Make in India cannot succeed without Skill India
THOUGHTFUL, is one word which can be used to describe budget 2017. Aftermath of demonetization and subsequent cash crunch in the system lead to slow down in the economy, manufacturing sector also slowed down, quarterly result of companies were affected (with few exceptions). Finance Minister has tried to curb demonetization effect in this budget.
Government has been supporting manufacturing sector via various schemes and tax concessions Budgets allocated by finance minister to PKVY, Skill India, Apprentice program and other various schemes testify importance of manufacturing sector. Another major decision which common man cheered about was zero income tax for income up-to Rs 3 lac and tax rate for lowest income slab reduced to 5%, a prudent move. This move will increase disposable income, which will lead to growth.
India’s manufacturing sector is stagnant in comparison to its flourishing services sector. Make in India aims to boost investment and industrial production to increase the GDP share of manufacturing from the current 16 percent to 25 percent. After the launch of Make in India, September 2014, over 250 investment proposals for electronics manufacturing have been received, totaling an investment of Rs1.26 lac crore.
As per economic survey of 2016-17 poor infrastructure is preventing India from being cost efficient manufacturing hub. The cost involved in moving goods from the factory to desired destination is more in India than other countries. Government has allocated 4 trillion INR for infrastructure projects in 2017-18 budgets. Spending on energy, rail and road infra will be increased considerably. Another flagship projects is SANKALP, Rs.4,000 crore has been allotted to SANKALP (Skill Acquisition and Knowledge Awareness for Livelihood Promotion), this program is aimed at providing market-relevant training to 3.5 crore youth across the country. Budgets allocated and step taken to strengthen these programs show that government understands the importance of these programs.
Ease of Doing Business
The process of applying for new business has been made online. Initial validity period of Industrial License has been increased to three years from two years. This will give enough time to licensees to procure land and obtain the necessary clearances/approvals from authorities. Form filling and other necessary procedure are put up online, thus reducing the time required. Reduction in paper work is making setting up new business quicker and easier. Innovation plays important role in growth of nation. Start-up India is all about youth - innovating products.
Government Support to Manufacturing Unit
Our corporate tax rate was close to 35%, which was the second highest in the world.
Reduction in corporate tax to 25 % (for companies with turnover up to 50 crore), 95 % of the companies will benefit from this decision. This will not only help for better tax compliance by companies, it will also make it easier for the tax department to administer appropriate tax collections as well as reduce tax litigation. More importantly companies will be able to expand their business at faster pace which in turn help in job creation.
Small manufacturing units were reluctant to enroll apprentice in their facility, because of cost factor. Under Apprentice Protsahan Yojana government has started supporting the manufacturing unit by reimbursing 50 % of stipend paid during first two years of training.
At least 10 million young people enter the country's workforce every year, but job creation in India has not kept pace with this influx, making rising unemployment a major challenge for the government. By 2020 India is expected to be the youngest population of the world, two third of the population will be eligible for work. In a recent employability skill test across domains only 38.12% were found employable, this percentage is very less compared to other developed and developing nations. Young generation should have the requisite skills, if we want foreign multi-national companies to set up manufacturing units in India. Make in India cannot succeed without Skill India.
This year government has allocated INR 17,273 crore towards Employment Generation, Skill, and Livelihood. Besides, the ministry will be setting up 100 India International Skills Centres that will conduct advanced courses in foreign languages to help youngsters prepare for jobs. Government understands that mere launching of schemes and allocating budget is not enough to generate awareness among youth about Skill India program, Government has roped in Sachin Tedulkar as face of Skill India. Government’s marketing efforts are also commendable in spreading Skill India program.
Divestment & Consolidation
It is not governments business to run a business, government must be facilitators in creating new opportunities. A lot of PSU were formed with intent to provide employment to large un-employed workforce. Some of the critical industries (like steel, energy) were bought under government control. Post liberalization, privation and globalization lot of companies invest in India, government must join hands with these private players. Divestment target for 2017-18 is 725 billion rupees. Divestment is a logical move ahead.
Most PSU's are into losses, government can sell small portion of these PSU's to private entities to meet its expenses in infrastructure, defense, education, healthcare sectors. And since the PSUs will be partly run by private parties, more professionalism can be infused in the management, thereby making them more profitable. Recent strategy adopted by government to control PSU is via consolidation, State Bank of India and merger with 5 associate banks is one such move. It is easier to govern one big unit instead of small units. Moving forward strategy should be to consolidate profit making PSU units.
The purpose of the Govt behind its divestment policy is to make the government departments to be more competitive, increase their productivity, increase knowledge transfer and increase the PPP in various departments. The government can focus more on core activities such as infrastructure, defense, education, healthcare, and law & order.
If we want GDP to grow at 8 %, manufacturing will have to play an important role. Governments support to manufacturing units, empowering & encouraging youth (including serious marketing & promotion) with requisite skills are all part of strategies to make, Make in India successful. All these programs & initiatives cannot show results overnight, it will take few years to show results. Skilled youth in large number can turn around the economy. With help of government’s focused strategies of empowerment and successful Make in India, I don’t see 8% GDP growth a distant dream!
The author Abhijit Deshmane is MBA in marketing from Mumbai University, and also an Electronics and Tele-communication Engineer. He is having more than 7 years of experience in Marketing & Public Relation. He can be reached through firstname.lastname@example.org