infrastructure availability, social factors, manufacturing ecosystem and others. Additionally physical surveys and interactions with manufacturing unit and several other stakeholders were done to understand the ground scenario to arrive at the list of 9 most performing and plausible manufacturing clusters. Each cluster has its strengths in with certain industrial sectors which can be harnessed for future growth.

What are the major reforms that need to be looked into on a war footing that may catalyze the growth of these centers as major hubs of manufacturing?

Government of India has brought in several welcome changes in policies over the last 6-9 months just to provide more transparency and competitiveness. The special mention of reduction of Corporate Tax rates for new manufacturing units operationalising before 31st Mar, 2023. At 17.16%, India is now the most competitive tax structure for new manufacturing among MITI-V countries (Malaysia, Indonesia, Thailand, India and Vietnam).

Government of India has been very pro-active in understanding the requirement of policy support in boosting the manufacturing and supply chain advantage of India. More importantly, the policy changes that are being brought in now are industry friendly as these are being discussed with industry players and various stakeholders to understand the lacunae and bridging the gaps. Deeper look into some of the policy changes brought in only since March, 2020, will give a fair idea.

Some of the Major Policy Changes Brought in India since March 2020.

How important is the role of adoption of digital platforms and advanced manufacturing technologies? How does the scenario look in these aspects? 

India is on route to propagating radical digitisation to impel economic inclusiveness and social transformation, through initiatives like Digital India. India is now readying for an era of increased digitisation, heralding the advent of Industry 4.0, powered by new age technologies such the Internet of Things, Artificial Intelligence, and Robotics. Some of the key examples of India's technological advancements, include;

-  With 600 million internet users in India, the country has one of the fastest growing 'Internet penetration' in the world - 44 times growth in last 5 years (2015-19)

-  India is host to over 40% the world's Global In-house Centres (GICs).

-  3rd largest Tech Start-up Hub; after US and China

-  Number of Indian Unicorns could increase to 95-105 by 2025 (Source: Nasscom)

-  7thlargest patent filing office in the world as per WIPO.

As per your studies what can bring maximum investment in these areas? What are the prerequisites?

According to JLL analysis, the major clusters identified has majority of pre-requisites for setting up manufacturing units in the specific sectors highlighted. There are two major areas which needs improvements to bolster manufacturing investments;

- Land acquisitions &

- Approvals.

Easing out Land Acquisition Hurdles: Considering land in India is a state subject and land acquisition remains a concern in several locations due to local norms like 'ULCRA' in West Bengal or 'Zoning Restrictions' in Maharashtra which provides significant hindrances for acquisition, aggregation and conversion of land. However, there has been some conscious efforts from Central & State Governments to ease out acquisition hurdles i.e.

-  Identify land parcels with several central and state govt. authorities for the purpose of manufacturing

-  Creating GIS driven platform information for industrial parks and land options for evaluation

-  Fast Track and time bound zoning conversion of land for manufacturing purpose.

-  JLL also proposes Flex Manufacturing or Built Manufacturing Space, advantages of which include;

-  Built Factories on Rent - 22 Mn. sq. ft. ready- to- occupy built industrial space all the manufacturing clusters

-  Pre-constructed / Ready Infrastructure: 13 mts.+ height | 6 MT/sqm floor strength | Plinth - 1.2 Mts. | Provision for mounting  cranes

-  Built-to-Suit: As per tenant Specifications in 6 - 9 months

-  Higher CAPEX Savings: Conversion of CAPEX (land & building) to OPEX (rent) |Rented factories for lease tenure of 9 years and above

-  Ultra-fast Approvals: Pre-approved for most industrial investments |Non-polluting industries relaxed from several permissions.

Ease of Approvals: There are several state and central govt. agencies that provide Pre-EstablishmentApprovals &Pre-Operation Approvals. Lack of co-ordination of different departments and multiple documentary requirements historically has been creating delays in project approvals. Recent steps to each out approvals are however noteworthy;

-  Relax bureaucratic red tapes and overhaul the Ease of Doing Business hurdles by bringing in several initiatives including and not limited to fair assessment on a competitive environment of state's performance in attracting investments within stipulated time frame.

-  Several state coming out with automatic / deemed approval route eg. TS iPass - Telangana Govt. liable to approve based on self-disclosures within 30 days of submission or it is considered as deemed approved.

-  Central govt. working on 'Single Window Clearance System'

-  States offer permissions through online platforms with proper tracking mechanisms.

-  Several states coming up with cross functional teams to form Manufacturing Task Force to attract and expedite manufacturing investments in the country.

While India has made significant in improvements in Ease of Doing Business Jumping 79 positions to 63 in 2019 from 142 in 2015, as per World Bank ranking of 160+ countries, the recent steps in this regard, would hopefully reap further benefits.

How do you foresee the growth of the country as an inevitable destination for investment and her rise as a major manufacturing hub?

India sustained its position as one of the fastest growing large economies in the world. PE - VC (Private Equity - Venture Capital) investments into India have touched an all-time high within the first
8 months of 2019 with USD 36.7 bn, thereby breaking the previous record of USD 35.8 bn received in the entire year of 2018. Indian industrial real estate market has undergone a remarkable transformation since the last 5 years which is clearly visible from the Industrial Entrepreneur Memorandum (IEM - 2) or actual on-ground investment;

-   IEM implemented / Actual Implemented - USD $105 Bn (Apr, 2015 - Oct, 2019) more than doubled from USD $39 Bn (2010 - 2014)

While Make in India 1.0 (first five years - 2014 -19) has been a significant success, Make in India 2.0 (from 2020 - 2024) with the 'regionalization' agenda being a catalyst to the cause, extreme focus of the central & state governments for clearing all necessary hurdles and revamped endeavours is expected to be even a bigger success to make India a regional manufacturing hub of the world.

Hits: 313