China government organisations are asked to implement new measures as soon as possible to arm "Made in China" with advanced technology and equipment, encouraging more competitive products with high added value
The Chinese government has launched a "Made in China" campaign with a host of tax concessions. This launch coincides with Prime Minister Narendra Modi's "Make in India" pitch.
China will encourage high-tech imports, research and development (R&D) to upgrade 'Made in China', a decision by the Chinese central government said.
Under the new campaign China will use tax breaks to encourage enterprises to upgrade their equipment and increase R&D efforts to improve the manufacturing industry.
Companies that bought new R&D equipment and facilities after 1st January or possess minor fixed assets will have taxes reduced based on value, the Cabinet, presided over by Premier Li Keqiang, has decided.
Imported high-tech equipment will also enjoy tax deductions in aviation, bio-medicine production, manufacturing of railway and ships, electronics production including computer and telecommunications, instrument production and those used in making IT products and software, state-run Xinhua news agency reported.
The new decision coincides with the global launch of Modi's 'Make in India' campaign today.
The Indian Embassy, Consulates in Guangzhou, Shanghai and Hong Kong held special investment promotion events showcasing the 'Make in India' campaign.
China's new move aims to prompt technical improvement of companies, especially innovation of small and medium-sized enterprises, which in the last three decades propelled it to become world's second largest economy and made it a powerhouse of the manufacturing industry.
The cabinet asked government organisations to implement the new measures as soon as possible to arm "Made in China" with advanced technology and equipment, encouraging more competitive products with high added value, the report said.
China's manufacturing sector, a key driver of its economic growth, is regarded highly competitive in the global market.
Analysts believe the measures will not only start a new round of innovation but also spur fixed asset investment, and, in the bigger picture, contribute to stabilising economic growth.
India is ranked 134 out of 189 in the ease of doing business rankings of the World Bank. The PM's desire would require huge shifts at the Central, State, Judiciary, Regulatory and Executive levels. Can he achieve it all in three years?
Prime Minister Narendra Modi today launched the Make In India campaign. His target audience was primarily Indian businessmen, who have themselves been apprehensive about investing in India. While we court foreign direct investment (FDI) and foreign institutional investment (FII), the business environment in India is so poor that the Prime Minister has to push Indian businessmen to invest here. The only places in the world, where a businessman is worse off than India are either war-ravaged nations or those which are currently involved in civil conflicts.
India is ranked 134 out of 189 in the ease of doing business rankings of the World Bank. The West Bank and Gaza are at 138. Some of the countries that do better than us in these rankings include Ethiopia (125), Uganda (132), Bangladesh (130), Pakistan (110), Nepal (105) and even Vietnam (99).
The Prime Minister, in his speech to the Make In India audience stated that he wished to take India higher in the Ease-of-Doing-Business Index. When the World Bank Chairman Jim Yong Kim visited India in July, he had said that if Gujarat were to be taken as a separate entity, for the sake of evaluation, and then it would be among the top 50 in the rankings. So PM Modi wants India to break into top 50 in three years. Is this feasible?
To better understand what is involved in pushing India up these rankings, take a closer look at what constitutes the score in these rankings. What determines the final rank for a country is based on: (India's rank in parenthesis out of 189 nations)
1. Starting a Business (179)
2. Dealing with Construction Permits (182)
3. Getting Electricity (111)
4. Registering Property (92)
5. Getting Credit (28)
6. Protecting Investors (34)
7. Paying Taxes (158)
8. Trading Across Borders (132)
9. Enforcing Contracts (186)
10. Resolving Insolvency (121)
If the two factors 5 and 6 above are excluded, India's ranks on the rest leaves a little too much to be desired. Problem is, Modi can do little about the 8 factors where India’s ranking is pathetic.
Starting a Business: Depending on the industry, starting a business requires procedures to be completed with both Central and State agencies and departments. In India, starting a business requires an average of 27 days, to complete 12 required procedures (according to World Bank estimates). This, as any businessman will tell you, is an understatement, because it does not account for the great Red Tape that needs to be negotiated for even the simplest approvals. The government is said to be working on the issue of permissions.
With most registrations online and providing single-window clearances, starting a business could get a little simpler. But a number of State-level permits are needed too, what will happen to these? Modi has no control over them.
Paying Taxes: An Indian businessman suffers an average of 33 tax payments a year. While the South Asian average is also at 33, the OECD average is 12. The sheer number of taxes goes beyond suffocation and harassment. Moneylife has written before about how India's tax system is built to encourage harassment and extortion by officials and bureaucrats. There is no change in this.
Trade Across Borders: On one hand, India is ranked 132 on this and the PM has expressed that he wants to focus on trade, but on the other hand India voted against the WTO agreement at the last minute, which could have achieved better cross border trade. Reducing the number of clearances and documentations needed for export and import is the need of the hour. The Commerce Ministry is seriously looking to improve this. No steps taken so far
No Control of the Centre: Now we come to the hardest part, factors where the Centre has little to zero control. Registering Property (92), Getting Electricity (111) and Construction Permits (182) rest almost completely with State departments and agencies. It is difficult to conceive how the PM and the Centre propose to deal with these problems for businessmen and investors. Then we may come to the final thorn in the businessman's side, India's much-respected yet absolutely inaccessible judicial system.
On Enforcing Contracts, which is possibly the foundation of a business environment, India ranks 186 out of 189 countries. The time taken to get a hearing and then an award or decision in the courts and tribunals in India, is beyond measure. It has come to a point where property related and civil disputes are now being fought with only the interim order in view, because the final award is too far ahead in the future to even consider. The final measure that the Index deals with is Resolving Insolvency, which again leads in many cases to the doors of Indian courts.
Out of the factors listed and discussed above, improving scores on each of these counts would mean working at Centre, State, Judiciary, Regulatory and Executive levels. What this means is that even if the centre were to work with a clear objective in mind and with a concerted push, there are still too many factors outside the Centre's control that would still need act as impediments.
It is important to understand that while huge companies hog the media landscape, around 80% of the economy and jobs are centred on Small and Medium Enterprises. The biggest beneficiaries of every slight improvement in the business environment will exponentially improve their productivity and addition to the economy. It is difficult if not impossible to imagine how the Centre will be able to deliver a serious bump in India's rank from 134, forget breaking among the top 50.
By the way, if India were to break into the top 50, who will have to be better? How about India being better than Spain (52), Italy (65) and China (96) (all lie between India and the top 50)? Is it likely that India will have better courts, state organs, laws and efficiencies than EU nations and China? Even if it is, it is doubtful that such a sea change may come about in the next three years.
Prime Minister Modi, while launching his 'Make in India' campaign to boost domestic productivity, assured industrialists that they will not lose their money
Prime Minister Narendra Modi on Thursday launched his ambitious 'Make In India' campaign aimed at inviting foreign companies to produce and export their products from the country.
"Manufacturing boost will create jobs, increase purchasing power, thereby creating larger market for manufacturers. Industrialists don't come because of incentives. We need to create development and growth-oriented environment across the country," Modi said.
Assuring industrialists, especially from overseas, Modi said they will not lose their money (after investing in India) because India is an opportunity.
Not just good governance, effective governance, easy governance need of the hour, the PM added.