Economy
Impact of recent regulatory move on Make in India

In comparison to the services sector, the manufacturing sector has been clearly a laggard

 

Manufacturing in India has not been particularly strong. This is because of a host of reasons emanating from the India's socialist era. Prominent among these include labour laws resulting in trade unionism, licenses for regulating production activity and the like.
 
But the performance of the sector even post that period (initiated in 1980s and culminating into the reforms of 1990s) has been far from stellar. Although manufacturing sector has grown overall, the share of manufacturing in GDP has stayed constant at around 15 percent. The choice for consumers has increased manifold, but the output of manufacturing growth has been steady. 
 
In comparison to the services sector, the manufacturing sector has been clearly a laggard. In spite of this, a large number of sub-sectors have developed and deepened the manufacturing capability like the automotive industry, pharmaceutical industry, etc. Another prominent feature of Indian manufacturing is that still a massive portion is done by the small and medium sector enterprises. 
 
It is in this light of this context and backdrop that the recent move by the Department of Industrial Policy and Promotion (DIPP) (which awaits final approval of the finance minister) becomes important. The move does away with the 30 percent sourcing requirement for Apple, the Cupertino based technology giant. The sourcing requirement mandates that in single brand retail 30 percent of content is to be sourced locally. The apparent logic being given by the Indian government is that it can grant companies an exception if they are found to make state-of-the-art and cutting-edge products. 
 
Apple till date has not been able to enter India, but most likely sees India as a key market as it has a low smartphone penetration (<20 percent) and shipped roughly 1.9 million devices to India in 2015. Also, in the years ahead, India is slated to be one of the biggest markets for smartphones. Till date, resellers were selling Apple products in India. This could change if the move sees the finance minister's approval. 
 
There are three important issues surrounding the move. First, it tries to rectify a policy problem with a specific move. The question now is how is the decision on cutting edge products being made. Apple is into electronic consumer durables like phones and laptops. It does not appear cutting edge. If a change has to be made the change should happen at the FDI policy level. 
 
Also, it will be very difficult to reject applications by players like Xiaomi, the Chinese smartphone manufacturer, as its products use similar technology. In a competitive market this could very easily spell doom for incumbent Indian companies like Micromax, who had not faced massive international competition till date. This brings us to the related issue of the impact of the move. 
 
Second, the move is slated to impact different stakeholders differently. For the consumers choice and service is going to increase and most likely the prices are going to get streamlined with international prices of Apple products. This may be seen as beneficial impact of Apple's entry for consumers. 
 
However, with regard to key programs like 'Make in India' the move could have a 'no effect to a negative effect' unless Apple also invests in manufacturing. The move does provide Apple with access to Indian market but does not provide Indian industry especially MSME's with much scope for capacity building. It is because the cluster of ancillary firms which could supply parts to Apple by local production and manufacturing will not take place now. In addition if Xiaomi also enters India chances of incumbent firms facing stiffer competition may be bad from 'Make in India' point of view. 
 
Third, the move does not help the cause of making India a hub of ESDM sector. This is because it just makes India a market but not a production destination. Ideally, Apple should make a commitment to invest in India as costs are low with respect to labour (even though Apple's business is not very labour intensive and it outsources most of its production). 
 
The capacity building effort in India can also help Apple immensely as India is a diverse nation and can throw up unique insights into operating in emerging markets. The FM must look into all the details of what went into the move by DIPP before signing the document. Also, it seems like it is time for review of sourcing requirements if they are indeed coming in the way of progress in the present policy context. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

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Kishore Biyani resigns as Future Retail managing director
The resignations would be effective from the closing business hours of May 1, the company said
 
Future group chairman Kishore Biyani resigned from the post of managing director of Future Retail Ltd (FRL) as a part of rearrangement of the group's business, the company said on Monday.
 
The retail giant said Rakesh Biyani also resigned from the post of joint managing director as well as director of the company as part of a restructuring to carry out the merger with Bharti Retail with the company announced last year.
 
However, Kishore Biyani would continue to hold office as non executive director of the company, the company said in a BSE filing.
 
The resignations would be effective from the closing business hours of May 1, the company said.
 
In May last year, the Future group approved the consolidation and realignment of its retail operations with Bharti Retail Ltd to form one of the biggest supermarket chains.
 
In order to streamline the operations resulting from the consolidation, the respective board of directors had proposed to demerge the retail business of Future Retail to Bharti Retail and to demerge the infrastructure business of Bharti Retail to Future Retail.
 

Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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COMMENTS

R Balakrishnan

7 months ago

Creator of the biggest loss making businesses in India. But a lot of bluster and con to keep pulling it off again and again Truly India's miracle man!

Opposition flays private airlines for high airfares

An opposition member also said it is high time the government frames a new aviation policy

 

Opposition members in the Lok Sabha on Monday lashed out at private airlines for not passing on benefits of falling fuel prices to passengers while the ruling BJP members blamed the Congress-led UPA government for the financial problems faced by state-run Air India.
 
Bharatiya Janata Party's Jagdambika Pal also demanded that to do away with air traffic congestion over the Delhi airport especially at peak hours, a new airport should be built to cater to the national capital region, while some members called for a new aviation policy.
 
Congress leader K.C. Venugopal said airlines have not passed on the benefits of fall in fuel prices to passengers and they were looting the passengers.
 
Initiating the discussion on Demands for Grants for the ministries of civil aviation and tourism, he said the price of Aviation Turbine Fuel has come down resulting in huge benefits to airlines but at the same time common people and passengers continued to suffer.
 
He claimed even Air India has benefitted from fall in ATF prices and demanded from the government what actions it proposed on high air fares.
 
The Congress member was soon supported by lawmakers from other parties.
 
Trinamool Congress member Saugata Roy urged the the government to rein in the rising airfares.
 
"I feel that the government should have a role in having some regulations," he said.
 
He also said it is high time the government frames a new aviation policy.
 
Among others, P.D. Rai of Sikkim Democratic Front alleged that most airports are managed in PPP project and private sector partners were found wanting in their role.
 
Among others, expelled Rashtriya Janata Dal member Rajesh Ranjan, RJD's Jay Prakash Narayan Yadav and Janata Dal-United's Kaushalendra Kumar also spoke.
 
"I want to know from the minister when will Air India be back on its feet?" Kumar asked.
 
Venugopal criticised the government for reducing budgetary allocation to Air India, a charge denied by BJP and other NDA members.
 
The Congress member requested the central government to expedite Kerala government's proposal to launch Air Kerala to help citizens of the state going to the Gulf countries.
 
BJP member Dushyant Singh said the financial mess in Air India was started by the erstwhile UPA dispensation, and denied that fund allocation to the national carrier has been reduced by the Narendra Modi government.
 
Singh flayed Congress government for the merger of Indian Airlines and Air India.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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