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Make In India Initiative – Indo - US Cooperation
Gopal K Agarwal
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Gopal K AgarwalMember National Executive BJP Economic Policy Formulation
Group BJP Task Force on MSME
Governance Philosophy of BJP
Reduce EntitlementsEmpowerment through
Employment Generation Skill Development Cluster Development for Industry
Participative Democracy mygov.in etc.
Gopal K Agarwal
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Gopal K Agarwal
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Make in India Initiative: Indo-US Cooperation
India is moving towards being a partially open economy with sectoral openings in FDI taking place one after the other.
The US economy is looking heads-up, and so it was probably at the right time that the Prime Minister Modi announced the Make in India initiative on September 25, 2014.
An Indo-US bilateral relation is poised for a drastic change, in the positive direction. Cooperation between the two countries in many sectors like defense, energy, trade, agriculture
etc. Environment for business promotion between the two countries could not be more conducive
than it is now. Partiicularly areas like aviation, automobiles, defence manufacturing and oil & gas have huge
potential. In the aviation sector US companies are cooperating with Indian companies already.
DTTI Defense Trade and Technology initiative (DTTTI) between India and the US The DTTI focuses on ‘co-development and co-production’ which will require cooperation in the
form of US companies setting up units in India and work on a ‘transfer of technology’ basis.
Scope of Indo-US Cooperation
FDI and other Investment
Insurance - The insurance industry plans to hike penetration levels to five per cent by 2020, and could top the US$ 1 trillion mark in the next seven years.
Defence - India is expected to spend $40 billion (Rs 2.4 lakh crore) on defence purchases over the next 4-5 years, mostly from abroad.
Railway Infrastructure - India targets $1 billion private investment by 2017 to build rail lines.
Digital India: Indian Government to spend up to Rs1.13 trillion in three-five years
Smart Cities - Investments of about USD 1.2 trillion will be required over the next 20 years across areas like transportation, energy and public security to build smart cities in India
Gopal K Agarwal
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Gopal K Agarwal
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Areas of investment in Indo-US cooperation
Areas of investment in Indo-US cooperation The Make in India initiative has outlined 25 sectors in which it intends to attract businesses from
other countries. Out of these 25 sectors, at least 18-20 sectors are either areas that the two countries are already
working together on or are ares that have the potential for cooperation. Sectors - AUTOMOBILES - AUTOMOBILE COMPONENTS, AVIATION, BIOTECHNOLOGY, CHEMICALS,
CONSTRUCTION, DEFENCE MANUFACTURING, ELECTRICAL MACHINERY, ELECTRONIC SYSTEMS, FOOD PROCESSING, IT AND BPM, LEATHER, MEDIA AND ENTERTAINMENT, MINING, OIL AND GAS, PHARMACEUTICALS, PORTS, RAILWAYS, RENEWABLE ENERGY, ROADS AND HIGHWAYS, SPACE, TEXTILES AND GARMENTS, THERMAL POWER, TOURISM AND HOSPITALITY, WELLNESS
Most important area for Make in India initiative between India and the US is Defence manufacturing.
Hurdles ?
Offset Policy Big investment in India by US companies were hindered by India’s offset policy which requires
that 30% of the profit by the company be re-routed for investments within India.
Offset obligation Offset obligations require Defence contractors to source the equivalent of 30 per cent of the
foreign exchange value of the contract from Indian suppliers. Currently, the offset obligation is rarely met through any investment in the electronics sector.
FATCA - FATCA imposes a 30% withholding tax on payments of US source income made to non-US
financial institutions unless they enter into an agreement with the US Internal Revenue Service (IRS) and disclose information about their US account holders.
Taxes of US Citizen on their Global Income.
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PMO lists 36 steps for Ease of Doing Business
Unique identity number - A unique identity number for all firms and three forms instead of 17 for imports and exports.
Ambitious goal of moving India from 142nd to the 50th slot in the EoDB ranking list
Ownership reform process - Each secretary was asked to take ownership of the reform process
Online approvals and clearance processes One-stop shop and prepare a common application form Reduce the number of inspections, a key concern with the industry . All licenses for export and import, including for restricted items, will be
issued online from January.
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36 Steps…
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Providing electricity connections in the two cities - Will be made easier Environment ministry to do away with pollution control certificate as a prerequisite for a
connection. Standard sale deed - The ministry of urban development has been asked to prepare a standard
sale deed to ease the registration process for land Land resources department for digitization of land records, municipal tax records, sub-registrar
data and also integrate them. Single window set-up to integrate all activities - Several initiative have been lined up at ports,
including a single window set-up to integrate all activities of agencies involved in the clearance of consignments.
Simplify the laws and forms - The revenue department has also been asked to simplify the laws and forms for corporation and dividend tax.
Simplify the Companies Act, including a simpler process for registration of companies. Reduction in the number of customs forms
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36 Steps...
One identity number instead of multiple IDs such as Permanent Account Number, Tax Deduction Account Number (TAN), corporate identification number (CIN) and Labour Identification Number. The corporate affairs ministry , CBDT, Employees Provident Fund Organisation ( EPFO) and Employee State Insurance Corporation (ESIC) will integrate their processes and issue the numbers real time.
Work on an insolvency law - Apart from this, given India's low ranking on winding up and insolvency laws, PMO has indicated that work on an insolvency law should start soon after the Vishwanathan committee submits its report in February .
Similarly , the attorney general is being asked to request the Supreme Court to clear the constitution of the National Company Law Tribunal and notification of the relevant provisions of the Companies Act, 2010.
Form special courts to settle commercial disputes in Delhi and Mumbai.
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Insurance Reform Amendment Bill
According to Insurance Regulatory Development Authority (IRDA) India's insurable population is anticipated to touch 75 crore in 2020, with life expectancy
reaching 74 years. Life insurance is projected to comprise 35 per cent of total savings by the end of this decade, as
against 26 per cent in 2009-10. The insurance industry plans to hike penetration levels to five per cent by 2020, and could top
the US$ 1 trillion mark in the next seven years. According to IRDA’s annual report for the year 2012-13, insurance penetration (percentage of
insurance premium to GDP) and insurance density (ratio of premium to population) after showing consistent increase in the first decade of insurance sector liberalization, is showing a downward trend in the last few years.
From a high of 5.20% in 2009, insurance penetration was down to 3.96% in 2012. Insurance density, which was USD 64.4 in 2010 had fallen to USD 53.2 in the year 2012-13. The total capital requirement of the Insurance industry for the period 2011-15 was expected to
be Rs. 61,200 crore, a figure that is virtually impossible to reach without hiking the FDI limit.
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Life Non Life
2000 2010 2000 2010 No. of players 1 23 4 24
1st Yr. Premium income (Rs. in crs) 9,707 109,260 9,806 35,815
Insurance Penetration Prem. as %of GDP (2009)
1.2% 4.61% 0.4% 0.61%
Insurance Density Premium per capita (USD) (2009)
7.60 47.7 2.30 6.70
Source: Standing Committee Report
Insurance Sectoral Scenario
Standing Committee - Insurance
Major concerns of the Standing Committee have been incorporated in the recently amended bill in July 2014, as mentioned below:
Reciprocal clause with other countries, which was missing in the original bill has been reinstated. The minimum capital requirement has been restored to Rs 100 crore from Rs 50 crore as was
reduced in the 2008 bill. Preliminary expenses and deposit with the RBI, which were being included in the equity
calculation has now been excluded from the purview of the equity contribution. It has been made mandatory to keep separate account and funds for each class of business. Insurance companies will have to provide full detail of all policy to the actuaries. Agents have been restricted to act only for one Life and one General Insurance Company. The fine for the agents doing business without license has now been prescribed to Rs 10 lacs,
which was not specified earlier.
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Gopal K Agarwal
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Select committee report on Insurance.
The Insurance Laws (Amendment) Bill aims to raise the ceiling on foreign direct investment (FDI) in insurance to 49 per cent from the current 26 per cent limit including FDI and Foreign portfolio investors (FPI)
The target is US $2 billion with in a year. Management and control is to be defined in the bill itself.
Select Committee - Insurance
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Digital India Initiatives
India will spend as much as Rs.1.13 trillion in the next three-five years to provide Internet connections to all citizens through an initiative called Digital India.
'Digital India' is a revolution in itself. It will be possible in three phases -- all gram panchayats are to be connected first, all government services should be provided on digital platform and to strengthen every Indian, informed and educated in terms of digital platform.
Digital India will act as an umbrella plan to integrate and synchronize all digital initiatives including the national broadband plan and the domestic manufacturing policy.
The plan aims to connect 250,000 village councils at a cost of Rs.27,000 crore, to be completed by December 2016.
Will connect 50,000-60,000 gram panchayats by March-April 2016, one lakh by 2017 and another lakh by 2018.
An electronic development fund will also be set up to create Indian intellectual property for electronic goods.
The electronic delivery of services, including health, education, security, justice, financial inclusion and information to farmers has been labelled e-kranti.
This aims to provide broadband connectivity to 250,000 schools, including free WiFi and also massive online open courses. .
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Ease of Doing Business in MSMEs
The present Government has made the promotion of ease of doing business, an integral part of its agenda and is promoting it vigorously.
A few important steps have already been taken. De-licensing the manufacturing of many defense products Introduction of e-Biz project for single window clearance. Earlier, initial validity of Industrial License was for a period of two years with a provision of
granting two extensions of two years and one year respectively, in an important step, DIPP has extended the validity of Industrial License to encourage entrepreneurs.
Providing speedy environmental clearances, Removing bottlenecks for coal block allocation to improve availability of power etc After the new Government took over, India climbed several positions to reach a
commendable 7th position when it came to ‘Protecting Minority Investors’. Bringing down the level of current regulatory compliances Efforts to reduce the cost of setting business in India.
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MSME...
One Person Company – One person company (OPC) concept in the companies law. Its usefulness limited liability and level of compliance.
Prospective Policy Registration Registration for MSME enterprises should be based on
self-declaration, subject to verification by the authorities later, but for limited approvals only. Cut out a lot of paper-work, but will considerably decrease the apprehension caused amongst
the entrepreneurs relating to Inspector Raj. Besides, the entire registration process to being made online, instead of filling only. The
online process should replace the current system involving multiple-bodies in the registration. Stakeholders as well as entrepreneurs are together on the issue of only one body (probably DIC) handling the registration.
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Labour Laws
Clear guidelines on the skill development of the labours so that in the event of losing the job, the labour can find a suitable job elsewhere.
Inspector Raj should be curbed. A change in the Industrial Disputes Act was also brought to the table to protect the rights of the
labours. It was suggested that a number be allotted by the government to each labour (like Adhar) so that
much of the tedious requirements can be handled by the government. A single collection mechanism should be adopted Furthermore, it was suggested that just like every company keeps a record of the number of
employed people in the company, so should the keep a record of people who exited the company.
Simplification and Rationalisation of labour laws Evolve a common “definition” for a tern under “all” enactments Introduce only one “Annual Inspection” by all inspectors (viz. labour Inspectors, Factory
Inspectors etc.) to be coordinated and jointly organized Introduce innovative methods like ‘third party inspections’ self certification etc. to units of a
certain size Recognizing Electronic Record for the purpose s of Registers to be maintained under different
Act. [email protected]
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Creating Appropriate Labour Development Ecosystem
Industrial Disputes Act, 1947 Raise the cut off limit from 100 to 500 workmen to attract provision of “prior permission” for
downsizing/retrenchment. For establishment with more that 500 or workers for retrenchment and closure, automation
permission may be granted in lieu of high severance benefits Substitute ‘prior permission’ with ‘prior intimation’ in cases where retrenchment is not more
that 10% of the workforce Contract Labour “Regulation & Abolition Act, 1970
Remove uncertainty in contract Labour deployment by renaming the Act as the Contract Labour “Regulation Act”
Allow “deemed approval” for Contract Labour Registration Certificates in cases of delay beyond 30 days
Dispute resolution & industrial harmony Trade Unions Act, 1926 : Allow only persons engaged or employed in the establishment with
which the Trade Union is connected as office Bearers. Establish labour arbitration courts in industry cluster to expedite dispute resolutions
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Five Key New initiatives that will need a push
National Broadband Mission and the extension of NOFN – the National Optical Fiber Network to all parts of the country.
Focus area is another key enabler to make the Digital Literacy Mission an achievable one. Clear definition of government expectations and the Public-Private Partnership opportunities for
the creation of green field and brown field smart city initiatives in the country. Comprehensive digitization of records - the digitalization of all citizen to government interaction
processes in the country. C2G And finally, the government, through the Ministry of IT and the Department of Electronics and IT
(DeitY), needs to formulate clear guidelines for Public-Private Partnerships in each of these areas.
Budget Expectations and other reforms
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GST Simplifications in Tax Laws New Planning Commission
Resource Allocation Reduce Interest Rate Jan Dhan Yojna
Financial Inclusion Inclusive Growth Streamline Subsidy
Labour Reforms Shram ave Jayate Land Acquisition Bill amendment
Thank You
Gopal K Agarwal
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Gopal K AgarwalMember National Executive BJP Economic Policy Formulation
Group BJP Task Force on MSME
