YES BANK - ASSOCHAM Knowledge Report - Make in India - Presing The Pedal

TITLE
Make in India - Pressing the Pedal
YEAR
May, 2015
AUTHOR
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Economics Knowledge Banking, YES BANK

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FOREWORD
By 2025, India's manufacturing sector is expected to generate over 100 million new domestic jobs and contribute 25% of national GDP compared to ~15% currently. However,
for India to grow at 910% over the next 3 decades, we must aim to be a part of the global supply chain and produce for both domestic as well as international markets.
Hon'ble Prime Minister of India, Shri Narendra Modi has launched the landmark 'Make in India' campaign aimed at steering investments, infrastructure development,
employment generation as well as financial inclusion, thereby making it one of the most transformational initiatives to augment India's economic development.
'Make in India' and domestic manufacturing are also the central plank of India's 2015-16 Union Budget with focus on job creation through revival of growth and investment. I am
confident that the progressive proposals of the Union Budget, such as liberalization of foreign investments will enable companies to raise long term capital at competitive prices
and immensely boost the dual agenda of 'Invest in India' and 'Make in India' thereby making India a global manufacturing hub of excellence.
To support the efforts of the Government of India, ASSOCHAM, India's apex Knowledge Chamber, has formed the Global Investors' India Forum to attract foreign investments
into India by leveraging the newly established network of 14 International Offices as well as 14 International Business Promotion Councils in India. The Forum will aim to
improve Ease of Doing Business, promote cross-border business development, initiate strategic collaborations and focus on policy advocacy, thereby actualizing the 'Make in
India' strategy.
I am pleased to present this ASSOCHAM YES BANK special publication which is being released at this highly significant Interactive Investment Forum - Fast tracking India's
Growth Story with Confidence & Conviction, under the aegis of ASSOCHAM Global Investors' India Forum in New York. This special occasion also marks the formal launch of
ASSOCHAM's US office which will further strengthen India-US strategic and economic partnership.
The publication provides an overview of India's manufacturing sector and suggests key recommendations for actualizing the transformational 'Make in India' strategy. I am
confident that the contents of this publication will be insightful for the Government, policy makers and industry towards heralding a manufacturing-led economic resurgence.
Thank You.
Sincerely,
Rana Kapoor
President
Chairman, ASSOCHAM Global Investors' India Forum
Founder & CEO
Contents
1
Make in India: Overview and Synopsis
03
Strengths of Indias Manufacturing Sector
07
Realizing Indias Comparative Advantage
13
Key Challenges for India's Manufacturing Sector
27
Analysis of Key Sectors: Short, Medium and Long Term Measures
35
Summary of Key Recommendations
51
ASSOCHAM Global Investors' India Forum
57
01
1. Make in India: Overview

and Synopsis
Make in India: Overview and Synopsis

Economic theories and empirical studies have postulated that manufacturing is the main engine of growth in an economy. In order to develop India into a global manufacturing
giant, the NDA Government unveiled the national program of 'Make in India' last year with an aim to facilitate investments, foster innovation and build the best in class
manufacturing infrastructure.
The 'Make in India' pitch assumes significance for its criticality. Igniting the manufacturing sector is the key to kick-start a virtuous cycle of higher economic growth in India.
Manufacturing sector has for long been the Achilles heel of our economy. The contribution of manufacturing to India's GDP has largely been stagnant at 15.5% over the last 35
years and its contribution to India's export basket remains meager vis--vis offshore competitors.
In the first section of this report, we assess India's structural strengths that are in some sense pre-requisites for manufacturing led growth to kick-off. In the second section, we
draw from classic economic theories of comparative advantage - Hecksher Ohlin and Factor Price Equalisation, to justify a focussed manufacturing of labour intensive goods (basis
India's comparative advantage, given a cheap and abundant labour) in Textiles and Garment, Leather, Food Processing and Gems & Jewellery sectors. Thereafter, we argue how
technology can also prove to be a key determinant of manufactured exports from India. A decomposition of domestic value added for India's current export basket indicates a
higher share of non-labour (i.e capital) inputs, reflecting a pervasive process of technological change that has already taken place. To reaffirm our validation, we draw from two
trade theories of Technology Gap and Product Cycle Hypothesis which suggest that technological capability is not only in terms of creating 'new products' but minor innovations
around a given technology have historically succeeded in augmenting exports for less developed economies. India, too can replicate this by focusing on 'know-why' and 'knowhow' in sectors such as Pharma, Electronics, Auto, Biotechnology and Defence, which are most effectively expected to give India a competitive edge in order to become a
meaningful player in the global supply chain.
The third section identifies the key challenges riddled in the Indian manufacturing sector which have been a deterrent to investment. We explicate that India fares extermely poorly
as compared to not only advanced economies (AEs) but even Emerging Market Economies (EMEs) when it comes to infrastructure & logistics, R&D spending, taxation structure
and labour productivity; which have been stumbling roadblocks for manufacturing led growth to taking root.
The last section concludes with key recommendations that in our opinion would enable the groundbreaking 'Make in India' campaign to achieve the vision of transforming India
into a global manufacturing hub.
04
Pressing the Pedal Make in India

While India has metamorphosized from an agrarian economy into an economy driven by the services sector, the desired dynamism in the manufacturing sector has remained
elusive. The share of agriculture in Indias GDP has declined from 35% in 1980 to 18% in 2013 and the corresponding share of services has risen from 40% to 57%; however the
share of manufacturing has largely remained stagnant averaging around 15.5% of GDP over the last 35 years (see chart 1).
The share of manufacturing in Indias GDP stood at a meagre 12.8% in 2013, falling behind both EMEs and AEs (see chart 2). Further, India is still struggling for a manufacturing
led export growth to take root. Of Indias export basket, 62% comprise of manufacturing exports (as of 2013) which is the lowest among most Asian economies (China 94%,
Japan 88%, Phillipines 77%, Singapore 70% and Thailand 74%).
Harnessing Indias manufacturing potential is the key to ensure a sustainable long term growth. The most significant and comprehensive policy initiative by the Government in this
regard has been the National Manufacturing Policy (NMP) in 2011, which envisioned to increase manufacturing sector growth to 12-14% per annum, share of manufacturing to
25% of GDP, and create additional 100 mn jobs in the sector by 2022.
After averaging at 6% from 2000-04, manufacturing growth accelerated to an average 10.1% between 2005-11, but thereafter
slipped to a negative 0.7% in 2013. Further, with the contribution of manufacturing to GDP averaging around 15% of GDP from
2000-13, total employment in manufacturing sector stood at 52.4 mn in 2011-12. While data from the 68th NSSO (National
Sample Survey Organisation) round indicates a growth in manufacturing employment between 2009-12 (versus a contraction
over 2004-05 and 2009-10), India seems to be far from the envisioned target of creating an additional 100mn jobs in
manufacturing sector by 2022. Although NMP was a step in the right direction, the lingering slowdown in global economy,
alongwith a slack in domestic policy push, meant Indias manufacturing sector underperforming its intended targets.
Ongoing reform efforts need to be

supplemented with proper
implementation hereon along with
overhauling some of the fundamental
factors such as labour laws, poor
infrastructure, tax policies that have
held back Indias manufacturing
potential.
Reinforcing the vision to develop India into a global manufacturing giant, the NDA Government last year unveiled a national
program of Make in India with an aim to facilitate investments, foster innovation and build world class manufacturing
infrastructure. A strong political mandate and push for reforms, Reserve Bank of India (RBI) commencing its rate easing cycle,
benign global commodity prices along with gradually improving global growth have created a favourable setting for Indias manufacturing sector. The envisaged creation of smart
cities and investment corridors, allowing higher FDI in sectors such as defence and railways, actions to foster project execution including faster approvals and clearances,
appeasing investor sentiment, correcting inverted duty structures amongst others, have been some of the encouraging efforts that the Government has undertaken over the last
10 months. However, these efforts needs to be supplemented with proper implementation here on along with overhauling some of the fundamental factors such as labour laws,
poor infrastructure, and tax policies that have held back Indias manufacturing potential.
05
Chart 1: Stagnant share of manufacturing in India's GDP (in %)
Chart 2: Share of manufacturing lags Advanced Economies (AE) and Emerging

Market Economies (EMEs)
Services, value added

35
Non Manufacturing Industry, value added

Manufacturing Industry, value added
Agriculture, Industry, value added
30
Manufacturing, value added (% of GDP)
25
100
90
80
70
60
50
40
30
20
10
0
20
15
10
5
United
Kingdom
India
United States
OECD Members
Japan
Singapore
Philippens
Indonasia
Malaysia
China
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
Thailand
Source: World Bank Database, YES BANK Limited

06
2. Strengths of
Indias Manufacturing Sector
Strengths of Indias Manufacturing Sector

Cheap abundant labour gives India a natural comparative advantage in low-value added, labour intensive manufacturing goods
Demographic Dividend to Indias advantage: With a population of 1.2 bn people, and the worlds highest youth population (India has 572 mn people under the age of 24);
labour is a vital factor of production for India. As per the Economic Survey 2014, the proportion of working-age population in India is likely to increase from around 58% in 2001 to
more than 64% by 2021. Demographics indicate that India will soon surpass China, with Indias dependency ratio declining from 61% in 2002 to 36% in 2020 and Chinas
remaining stagnant at 44% (UN department of Economic and Social affairs) (See chart 3).
Low Labour costs in India: Indias harnessing of its manufacturing potential will lie in tapping its low cost labour. India fairs as the most competitive economy in terms of both
average monthly wages and minimum monthly wages as compared to its Asian peers. Cheap semi-skilled and unskilled labour intensive products give India a natural
competitive advantage (See chart 4).
Additional advantage stemming from abundant raw material
Adequate availability of raw material inputs: India has rich availability of raw materials inputs such as cotton, coal and iron ore. India has the worlds 5th largest coal reserves,
India is the fourth largest iron ore producer accounting for 5% of global production, and is likely to overtake China as the largest cotton producer. Abundant raw materials give
India a comparative advantage in terms of low-cost manufacturing inputs, reducing the overall cost of production. Further, domestic availability of raw materials can insulate
Indias manufacturing sector from global commodity cycles.
Rising wages in China is creating room for India
08
Rising incomes with rising exports: With growing labour intensive exports and increasing prosperity, the low cost wage dynamics in China are gradually seeing a shift (see
chart 5). Average Chinese wages have grown 14.2% YoY from 2000 to 2013. Average wage in China is more than three times of India, and about double the wage in other Asian
manufacturing hubs. This suggests that China is losing advantage as a lowcost manufacturing destination and inducing investors to shift to other South and South-East
destinations for low-end manufacturing bases. Further, demographic dividend is expected to cap labour force growth in China as population ages; hence creating room for India
in the global markets to export labour intensive products like clothing, textiles, footwear, furniture, plastic products, bags and toys
Make For India: Indias domestic demand offers tremendous potential to tap economies of scale in manufacturing consumer goods segment
Recognition of Indias neo-middle class: Indias domestic consumer market is the most rapidly growing consumer market in Asia. The new aspiring Indian middle class is
expected to touch 267 mn over the next 5 years as per National Council of Applied Economic Research (NCAER), presenting tremendous opportunities to realize economies of
scale for fast moving manufacturing consumer goods. With consumerism and disposable incomes on the rise, retail sector has experienced rapid growth in the past decade
with many global players entering the Indian market
Chart 3: Dependency ratio for India expected to improve up to 2040

Dependency ratio
110
100
90
80
70
60
50
40
30
20
Chart 4: Wages in India lower than offshore competitors

700
Average monthly wage, PPP (USD)

Minimum monthly wage (USD)
China
India
600
Indonesia
Philippines
500
400
Srilanka
300
200
100
Source: UN Population Statistics, YES BANK Limited
India
Indonasia
Vietnam
Philippens
Thailand
China
2100
2090
2080
2070
2060
2050
2040
2030
2020
2010
2000
1990
1980
1970
1960
1950
0
Malaysia
Source: ILO (2012), National Wages and Productivity Commission, YES BANK Limited
Empirical Experience from Trade Theories

Studies and empirical findings have shown that international trade has a direct correlation with economic growth and very few countries have sustained high growth over long periods
without experiencing an increase in the share of foreign trade in their GDP. To draw policy recommendations for Indias manufacturing sector, we rely on popular economic trade
theories, as outlined below:
Hecksher-Ohlin Model
This pioneering model of international trade states that relative endowments of the factor of production (land, labour, capital) determine a country's comparative advantage. In other
words, countries have comparative advantage in those goods for which the required factors of production are relatively abundant, such that a rich country (i.e an advanced economy)
that is capital abundant would export a capital intensive good and import a labour intensive good (from a developing economy) and vice-versa.
09
Factor Prize EqualizationTheory

The factor price theorem asserts that that if commodities were freely tradable we would see the wage to rental ratio (payments to factors of production i.e. wage to labour and rent to
capital) equalize across trading partners. Free trade which results in a unified market (of the trading partners) would lead to rising capital costs in the rich country as a consequence of
exporting the capital intensive good rise (rising demand); and rising labour costs in the labour abundant country until the wage to rental ratio in both the countries is equalized.
Chinas Export Miracle

The expansion of China's exports has been one of the most remarkable features of Chinas economic development. Chinese exports rose on average by 5.7% in the 1980s,
12.4% in the 1990s, and 20.3% during 2000-03. By 2003, China's export growth rate was seven times higher than the world export growth. Chinese economy comprised of
one fourth of the worlds population and a low-wage labour market. In 1990s, light manufacturing unskilled products comprising of toys, footwear, apparels among other labour
intensive goods, accounted for more than 42% of Chinas exports. The cheap abundant labour resource supplemented with its sheer size played a strategic role in terms of
generating economies of scale and enabling China to realize its export potential. Chinas top four trading partners - EU, US, Japan and Hong Kong, which accounted for 54% of
Chinas merchandise trade with the world, were nations characterized by high capital intensity. However, since the 1990s, the composition of Chinese manufacturing exports
has been gradually undergoing a transformation from traditional and unskilled to skilled labor exports. As a consequence, the share of light manufactures in Chinas export
basket has declined from 42% in 1990s to 28% in 2003 and further to 20% in 2013; while corresponding share of machinery and transport (including electronics) has increased
from 17% in 1990s to 41% in 2003 and further to 57% in 2013 (see chart 6). While the Chinese economy is gradually shifting from relatively simple manufactured goods
towards more sophisticated products; these products are low-cost, high-volume labour intensive products with not much technological sophistication. The share of high-tech
exports remains low in Chinas exports.
China's endowment structure gives it a huge comparative advantage in labour-intensive goods. Thus Chinese trade pattern is an exposition of Hecksher-Ohlin model with trade
stemming from Chinas comparative advantage in cheap labour exports to AEs (capital abundant economies).
10
Chart 5: Rising wages in China
Chart 6: Changing composition of Chinas exports

China's export basket
60
30000
Average yearly wages (USD)

50
Average yearly wages in

manufacturing sector (USD)
25000
20000
40
15000
30
10000
Share of light manufactures

Share of machinery and transport
20
5000
Source: National Bureau of Labour Statistics of China, YES BANK Limited
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2000
2001
10
0
1990
2003
2013
Source: IMF, YES BANK Limited
Technology Gap Model (Posner, 1961)

The Technology Gap Theory describes an advantage enjoyed by a country that introduces a new good in a market. As a consequence of research activity and entrepreneurship, new
goods are produced and the innovating country (i.e rich capital intensive Advanced Economy (AE)) enjoys a monopoly for a period of time the innovations remain unique until the other
countries learn to imitate these goods. Until the imitation is complete the AE (innovating country) enjoys an export advantage. The intuition behind this is the fact that time elapses
before the other countries' consumers come to know of the new good and acquire a taste for it (i.e demand lag). Hence, imports of the new good take place only during the time period
between the imitation lag and the demand lag.
Product Cycle Hypothesis (Vernon, 1966)

This theory postulates that a new product is produced by a country which has an advantage in producing innovations (capital intensive rich country). At the early stages of production of
the new product, the production unit is located in the innovating country as a high level of skill is required to produce the good. Gradually, as the product matures and becomes more
standardized, production of the commodity gets passed to other countries (Less Developed Countries - LDCs) which have cost advantage in production (like cheaper raw materials,
cheap labour). Thus according to Vernon, in the country where the product originated, production dwindles while the demand keeps on increasing gradually turning the nation into a net
importer from exporter.
11
3. Realizing Indias Comparative

Advantages
Realizing Indias Comparative Advantage in

Labour Intensive Manufacturing Goods
Given the availability of cheap and abundant labour, Indias true comparative advantage lies in labour intensive goods.
However, we estimate, that of aggregate exports, Indias share to developing economies is double that of Chinas and higher than that of South Asia and Low and Middle Income
nations (see chart 7). Between FY11-14, Asia and Africa accounted for 66.8% of Indias total exports, more than double the combined share of Europe and US at 30.6%. The lower
export realizations of India with advanced economies, with whom India enjoys a comparative advantage, defies the conventional wisdom of international trade. (i.e a labour abundant
country should have higher trade with capital abundant countries)
At the same time, employment share of workers in manufacturing sector is roughly 10% in India, which is less than half of China and the lowest among BRIC economies. The share of
manufacturing employment in India is infact comparable to advanced Economies like UK and USA where manufacturing sector is largely capital intensive (see chart 8). The lower
engagement of employment in manufacturing activity demonstrates that Indias manufacturing sector is yet to tap the potential of its low cost and abundant labour endowment.
Chart 7: Significant share of export realizations with

developing economies (in %)
35
Chart 8: Indias share of manufacturing employment less than

EMEs but comparable to AEs
Merchandise exports to developing economies outside the region
30
30
Share of employment in Manufacturing Sector (%); 2013
25
25
20
20
15
15
India
10
10
China
5
South Asia
Low & middle income
14
India
UK
USA
Brazil
Russia
Japan
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
China
Source: International Labor Organization, YES BANK Limited
Indias vast endowment of cheap unskilled and semi-skilled labour gives India a natural comparative advantage in low value added manufacturing goods. Basis this, we
recognize four sunrise sectors which are expected to most effectively tap Indias labour endowment.
Textile and Garments
Comparative
Advantage
Skilled and semi skilled cheap abundant manpower: With over 45 mn people, the industry is one of the largest sources of employment
generation in India
Raw Material: India accounts for about 14% of the worlds production of textile fibre and yarn, and is the largest producer of jute and the second
largest producer of silk and cotton
Exports in textiles and apparel from India are expected to increase to USD 65 bn by FY17 from USD 40 bn in FY14
With consumerism, favourable demographics, rising per capita income and shifts in preferences for branded products is expected to be a major boost
in demand for textiles and apparels
The domestic textile and apparel industry in India is estimated to reach USD 100 bn by Fy17 from USD 67 bn in FY14
Reasons
to
Invest
The sector contributes 14% to industrial production, 4% to Indias GDP and constitutes 13% of the countrys export earnings
India has the second largest manufacturing capacity in textile sector, globally
The Indian textile industry accounts for about 24% of the worlds spindle capacity and 8% of global rotor capacity
India has the highest loom capacity (including hand looms) with 63% of the worlds market share
Domestic
Demand
15
Leather Industry
Comparative
Advantage
Semi skilled cheap abundant manpower: With 55% of the workforce below the age of 35, the Indian leather industry has one of the youngest
and most productive workforces
Raw Material: India is endowed with 21% of the worlds cattle and buffalo and 11% of the worlds goat and sheep and produces 2 bn sq. feet of
leather, accounting for 10% of the world's leather
Exports have grown from USD 1.42 bn in 1990-91 to an all time high of USD 6 bn in 2013-14 and are projected to grow at 24% per annum over the
next five years
Rising purchasing power and growing middle class, domestic demand for light manufactures and consumer goods in the leather industry, offers
tremendous opportunities
The domestic market is expected to double in the next five years
Reasons
to
Invest
16
Domestic
Demand
The total production of the Indian leather industry stands at USD 11 bn with great potential for exports and a huge domestic market
High growth potential of exports, the ready availability of leather, the abundance of essential raw materials and rapid strides in the areas of
capacity modernization offer significant growth potential to the sector
Food Processing Industry
Comparative
Advantage
Skilled cheap abundant manpower: The sector is also one of the largest employment creators, with growth in direct employment in the
organised food processing sector growing 6.05% YoY in FY12
Raw Material and Geographical Advantage: With a large agricultural resource base, abundant livestock and cost competitiveness, India is fast
emerging as a sourcing hub of processed food
A total of 127 agro-climatic zones have been identified in India
Strategic geographic location and proximity to food-importing nations
One-third of the population is expected to be living in urban areas by 2020
Increasing desire for branded food as well as increased spending power
Large and distinct consumer brackets to support customised offerings, new categories and brands
Consumption in India is driven towards packaged and ready-to-eat foods
There is an awareness and concern for wellness and health, for high protein, low-fat, wholegrain, organic food
Reasons
to
Invest
A global outsourcing hub with large retailers sourcing from India due to abundant raw materials, supply and cost advantages
Food processing sector ranks 5 in the world in exports, production and consumption, and has grown at 8.4% for the last 5 years
Value addition of the food processing sector as a share of GDP manufacturing was 9.8% in 2012-13
Investment in registered food processing sector had grown by 20.1% at the end of 2012
Domestic
Demand
th
17
Gems and Jewellery
Comparative
Advantage
India is deemed to be the hub of the global jewellery market because of its low costs and availability of semi-skilled labour
India is the worlds largest cutting and polishing centre for diamonds, with the cutting and polishing industry being well supported by Government
policies. Moreover, India exports 95% of the worlds diamonds, as per statistics from the Gems and Jewellery Export promotion Council (GJEPC).
The sector is witnessing changes in consumer preferences, as the westernization of lifestyle is responsible for changes in the buying habits of the
consumer. Increase in per capita income has led to an increase in sale of jewellery, as jewellery is a status symbol in India.
The domestic gems and jewellery industry had a market size of USD 40.45 bn in 2013, and has the potential to grow to USD 80.59 - 85.43 bn by 2018
The country's gems and jewellery market is expected to double in the next five years. The growth will be driven by a healthy business environment
and the Government's investor friendly policies
Reasons
to
Invest
18
Domestic
Demand
The Gems and Jewellery sector contributes around 6-7% of the countrys GDP
The Government has declared the sector as a focus area for export promotion based on its potential for growth and value addition. The
relaxation of restrictions of gold import is likely to provide a fillip to the industry
India's Gems and Jewellery sector has been contributing in a big way to the country's Foreign Exchange Earnings (FEEs). In FY14, it
contributed USD 34.74 mn to the country's FEEs
Realizing India's Comparative Advantage in

Capital Intensive Manufacturing Goods
The decomposition of domestic value added for India's exports allows examination of how the benefits of international trade are being distributed between domestic capital and labour.
The domestic value of exports is divided into two components - labour and non-labour (i.e capital). Using this classification, an academic study (Estimating Value Added and Foreign
Content of India's exports, Indian Council for Research on International Economic Relations, ICRIER) shows that the combined share of non-labour component is significantly higher in
India's merchandise exports at 42.9% vis--vis services exports (at 35.8%). This reflects a pervasive process of technological change in India's export basket across goods and
services, alike.
At a disaggregated level, the labour component in domestic value added of India has increased mainly for agriculture, food processing, whereas capital contribution has
increased for machinery, metal products among other sectors.
Decomposition of India's Domestic Value Added of exports by factor components

Labour component
Non-labour component
1998-99
2003-04
2007-08
1998-99
2003-04
2007-08
Merchandise exports
34.2
32.1
27.9
50.7
47.3
42.9
Services exports
48.8
51.4
50.9
42
41.4
35.8
Total exports
39.2
38.9
39.1
47.8
45.2
39.5
Sector
Source: Economic Survey 2014-15, Government of India
19
India's Comparative Advantage stems not only from low labour costs but also technological capability
Know-why related technological progress: These encompass major innovations or shifting of the technological frontier
Know-how related technological progress: We must broaden the definition of comparative advantage to not only include major innovations but minor changes, which
reflects the ability of developing countries to adapt and invent around a given technology. This absorptive capacity of developing countries gives countries like India a
competitive edge that enables them to compete in global markets with the advanced industrial nations.
The technology factor can prove to be a key determinant of manufactured exports from Emerging Market Economies (EMEs) even for high-technology products. Technological
capability is not only in terms of shifting the technological frontier but minor innovations around a given technology, which have historically succeeded in augmenting exports for
Less Developed Countries (LDCs) and made them successful in competing in global markets.
There are significant inter - industry differences in developing countries. For some industries the 'know-how' variable generates significant results and for others the
'know-why' variable plays an important role. It is not the absolute level of technological capability which augments exports but the efficiency with which R&D is employed.
Therefore, comparative advantage of developing countries like India lies not only in low labour costs, but even technological capability.
Japan's comparative advantage in technological capability and lessons for India:

To cite historical examples, electronic products such as television receivers were for many years a prominent export of the US, but Europe and especially Japan emerged
as competitors, causing the US share of the market to diminish dramatically. More recently, Japan has been threatened by South Korea and other Asian producers. The
textile industry is another example where developing countries such as China, Taiwan, South Korea and India have become major suppliers in the world displacing in
particular US and Japan.
After 1960's Japan started developing comparative advantage over USA in several high technology industries such as automobiles, semiconductors and electronic
goods. According to Technology Gap Model and Product Life Cycle hypothesis, this phenomenon was initially attributed to labour cost advantage of Japan. But later on, it
was acknowledged that technological capability of Japan and know-how oriented technological progress i.e. its ability to invent around a given technology was the
reason behind its growing competitiveness. Therefore we need to attach the importance of technological capability to the comparative advantage of developing
countries.
20
We identify five key industries with tremendous growth potential where India enjoys a competitive advantage in terms of technological capability
Pharmaceutical Industry
In India's pharmaceutical exports, comparative advantage stems from both know-how and know-why-oriented technological capabilities (reverse engineering). Product development, in
the context of the pharmaceutical industry in general, implies development of formulations using a particular bulk drug and in the Indian context it means simple alteration of dosage forms.
Comparative
Advantage
Indias cost of production is significantly lower than that of the USA and almost half of that of Europe
A skilled workforce as well as high managerial and technical competence
Indias generic drugs account for 20% of global exports in terms of volume, making the country the largest provider of generic medicines globally
The healthcare sector in India is expected to grow to USD 250 bn by 2020 from USD 65 bn currently
The generics market is expected to grow to USD 26.1 bn by 2016 from USD 11.3 bn in 2011
In 2011, Indias OTC drug market stood at USD 3 bn and a rise to USD 6.6 bn is forecasted by 2016
Pharma companies have increased spending to tap rural markets and develop better infrastructure. The market share of hospitals is expected to
increase from 13.1% in 2009 to 26% in 2020
The purported rise of lifestyle diseases in India is expected to boost industry sales figures
Rising levels of education are set to increase the acceptability of pharmaceuticals
Indias patient pool is expected to increase to over 20% in the next 10 years, due to the rise in population
Reasons
to
Invest
Domestic
Demand
India's pharmaceuticals industry accounts for about 2.4% of the global pharma industry by value and 10% by volume
Industry revenues are expected to expand at a CAGR of 12.1% during 2012-20 and reach USD 45 bn
Between 2011 and 2016, patent drugs worth USD 255 bn are estimated to go off-patent, leading to a huge surge in generic product and
tremendous opportunities for companies
Following the introduction of product patents, several MNCs are expected to launch patented drugs in India
Over USD 200 bn is to be spent on medical infrastructure in the next decade
21
Electronic Systems
In Electronic Systems Industry in India, know-how or production engineering rather than know-why would better explain export success in this sector. Rather than absolute levels
of technological capability it is the efficiency with which technological capability which is acquired is likely to play an important role. The sector comprises Electronic Products,
Electronic Components, Semiconductor Design and Electronics Manufacturing Service.
Comparative
Advantage
India has the third largest pool of scientists and technicians in the world
Skilled manpower available in abundance in Semi-conductor Design and Embedded Software
Strong design and R&D capabilities in auto electronics and industrial electronics
Rising manufacturing costs in alternate markets
Large demand generated due to Government schemes like the National Knowledge Network (NKN), National Optical Fibre Network (NOFN), tablets
for the Education sector, a digitisation policy and various other broadband schemes
Growing consumerism and rising middle class contributing to significant local demand
Reasons
to
Invest
22
Domestic
Demand
The Indian Electronic System Design & Manufacturing (ESDM) Industry was estimated to be worth USD 68.31 bn in 2012 and is anticipated to be
worth USD 94.2 bn by end of 2015 with a CAGR of 9.88% between 2011-15
Existing R&D capabilities can be encouraged to develop Made in India products and generate local Intellectual Property (IP)
Adequately developed Electronic Manufacturing Services (EMS) industry is set to be a significant contributor to the entire industrys development
Bio-Technology
In this sector, India's comparative advantage stems from both know-how oriented and know-why-oriented technological capabilities. The sector is divided into five major segments
bio-pharma, bio-services, bio-agri, bio-industrial and bio-informatics.
Comparative
Advantage
India is in the top 12 bio-tech destinations in the world and ranks 3rd in the Asia-Pacific region
India has the second-highest number of USFDAapproved plants, after USA. No. 1 producer of Hepatitis B vaccine
India has the potential to become a major producer of transgenic rice and several genetically modified or engineered vegetables
A strong pool of scientists and engineers and cost-effective manufacturing capabilities
Global companies looking to economise, outsourcing to lower cost economies results in a cost arbitrage of more than 50%
The market size of the sector is expected to rise up to USD 11.6 bn by 2017 due to a range of factors, such as, growing demand for healthcare services,
intensive R&D activities and strong Government initiatives
India constitutes around 8% of the total global generics market, by volume, indicating a huge untapped opportunity in the sector
Reasons
to
Invest
Domestic
Demand
The sector has seen high growth with a CAGR in excess of 20% and the key drivers for growth in the biotech sector are increasing investments,
outsourcing activities, exports and the governments focus on the sector
The industry is expected to grow at an average growth rate of around 30% per annum to reach USD 100 bn by 2025
The Indian bio-economy grew to USD 4.3 bn at the end of 2013, up from USD 530 mn in 2003
23
Defence Sector
The opening up of defence sector provides significant opportunity for know-how oriented technological progress in defence modernization and advanced weaponry. The
Government aims to promote self-reliance, indigenization, technology upgradation, achievement of economies of scale and development of capabilities in the defence sector.
Comparative
Advantage
India has one of the largest defence budgets in the world, but is also the worlds largest arms importer
Developing institutional mechanisms to identify technologies that need to be developed for defence does not only offer potential to be self
sufficient but also to transform into an exporter in the long term
India's modernization plans, increased focus on homeland security and growing attractiveness as a defence sourcing hub
The opening of the strategic defence sector for private sector participation will help foreign original equipment manufacturers to enter into strategic
partnerships with Indian companies and leverage the domestic markets by building domestic capabilities
Reasons
to
Invest
Domestic
Demand
Defence Production Policy, 2011, to encourage indigenous manufacture of defence equipment. The Policy has been amended to provide for the
following: 1. Preference to Buy (Indian)
3. Simplification of the procedure for Buy and Make (Indian)
2.
4.
Buy and Make (Indian) over Buy (Global)

Clear and unambiguous definition of indigenous content
5. Provision for Maintenance Terms of Trade (TOT) to Indian Industry partners
24
Auto Sector
Growing population and an expanding middle class are expected to remain massive drivers for know-how oriented production progress. This along with Government support can
allow know-why technological progress.
Comparative
Advantage
Global car majors have been ramping up investments in India to cater to growing domestic demand. These manufacturers plan to leverage Indias
competitive advantage to set up export-oriented production hubs
An R&D hub: strong support from the Government in the setting up of NATRiP (National Automotive Testing and R&D Infrastructure Project)
centres. Private players such as Hyundai, Suzuki and GM are keen to set up an R&D base in India
A low cost market and engineering skills are likely to give India a competitive edge when it comes to frugal engineering
By 2015, India is expected to be the fourth largest automotive market by volume in the world
Over the next 20 years, India will be a part of the big global automotive triumvirate
Tractor sales in the country are expected to grow at CAGR of 8-9% in the next five years
Two-wheeler production has grown from 8.5 mn units annually to 15.9 mn units in the last seven years. Significant opportunities exist in rural markets
Indias car market has the potential to grow to 6 mn+ units annually by 2020
Reasons
to
Invest
The sector currently accounts for ~7% of the countrys GDP and employs about 19 mn people both directly and indirectly
India is currently 7 largest producer in the world with an average annual production of 17.5 mn vehicles, of which 2.3 mn are exported
The total turnover in 2010-11 was USD 58.5 bn turnover by 2016 is slated to be USD 145 bn
Domestic
Demand
th
25
4. Key Challenges for

India's Manufacturing Sector
Key Challenges for India's Manufacturing Sector
Ease of Doing Business

According to World Banks Ease of Doing Business survey 2014, India ranks 142 out of a total of 189 countries, significantly behind its Asian peers (Singapore ranks 1, Hong
Kong ranks 3, Malaysia 18, China 90, Philippines 95 and Indonesia 114), highlighting that the procedures and costs of doing business are particularly cumbersome for India.
Start up procedures to register a business requires 12 days in India as compared to 5 days in OECD nations and 8 days in Low and Middle Income nations. Further, 1420 days
are required to enforce a contract in India as compared to 527 days in OECD nations and 655 days in Low and Middle income nations. India is characterized by multi-tier
regulatory frameworks and complex procedures making it tedious for investors to venture into manufacturing projects.
28
Labour Related Issues
Labour Productivity: Manufacturing entails enhancing labour productivity and a sustained availability of skilled workforce. Relative labour productivity in India falls
behind its global peers, despite a cheap and abundant labour resource. Only 14% of labour force in India is endowed with primary education, 36% with secondary
education and 10% with tertiary education. Literacy rate in India stands at 62%, much below comparable levels of above 90% in other EMEs. The public expenditure on
education is a meager 3.3% of GDP as compared to 5.5% of GDP in OECD nations and 4.4% in lower middle income nations, respectively. As a result of poor
education, labour productivity remains low in India, serving as a deterrent for attracting investment and manufacturing opportunities.
High concentration of Informal Labour: Rigid labour laws and limited adsorptive capacity of the manufacturing sector, have led to restricted job creation in the
organised sector. As per the latest NSSO 68th round Employment-Unemployment Survey, nearly 72% of the workforce is employed in the informal sector. The
corresponding figure for developing countries is 40%. Waged and salaried workers comprise a meager 18% of workforce, with close to 84% of the workers being self
employed.
Time required to get electricity (days)
105.7
81.8
113.7
Time required to enforce a contract (days)
1420
527.3
654.5
Time required to build a warehouse (days)
185.9
146.5
159.1
Source: World Bank, YES BANK Limited
Chart 12: Public spending on education
Labor force with primary education (% of total)
Labor force with Secondary education (% of total)
6
5
Labor force with tertiary education (% of total)
Public spending on
education, total (% of GDP)
50
3
2
40
Singapore
India
Indonesia
Russia
Low income
Russian
Federation
India
Malaysia
Singapore
Hongkong
SAR, China
Philippens
Brazil
Indonasia
Lower middle
income
10
US
UK
20
OECD
1
0
30
Brazil
60
10
Malaysia
70
30
Chart 11: Low level of educated workforce

80
50
Japan
54.8
US
24.4
Germany
47
South Africa
Time required to register property (days)
70
Brazil
25.2
Taiwan
8.9
Thailand
28.4
Sri Lanka
Time required to start a business (days)
90
South Korea
7.6
Singapore
4.8
Philippens
11.9
Indias labour productivity as a

proportion to others (%)
Malaysia
Start-up procedures to register a business (number)
110
Indonasia
Low & Middle

Income Nations
Hongkong
India OECD Members
Chart 10: Labour productivity lags behind both AE's and EME's
China
Chart 9: Cumbersome costs and procedures of doing business in India
Source: World Bank
Infrastructure Bottlenecks
Infrastructure and logistics in India lag far behind international standards adding significantly to the cost of doing business. Highways, bridges, world-class airports, reliable
power and clean water are in short supply. Power shortage is estimated at 12% at peak levels and 8% at non-peak levels. Indian ports have a vessel turnaround time of 3-5
days as against only 4-6 hours in Singapore and Hong Kong. Lack of clear-cut policies on land acquisition, multiplicity of authorities and bureaucratic hurdles lead to delays
in the implementation of industrial and infrastructure projects in India.
Makein
Make
inIndia
India- -Pressing
Pressingthe
thePedal
Pedal
29
Chart 13: Frequency with which shipments reach consignee
Chart 14: Ease to arrange competitive priced shipment
United Kingdom
Singapore
Singapore
Malaysia
Japan
United Kingdom
United States
Logistics
performance
index:
Frequency with
which
shipments reach
consignee
within
scheduled or
expected time
(1=low to
5=high)
Hong Kong SAR, China

OECD members
Malaysia
China
Indonesia
India
Philippines
Low & middle income
0
China
Japan
United States
Logistics
performance
index: Ease of
arranging
competitively
priced shipments
(1=low to 5=high)
OECD members
Philippines
India
Indonesia
Low & middle income
0
0.5
1.5
2.5
Chart 15: Competence and quality of logistic services
Chart 16: Efficiency of customs clearance
United Kingdom
Singapore
United States
United Kingdom
Singapore
Japan
Japan
United States
Hong Kong
OECD members
Malaysia
OECD members
Malaysia
China
China
Logistics
performance
index: Competence
and quality of logistics
services (1=low to 5= high)
Indonesia
India
Philippines
Low & middle income
0
30
3.5
4.5
Logistics
performance
index: Efficiancy
of costoms
clearance process
(1=low to 5=high)
Philippines
Indonesia
India
Low & middle income
0
Chart 18: Poor development of Port infrastructure
United Kingdom
Logistics
performance
index: Overall
(1=low to 5= high)
India
Philippines
Low & middle income
0
Brazil
Russia
US
Japan
Indonesia
UK
China
China
Malaysia
Philippens
OECD members
Singapore
South Africa
Japan
India
United States
Malaysia
WEF (1=extremely underdeveloped to 7=well

developed and efficient by international standards)
7
6
5
4
3
2
1
Singapore
Indonasia
Chart 17: Logistics Performance Index fairs poorly
Low R&D Spending

Productivity is a function of innovations and technology which relates to both know-how and well as know-why oriented technological progress. India's expenditure on R&D
as a share of GDP is a paltry 0.8% as compared to 2.4% in OECD nations and 1.2% in Low & Middle income nations.
Tax Structure
Currently the taxation regime faces challenges such as double taxation, inverted duty structure and lower incentives which have rendered the manufacturing sector
uncompetitive. Taxes on international trade account for 15% of revenue (as compared to 5.6% in Low & Middle income nations and 0.3% in OECD nations) taking a toll on
manufacturing exports. The indirect taxation regime is riddled with double taxation such as sales tax on cenvat, sales tax on central sales tax, entry tax on sales tax, and
income tax on service tax. Further, the current direct tax structure is a major impediment towards building an investor friendly ambience and boosting consumer
sentiment. Taxes on income profits and capital gains comprise 45% of total revenues in India with comparable ratios at 23% in OECD nations and 21% in low income
nations, reflecting disincentives the current tax structure at present imposes. In the recent FY16 budget, the Government proposed to reduce the corporate tax rate to
25% from 30% over a four-year period along with removal of exemptions. While this may imply a higher tax rate vis--vis the current effective tax rate of 23%, it
nevertheless imparts predictability to the tax regime.
Makein
Make
inIndia
India- -Pressing
Pressingthe
thePedal
Pedal
31
Chart 19: R&D expenditure is amongst the lowest
Chart 20: Researchers engaged in R&D lag global peers

Philippines
Research and development

expenditure (% of GDP)
3.5
Korea, Dem. Rep.

Indonesia
India
2.5
Researchers in R&D (per mn people)
Brazil
China
1.5
Malaysia
Hong Kong SAR
India
Malaysia
Russian
Federation
Brazil
Low & middle

Income
United Kingdom
United States
United Kingdom
Japan
Singapore
0
Chart 21: High Taxes on international trade
Russian
Low income
OECD members
Hong Kong
SAR
OECD
members
United States
Japan
Malaysia
Indonesia
Brazil
China
Low & middle
India
China
Brazil
Singapore
10
Hong Kong
10
Indonesia
20
Philippines
15
India
30
Philippines
8,000
40
20
Russia
6,000
Taxes on income, profits and capital gains (% of revenue)
50
Taxes on international
trade (% of revenue)
25
32
4,000
Chart 22: Direct taxes on the higher side
30
2,000
United Kingdom
China
Singapore
OECD members
OECD members
0
United States
Hong Kong SAR

Russian Federation
Japan
1
0.5
Four Policy Choices that India Faces

Centre versus States
The onus of success of Make in India rests as much with the States as with the
Centre, as several decisions pertaining to land and labour are State subjects. Further,
States have innovated with unique business practices benefiting industry at large,
which can be replicated on a national basis.
Labour Management Solutions by Maharashtra: Designed to provide businesses
an online interface with the Labour Department such that license applications and
renewal of applications can be applied online. It has led to 50-75% reduction in the
service delivery timelines along with greater transparency and accountability.
Land related interventions in Gujarat: Gujarat Industrial Development Corporation
(GIDC) has been entrusted to oversee and ensure reduction in complexity across all
processes in getting land. GIDC has been able to bring down the days taken to
provide land possession to less than 45 days from the date application. Further, Land
allotment increased by 4 folds with the launch of online portal in 2010.
Skilled versus Unskilled jobs

The experience so far shows that India has not been able to reap its comparative
advantage in labor albeit for skilled labour. Industries especially servicesoriented such as IT, Business Processing Outsourcing have shown tremendous
growth over the last two decades. Against this backdrop, the obvious question
arises as to whether India should focus on developing a comparative advantage
in unskilled (labour) intensive sector or continue focus on skill-intensive sector.
The answer lies in a dual policy mandate, which focuses on education and
skilling along with the Make in India program. Such an approach will allow the
current inelastic supply of skilled labour to become more elastic while ensuring
that Make in India absorbs the countrys large unskilled labour workforce its
biggest comparative advantage.
Measured or Ambitious Integration
Make for India versus Make for the World
One of the fallouts of the recent proliferation of regional / bilateral Free Trade
Agreements has been the inverted duty structure (that makes domestic products
less competitive against imported products) which has adversely impacted Indias
manufacturing industry. While some of the inverted duty issues were addressed in
FY15 Budget (certain chemicals, battery waste and scrap, coal tar among others)
and more recently in FY16 budget (electronics and several raw materials), several
sectors (aluminum, steel, tyres) still continue to suffer from Inverted Duty Structure.
There is a rampant economic debate whether India should produce for itself or
Given the limited success of FTAs so far, on the front of international trade, India has
two policy choices in the form of measured integration or ambitious integration.
India must carve its space in global value added chains by forging measured regional
integrations, but strategizing its policy keeping in view the progress of TPP (Trans
Pacific Partnership) and TIPP (Trans-Atlantic Trade and Investment Partnership).
for the global markets. Given the slowdown in global growth, replicating an
export oriented growth strategy aka East Asian Economies might be difficult for
India. India must develop as a manufacturing hub, but cater to both domestic and
external demand. Import Substitution and satiation of domestic demand must
be accompanied by Export Optimism. A low share of India in global trade leaves
ample scope for tapping global markets.
33
5. Analysis of Key Sectors:

Short, Medium and Long Term Measures
In order to actualize the Government's 'Make in
India' objective and to build Confidence,
Conviction and Growth in the Indian economy,
ASSOCHAM launched the 'Believe in India'
National print media campaign in May 2014,
focused on reviving key sectors of the Indian
economy that can act as engines of growth, with
huge job creation and income potential, such as
Affordable Housing, Urban Infrastructure, Food &
Agribusiness, MSME, Tourism, Manufacturing,
Defence, Education, Railways and Renewable
Energy, amongst others. Through this campaign,
ASSOCHAM endeavours to par tner the
Government on policy imperatives for driving
growth in aforementioned priority sectors to
further create a multiplier effect on India's
economic growth. The campaign has appeared
nationally in leading publications such as The
Economic Times, The Times of India, Hindustan
Times, MINT, Hindu Business Line, Business
Standard, The Indian Express and The Financial
Express as well as prominent business magazines
in India such as BusinessWorld, Business Today
and Business India.
MANUFACTURING: Actualizing MAKE IN INDIA

Driven by Creative DESIGN and INNOVATION for Domestic & Global Markets
OPPORTUNITIES
Manufacturing sector growth rate of 12-14% targeted in the medium term1

India ranked 4th in Global Manufacturing Competitiveness Index (2013)2
Capitalize on strong domestic demand and expand geographical base of manufacturing exports to reduce reliance on the US (12%) and UAE (10%)3
Scope for 4-5 times increase in labour productivity, and 50% increase in capital productivity4
Exports to rise by USD 64 billion annually if India captures 20% share of low-end exports, where China is losing advantage5
DIRECT BENEFITS FOR THE INDIAN ECONOMY

Manufacturing projected to generate 100 million new domestic jobs and contribute 25% of national GDP by 2025, from existing ~15%1
Reduction in manufacturing imports from USD 127 billion in FY14 to USD 40-50 billion possible in next 5 years6
Productivity improvement to boost skill intensive manufacturing in India by 20254
One of the top 2 low cost exporters in auto components, power equipment, pharma
Among the top 5 low cost exporters in machinery, electronics, automobiles, textiles
28 million new jobs in hi-tech and electronic hardware sector to cater to USD 400 billion domestic market by 20207
REFORMS IN THE SHORT TERM: RECOMMENDATIONS

Vital Reforms in Business Regulations
Review Land Acquisition, Rehabilitation & Resettlement Act, 2013 and Companies Act,
2013 to align with industry
Improve ease of doing business by setting up single window clearance through eBiz
platform in the Centre and all States
Clarity in FDI/FII policy across sectors with better Centre-State coordination to stimulate
investments and improve business confidence
Capitalize on Domestic demand
Reduce duty on raw materials and components vis--vis finished goods to strengthen
domestic value addition
Implement nationwide GST while allowing for input tax credit, and reduce MAT
Create a vibrant labour market - reform existing 44 Central and 160-odd State labour laws
Develop industrial corridors with regional mapping of strengths and capabilities, and
investment regions (FTZs) to build manufacturing scale and competencies
A strong manufacturing sector

driven by a creative innovation and
design ecosystem will be a game
changer to revive the investment cycle
and accelerate economic growth and
job creation. W ith its buoyant
consumption patterns, India offers a
very large domestic market for value
added manufactured goods in addition
to the export markets.
REFORMS IN THE MEDIUM - LONG TERM: RECOMMENDATIONS

Prioritize Sectoral approach
Help create strong brand - geographic appellation for Indian products and trustmarks & traceability in key sectors
with globally competitive capabilities
Integrate Foreign Trade Policy with Make in India to promote sectors with high domestic value addition
component as textiles, electrical goods
Facilitate growth of exports in labour intensive sectors akin to capital intensive sectors for higher employment
generation driven by MSMEs
Incentivize investments in IT, Electronic hardware manufacturing with special financial packages and dedicated
industrial clusters
Increase private sector involvement in aerospace and defense value chains to reduce import dependence
(currently ~70%)
Build private sector capabilities in manufacturing through public linkages
Empower 3P India - build robust PPP framework with clear dispute resolution mechanism to encourage private
sector participation in Make in India
PPP to augment skill development capacity through dual program of ITI training cum industrial apprenticeship
Improve R&D capabilities to Design and Innovate with greater industry-academia collaboration - encourage
international tie-ups for technology transfer
Stipulate offset program in capital goods production to promote domestic vendor-supplier ecosystem
Develop domestic manufacturing base for power equipments to ensure consistent power
at competitive prices
We invite valued inputs from bankers, bureaucrats, economists, industry leaders and regulatory agencies to make India a Global Manufacturing Hub. Do write to us with your advice.
Corporate Office: 5, S. P. Marg, Chanakyapuri, New Delhi 110021 | Ph: +91 11 4655 0555 | Fax: +91 11 2301 7008 | E-mail: believeinindia@assocham.com | www.assocham.org
Source: 1 National Manufacturing Policy 'Make in India';
Deloitte Survey; 3 DGCI&S Data 2013-14; 4 McKinsey Quarterly Report; 5 ASSOCHAM Internal Study; 6 YES BANK Analysis; 7 Department of Electronics & IT
BUSINESS REGULATIONS: vital REFORMS

Key for Catalyzing Investments and Capital Formation
OPPORTUNITIES
India ranked 142 out of 189 countries in Ease of Doing Business Index 2015. While India ranks high (No. 7) on Protecting Minority Investors,
simplifying the business regulations can hugely improve India's overall rank.1
Huge untapped potential to attract FDI across manufacturing, infrastructure, agribusiness and services.
During 2004-13, India received USD 258 billion net FDI inflows, compared to USD 1.65 trillion by China2.
Progressive tax regime for efficient resources allocation, and to reinvigorate the manufacturing sector.
Overhauling the labour laws to act as an important enabler for industrial development and employment generation.
e-Governance initiatives remain unexplored in important areas like Legal and Judiciary, Telemedicine, Healthcare, amongst others.

Expeditious and timely approval process, including forest and environmental clearances, will expedite on-ground execution of projects, revive the
investment cycle and result in huge job creation.
0.9-1.7% potential increase in GDP annually and 3.2-6.3% y-o-y gains in exports estimated through a comprehensive rollout of GST alone.3
Over Rs. 1 trillion of taxes locked up in litigation in indirect taxes4. A comprehensive plan to reduce litigation and expedite dispute resolution will
tremendously boost investor sentiment.
Each 1% increase in FDI inflows can add about 0.4% to India's GDP growth.5
Improved governance interface between Government and industry will boost entrepreneurial activity through simplified procedures.

Clarity in FDI/ FII policy across sectors, with better Centre-State coordination to stimulate
investments and improve business confidence.
Review and update 105 archaic laws and business regulations to make them relevant to
the current business context and boost investments.6
Improve labour market vibrancy by rationalising laws to create a conducive business
environment
Reduce multiplicity of legislation by grouping laws under 4 broad categories:
industrial relations, wages, employment standards and social security.
Review laws on process for rationalizing workforce and factory closure.
Reduce the number of procedures and approvals involved in starting and doing business
by creating a single window approval mechanism in each state.
Prioritize key reform-oriented bills in the Winter Session of the Parliament to improve
business sentiment, including Insurance Laws (Amendment) Bill, 2008, The Factories
(Amendment) Bill, 2014, amongst others.
Replicate best practices of IT and ITeS sectors in ongoing e-Governance projects through
Public Private Partnership models.
Implement 3P- new agreement for implementing sectoral contractual frameworks, and
bidding guidelines for infrastructure acceleration.
A refreshed, strong and stable

regulatory and business environ-ment is
critical for revitalizing the Indian economy
and boosting investor confidence. A
dedicated focus on building trust, transparency, clarity, consis-tency and
predictability in the laws of the land
and business regulations, will hugely
encourage investors, both foreign and
domestic, to invest in the India growth
story and help actualize the 'Make in
India' initiative combined with Create in
India.
REFORMS IN THE MEDIUM - LONG TERM: RECOMMENDATIONS

Simplify the land acquisition process for investors by creating land banks and reorienting the Land Acquisition,
Rehabilitation and Resettlement Act, 2013 Act, with support from State Governments.
Expand Industrial clusters/corridors model in all states with dedicated land and tailored laws for a particular
cluster.
Create online government to business (G2B) interfaces at the State level with the eBiz platform as a template.
Roll out a single Goods and Services Tax (GST) through consensus of all states, as well as reorient the Direct
Taxes Code to create a business friendly tax structure.
Avoid retrospective application of tax laws and strengthen the scope of advance ruling mechanism for cross
border transactions to improve investor confidence.
Foster swift and transparent dispute resolution mechanism, including further developing e-courts and e-rulings.
Create an enabling regulatory environment across all states to effectively implement the Swachh Bharat
campaign by calibrating existing environmental laws.
Develop deeper equity and debt (both corporate & structured) capital markets to facilitate increased FDI and FII
inflows.
Ensure effective People-Public-Private-Partnership for governance and development through empowered
agencies with powers to authorize key investment projects.
We invite valued inputs from regulatory agencies, bureaucrats, economists, industry leaders and bankers to improve the ease of doing business in India. Do write to us with your advice.
Source: 1World Bank; 2UNCTAD - FDI inflows, by region and economy, 1990-2013; 3National Council of Applied Economic Research; 4CAG (Mar 2013); 5Economic Times, Sep 23, 2014; 6ASSOCHAM analysis
TAX SIMPLIFICATION FOR BETTER GOVERNANCE

AND BOOSTING ECONOMIC GROWTH
Opportunity
1
Widen individual taxpayers base from 3.6 Crore to over 5 Crore in the short term and increase tax revenues
Single and unified GST as indirect tax for efficient resource allocation and to boost the manufacturing sector
Progressive and reoriented Direct Taxes Code (DTC) to consolidate all direct taxes and simplify the taxation
structure
Promote infrastructure development and investments in Power and Housing sectors through increased tax incentives
Direct Benefits for the Indian Economy

2
Gross Taxes-GDP ratio projected to increase from the current 10.6% to 11.9%
0.9-1.7% potential increase in GDP annually, accrued to comprehensive rollout of GST3
3.2-6.3% y-o-y gains in exports estimated subsequent to GST implementation3
IMMEDIATE / SHORT Term Recommendations
The taxpayer should be treated as a valued stakeholder

in the economic development of our nation. A simpler,
reformed tax regime, along with implementation of GST and
revised DTC, will play a pivotal role in driving growth and act
as the central plank of the new Government's fiscal agenda.
Increasing efficiency, transparency and incentivisation in tax
administration, along with expeditious dispute resolution
and streamlining the redressal mechanism will positively
boost investor sentiment and business confidence.
MEDIUM - LONG Term Recommendations
Streamline indirect tax regime through a pan-India Goods and Services Tax (GST) roll
out through:
Concurrence of all states for the rollout
Nationwide uniform rate to prevent tax arbitrage
Mechanism to compensate states for tax revenue shortfall
Constitutional amendment to operationalize GST
Revisit the DTC bill by rationalizing taxes to create a more investor and business
friendly environment and improve tax collections
Provide tax relief to corporates for mandatory CSR spend
Institute an efficient arbitration mechanism for speedy resolution of tax disputes
Extend tax holiday by 5 years under Sec 80-IA of the Income Tax Act to encourage
investments in the Power sector and help realize the vision of 24x7 electricity for all
Treat infrastructure projects, particularly water, roads, power at par with SEZ
projects to extend all applicable exemptions and tax benefits
Extend sunset clause under Sec 80-IC of the Income Tax Act to facilitate industrial
growth of specified areas, including the North East
Facilitate manufacturing sector growth by introducing investment allowance and
increasing rate of depreciation on machineries
Review existing Double Taxation Avoidance Agreements (DTAAs) particularly with Mauritius, to
improve investor confidence leading to higher tax revenues
Avoid retrospective application of tax laws and defer General Anti Avoidance Rules (GAAR) rollout
to reassure industry concerns and investor sentiments
Institute e-governance in tax system and consider merging Direct and Indirect Tax departments for
more efficient compliance
Strengthen and widen the scope of advance ruling mechanism for cross border transactions to
reduce tax disputes and litigation
Rationalize tax liability from transfer pricing through more robust Advance Pricing Agreements and
Safe Harbor Rules
Overhaul customs and excise duty structure and favorably review tax benefits of SEZ for Minimum
Alternate Tax (MAT)/ Dividend Distribution Tax (DDT) to catalyze exports and industrial growth
Encourage technology up-gradation through foreign collaborations and investments by abolishing
the R&D Cess Act
We invite valued inputs from regulatory agencies, economists, industry leaders and bankers for inclusion in the policy submission to the Government of India by ASSOCHAM. Do write in to us with your advice.
Corporate Office: 5, S. P. Marg, Chanakyapuri, New Delhi

1
110021 | Ph: +91 11 4655 0555 | Fax: +91 11 2301 7008 | E-mail: believeinindia@assocham.com | www.assocham.org
Tax Administration Reforms Commission; 2 Planning Commission 12th Five-Year Plan; 3 National Council of Applied Economic Research
DEFENCE & AEROSPACE: MAKE for INDIA

Indigenization and Modernization to boost MANUFACTURING
OPPORTUNITIES
A strong domestic defence manufacturing industry can improve production and indigenization in defense procurement from
current 30% to the target 70%1
USD 248 billion defence outlay projected over the next 10 years with scope for USD 75 billion offset business2
Capital equipment spending for defence expected to be USD 18-20 billion dollars annually by 20203
Scope for USD 16 billion of domestic supply of components and sub-systems for defence aircraft over the next 10 years3

Higher defence production in India to increase growth of manufacturing sector by 8-14%
Estimated savings of 30-50% from import substitution and low cost of maintenance due to strong domestic defence sector
Additional 1.2 lakh direct and 5-10 lakh overall jobs to be created from increased involvement of domestic players
Cost advantages in manufacturing and growing talent pool of engineers to drive USD 6-10 billion exports of engineering services
and components for defence by 20203

Very high potential for spillover effects in other adjacent sectors like automobile, high-precision engineering, homeland security, etc.

Integration of national resources is vital and collaboration between government
and industry (PPP) will be in the national interest
Common framework for defence procurement across Research Establishments,
Ordnance Factories and Defence PSUs
Increased indigenization and

modernization of defence products and
services is an imperative for India to
achieve self reliance in National Security,
and to strengthen geopolitical and
diplomatic relationships.
A vibrant domestic defence manufacturing
industry will be the cornerstone of the
Make in India initiative, with multiplier
effects on employment generation.
REFORMS IN THE LONG TERM: RECOMMENDATIONS

Target defence expenditure at 2.5% of GDP from current 1.7-1.9% - indigenous manufacturing capabilities through
defence industrial clusters, mandate to locally procure certain percentage of ancillary requirements
Flexibility in key areas like management control, product diversification and scaling up clauses to attract
investments and ease transfer of technology from foreign firms post the recent hike in the FDI cap
Investor friendly tax treatment for the defence sector in the proposed GST framework
Indian private sector to be at par with PSUs, foreign suppliers for defence
contract bids and liberalize guidelines on partnering foreign firms for know-how
Industry status for aerospace, infrastructure industry status for defence to
provide tax incentives and facilitate funding to increase role of private sector
Mechanism to provide protection against Foreign Exchange Rate Variation to the
private sector akin to that for Defence PSUs
Allocate products and services for MSMEs in support and maintenance activities related to high value-contracts
Tax incentives, accelerated depreciation benefits and exemption of cess, duties

on capital investments and R&D expenditure for production/shipyard companies
Increase allocation for Technology Development Fund from INR 100 crores to INR 500 crores; set up Patent Pool
Fund to support Intellectual Property development by MSMEs
Private sector involvement in artillery gun, submarine and warship programs

where proven domestic capabilities can expedite order fulfillment for armed
forces
Prioritize development of propulsion, weapon systems, military electronics and communications as core
manufacturing capabilities
Implement corporatization of Ordnance Factories & liberalize investment through private sector strategic alliances
with Defence PSUs, including BUY vs BUILD acquisition of private sector shipyards by financially strong PSUs
Defence and aerospace incubators with common R&D infrastructure and support facilities for MSMEs; PPP to
support sector specific skill development initiatives
Focus on building indigenous capabilities in critical aircraft components like

aerostructure, engine, avionics, armaments
We invite valued inputs from bureaucrats, economists, strategic affairs experts, industry leaders and bankers for inclusion in the policy submission by ASSOCHAM. Do write to us with your advice, Email: believeinindia@assocham.com
1
BCG Report on Defense Manufacturing Sector, 2012; 2 Edelweiss Report on Defense, 2014; 3 McKinsey Report on Indian Defense Industry, 2013; 4 Vijay Kelkar Committee Report, 2004
MSME - Actualize MAKE in INDIA

Inclusive Economic Growth and Comprehensive Jobs Creation
OPPORTUNITIES
MSMEs in India account for over 95% of the total number of industrial enterprises1
Diverse manufacturing base, with 8000+ products ranging from traditional to high-tech2
Labour intensity of the MSME sector 4 times higher than that of large firms2
Scope to provide institutional finance of USD 418 billion to MSMEs3
Contributes about 45% of the industrial production and 37.5% of the national GDP4
Accounts for 40% of the total exports from India4
Employment for 500 million non-graduates including women in the 700+ million working age population by 20222
Enhanced technology adoption to increase MSME economic output by USD 56 billion5

Priorities for Union Budget 2015-16
Broaden the definition of MSE by doubling the present threshold investment in
Plant & Machinery with 10% annual escalation clause
Interest subvention for exports, tax breaks for investment or lease/rental of
premises and capital goods
Capital Gains Tax exemption for One Time Settlement with banks and enable
payment of Service Tax on realization of receivables
Overall procurement of 20% from MSME to be mandatory w.e.f. 1st April, 2015
under Public Procurement Policy
Certification of payments due towards MSMEs, by auditors of large firms to
address receivable related burden of MSME vendors-suppliers
Improved access to capital
Include finance to medium enterprises by all banks as Priority Sector Lending
Classify loans to Food & Agro processing units as Direct Agri to reduce cost of
credit
The MSME sector is critical to our nations

economic growth. Employing nearly 10 crore people,
MSMEs are the vehicles for inclusive growth and
Indian entrepreneurship. An enabling business
environment with strong focus on industry clusters and
leveraging technology can help harness the true
potential of the sector. The forthcoming Union Budget
provides an excellent opportunity to steer policy
impetus towards improving the competitiveness of
MSMEs and incentivizing exports to actualize the
benefits from Make in India initiative.

Growth enablers
Simplified norms and incentives to invest in cutting edge technology ventures for alternate sources of capital like
Private Equity, Venture Capital, Angel Funding and focused Investment Fund for MSME
Set up a mechanism for small firms to convert their trade receivables into liquid funds and improve their finances
Improve shared resource pool for tooling, testing, marketing to help small firms reduce business overheads
Implement MSME specific guidelines for restructuring or closure of distressed units to improve ease of doing
business
Reform the archaic labor laws linked with various acts like The Factories Act, 1948, The Industrial Disputes Act,
1947 into a single labor code
External linkages
Initiate tie-ups with overseas MSME clusters & industrial establishments and increase MSME presence in
industrial fairs to improve exports potential
Large corporates to anchor Industry-Academia collaboration through PPP to promote cost effective technology
upgradation & incubate small units with Intellectual Property potential in facilities akin to STPI
Promote partnership among industry associations and trade bodies to roll out skill development programs for
small businesses
Improve global competitiveness of MSMEs by linking refinance rate with LIBOR

based international rate
We invite valued inputs from bureaucrats, economists, industry leaders, regulatory agencies and bankers to realise the full growth potential of the MSME sector in India. Do write to us with your advice.
1
CARE Ratings Research; 2 Centre for MSME (IICA) Research, 3 IFC Report: MSME Finance in India, 4 Consultation Paper on MSME National Policy, Ministry of MSME, 5 BCG Report: Ahead of the curve
INFRASTRUCTURE: Accelerate Investments for

achieving 10% sustainable economic growth
Affordable Housing | Smart Cities | Ports | Roads | Railways | Aviation | Power | Renewable Energy
OPPORTUNITIES IN INDIAN INFRASTRUCTURE
India's Urban population will grow to 40% by 20301 from current 31%2 - critical gaps in healthcare, education, sanitation, affordable housing, logistics and public
transportation to be addressed - India poised to be world's 3rd largest construction market by 20253
7,500 km coastline3 with opportunities for port and harbour development - nearly ` 2 Lakh Crore4 allocated by Interim Union Budget 2014
World's 2nd largest road network handling more than 60% of freight and 90% of passenger traffic in the country - 64,000 kms of new highways to be developed5
World's 3rd largest rail network spanning over 64,600 kms 25,000 kms of new lines to be added by 20206
Airline traffic expected to nearly treble to 450 million by 2023 from 169 million in FY14 and make India world's 3rd largest aviation market by 20207
25% of total infrastructure investments directed towards Power8; Share of renewable energy in total power generation to increase from present 6.5% to 15% by 20199 Green Energy Commitments worth 266 GW received by the Government against a target of 175 GW of additional capacity to be installed by 20229
DIRECT BENEFITS FOR THE INDIAN ECONOMY AND INDIAN CITIZENS

Increase in Infrastructure investment of 1% of GDP results in additional 34 Lakh jobs in India (Compared to 15 Lakh in USA and 13 Lakh in Brazil)10
` 70 Lakh Crore2 investment required till 2030 for development of urban roads, affordable housing and transportation systems - ` 39 Lakh Crore5 to be invested over the
next 20 years to build urban infrastructure for Smart Cities alone
Wide-spread rail network with DMIC will promote tourism and position India as a global manufacturing hub and investment destination - contribution of Railways to GDP to
increase to 3% in 20206 from 1% in 201211
Investment of ` 7,800 Crore by 20177 in civil aviation to improve regional connectivity with industrial hubs through modernization and up-gradation of existing airports and
development of 'no-frills' airports
` 2 Lakh Crore12 to be invested in solar and wind power projects in wastelands and uninhabited regions - 50,000 villages to receive electricity through off grid solar by 203013
Multiplier effect on core and ancillary sectors through inter-linkages between over 250 industries5, including manufacturing, logistics, modern retail with improved health,
education and social outcomes

Priorities for Union Budget 2015-16
Formulate overarching Infrastructure Regulatory Authority for structured and time bound development
Mechanism to speed up environment & forest clearances and land disputes relating to stalled infrastructure and
construction projects - 70-90% of road projects delayed by upto15-20% of their planned project timelines
Digitize records and reform Land Acquisition laws to facilitate acquisition of land for infrastructure projects
Implement 'Indian Customs Single Window Project' to improve timelines at Ports and help importers and
exporters
Improved access to Capital
Channelize surplus funds of Government PSUs and long term finance towards infrastructure investments
Facilitate investment through land-monetization, deepening municipal bond market and augmenting fiscal
transfer to Urban Local Bodies (ULB)
Financial Sector reforms - 'approved investments' status for investments into SPVs of infra projects by
insurance and pension funds; Eased regulations to promote M&A deals in infrastructure and reduce underperforming projects
Incentivize investments in renewable energy through tailored banking products and innovative financing
instruments such as Infrastructure Debt Funds (IDFs), RE Green Bonds and REITs / InvITs
Develop innovative infrastructure financing models, such as Urban Infrastructure Fund and India Infrastructure
Fund, with relaxed KYC provisions and tax incentives for investors
The Union Budget will usher incremental

reforms to boost infrastructure development, with
an increased thrust on Smart Cities and the National
Urban Development Mission which are critically
interlinked for India's 'Rurban' push. A visionary
framework for developing 100 Smart Cities, aided by
enhanced Infrastructure spending, will further
accelerate investments through People-PublicPrivate Partnerships, thereby creating jobs and
inclusive growth. Innovative financing options such
as an 'India Infrastructure Fund' and Green Bonds or
Smart City Bonds can play a key role in attracting
investments. Critical gaps in healthcare, education,
sanitation, affordable housing, logistics and public
transportation need to be addressed to actualize this
mission critical objective of growing Indias
Infrastructure - the biggest investment opportunity
in the country and in the world.

Enhance Synergies
Develop and replicate a model slum-free Tier I city through slum rehabilitation programs, creation of affordable and rental
housing inventory over the next 5 years - collaborate with global technical and financial agencies to develop each city
Increase competitiveness of Indian Ports smart satellite cities, road and rail connectivity, SEZ development, enhancing
containerization, mechanized handling facilities, dredging and break-water development by Major Port Trusts
Develop new and upgrade existing roads to minimize logistics cost and provide comprehensive support to the industry
Ensure last mile connectivity and efficient supply-chain management through development of roads, integrated public
transport, track and pit head rail infrastructure, 100 new airports in Tier II and III cities and upgrading over 300 unused air strips
Utilize Indian Railways' land bank and buildings for creating revenue generating assets, large fiscal surpluses and
harnessing solar energy through roof top panels
Make India a Trans-shipment cargo hub by developing world-class automated cargo and material handling facilities, 24x7
customs operations and establishing air-freight stations
Implement Smart Grid projects to integrate renewable energy sources for developing efficient power generation and
transmission projects
Growth Enablers for Infrastructure
Develop robust framework for People Public Private Partnerships (PPPP) in urban infrastructure projects to enhance
efficiency in delivery of urban services
Expedite resolution of cancellation of coal blocks - crisis affecting power, steel and several other sectors
Infrastructure' status for Value Added Services (3PL), Shipping, Shipyards, and other Defense supporting segments
We invite valued inputs from bureaucrats, economists, industry leaders, regulatory agencies and bankers to realise the full growth potential of the Infrastructure sectors in india. Do write to us with your advice.
URBAN INFRASTRUCTURE: INDIAS SUSTAINABLE GROWTH ENGINE

Urban cities are growth catalysts and likely to create 70% of net new jobs and contribute over 70% to Indias GDP by 20301
Opportunity
31% of Indias population resides in cities during 20012011 urban population grew at a CAGR of 2.8% resulting in a net addition of
3
91 Mn
1
By 2030, India will have 6 megacities (10 Mn+ population) Mumbai and Delhi will be among the 5 largest cities in the world
In addition, cities with 1 Mn + population will increase from 53 to 681 huge potential for job creation and workforce addition
4
As our urban population grows to 590 Mn by 2030 (approximately 40% of total population), critical gaps in healthcare, education,
clean drinking water, sanitation, affordable housing and public transportation need to be addressed
Direct Impact on Economy
Indias rapid urbanization requires an aggregate capital investment of over R 70 Lakh Cr2 till 2030, mainly in urban roads, affordable
2
housing and transportation entailing annual per capita investment on urban services to grow eightfold from ~R 1000 to ~R 8000
Potential to create huge demand in various core and ancillary sectors multiplier effect through interlinkages between 254
5
industries , including infrastructure, logistics, modern retail and also improved synergy between rural and urban centers
Promotion of social stability and economic equality through sustainable all round development of urban economic centers
Develop basic infrastructure like public transport, flyovers, drainage, sanitation and
waste management
Incentivize REITs and Urban Development Funds to invest in public utility services
like slum rehabilitation, water supply and waste management and sanitation
Deepen egovernance mechanisms for electronic delivery of public services
Establish regulatory authority to monitor work of Urban Local Bodies (ULBs) build
capacity in research, planning, HRD facilitated by State Governments
Strengthen fiscal standing of ULBs through improved revenue collection, expense
management, budgetary allocations and developing Municipal Bond Markets by
providing suitable tax incentives to investors
Rehabilitate slums and create affordable housing inventory and rental housing
facilities for various income groups at city outskirts
Improve quality of life in Tier 1 and Tier 2 cities by maintaining and developing
recreation facilities and public parks
Urbanization has put Indias cities and

towns at the center of our growth story.
Investing in sustainable development of our
urban centers will play a critical role in
achieving accelerated economic growth.
No other area requires better Center
StateLocal Government coordination
than Urban Development. A combination
of good governance and comprehensive
capacity building at all levels of the
Government is essential to make our
urban cities pillars of job creation, comfort,
Develop greenfield integrated smart cities along industrial corridors such as DMIC
Upgrade civic amenities, health services, urban transport and intercity connectivity for Tier II cities
Innovation in Public Transport through Intelligent Transportation systems incorporating vehicle
telematics to reduce commuting time
Integrate Disaster Management Systems and a comprehensive Risk Management Framework into
Urban Planning, with periodic audits
Develop suitable framework for People Public Private Partnership (PPPP) in urban infrastructure
projects to enhance efficiency in delivery of urban services
Effectively use Indian Railways' urban land banks to set up Central Business Districts with facilities for
holding conventions and exhibitions, transportation hubs, affordable housing and shopping centers
Develop an Urban Infrastructure Fund with special dispensations such as relaxing KYC provisions
for investors, tax incentives, excluding
investment by Banks into such funds from
SLR/CRR requirements
Corporate Office: 5, S. P. Marg, Chanakyapuri, New Delhi 110021 | Ph: +91 11 4655 0555 | Fax: +91 11 2301 7008 | Email: believeinindia@assocham.com | www.assocham.org
1
Indias Urban Awakening McKinsey Global Institute 2 Reserve Bank of India Financing Strategies for Urban Infrastructure Trends & Challenges 3 Census 2011 4 World Resources Institute (http://www.wri.org/blog/2013/04/5keyssustainabledevelopmentindiancities)
Planning Commission
Affordable Housing policy measures to ensure

every Indian family has a HOME by 2022
OPPORTUNITY
Out of 7,935 cities and towns in

India, there are 495 urban cities
with population over 1 Lakh1
Demand for an additional 1.9 Crore

houses, of which approximately
96% is for the Economically Weaker
Section (EWS) and Lower Income
2
Group (LIG)
Potential to add 11.5 Crore new non3

agricultural jobs by 2022
concurrent investments required in
Affordable Housing
An estimated 40-45% of
households earning INR 10,000 25,000 per month live in rented
4
accommodation
DIRECT IMPACT ON ECONOMY
Real est ate projects under

construction, including Affordable
Housing, valued at INR 8.7 Lakh
5
Crore (FY12) if expedited, these
projects are expected to add INR
1.6 Lakh Crore to steel, cement
and other construction material
sectors6
Development of sector will lead to
betterment of general health
conditions and overall reduction in
healthcare costs
IMMEDIATE RECOMMENDATIONS FOR THE BUDGET/

1st SESSION OF THE 16th LOK SABHA
Infrastructure status for sector to attract greater capital and investment formation
Improve credit availability and implement interest subvention schemes for the sector
Insurance and Pension funds to be allowed to be invested in the sector
Ease conditions for FDI in real estate and reduce minimum capital requirement from
INR 59 Crore (USD 10 million) to INR 29.5 Crore (USD 5 million) and minimum
tenure before repatriation from 3 years to 1 year
Review Section 43C of the Income Tax Act (taxation at circle rate) and restore 80 IB
(10) (tax exemption on income derived by an undertaking engaged in development
and construction of small dwelling units)
Review RBI norms for project finance; Uniformity in end user income ceiling norms
for Affordable Housing units for EWS/LIG/MIG
MEDIUM AND LONG TERM RECOMMENDATIONS
Impetus to essential infrastructure in outskirts of Tier I and II cities to ensure

Affordable Housing clusters are well connected and cities are decongested
Digitization of land records
Rationalisation of Direct and Indirect taxes in real estate sector to enable competitive
pricing for end user
Single window approval mechanism for Housing Sector, compared to approvals
through approximately 150 tables across 40 departments of Centre and State
7
Governments and Municipal Corporations
Mandating developers across the country to construct EWS/LIG/MIG units and
authority to create enabling environment with increased Floor Area Ratio (FAR)
Incentivize low cost, innovative technologies, such as prefab, for producing large
volumes of Affordable Housing units
Foolproof mechanism for rental housing and ensuring implementation of REITs and
REIMFs
Availability of higher FSI with relaxed density norms for Affordable Housing projects
Sources: 1Census of India - 2011, 2Report of The Technical Group on Urban Housing Shortage - 2012-17 (MoHUPA), 3From poverty to empowerment:
Indias imperative for jobs, growth, and effective basic services, MGI (2014), 4State of the Low-Income Housing Market (Report by Monitor Deloitte),
5
Real Estate Intelligence Service, Jones Lang LaSalle, 6YES BANK Analysis, 7Bridging the Urban Housing Shortage in India (Report by KPMG)
India is at the crossroads of

experiencing rapid urbanization in the
current decade. Addressing the
Affordable Housing shortage will
create a multiplier effect, while
improving the living standards of
Indian citizens and contribute towards
making our cities pillars of comfort,
efficiency and security.
We invite valued inputs from regulatory

agencies, economists, real estate industry
leaders and bankers for inclusion in the
policy submission by ASSOCHAM.
Do write to us with your advice.
Email: believeinindia@assocham.com
ASSOCHAM Corporate Office: 5, S. P. Marg,
Chanakyapuri, New Delhi 110021.
Ph: +91 11 4655 0555, Fax: +91 11 2301 7008
www.assocham.org
INDIAN RAILWAYS: Lifeline of the Nation

Transforming Transportation, Logistics, Tourism, Trade and
Manufacturing
OPPORTUNITIES
Indian Railways' earnings expected to double from ` 1.4 Lakh Crore1 in FY14 to ` 2.7 Lakh Crore by 20202
3rd largest rail network in the world, spanning over 64,600 kms3 - 25,000 kms of new lines to be added by 20202
World's 4th largest freight carrier1 and the largest passenger carrier3
9% GDP growth to increase demand for transport by 11%2 - Rapid urbanization to increase rail traffic at 7.4% CAGR during FY12-174
Diamond Quadrilateral Network of bullet trains to connect metro cities; PPP to increase Private investment in Mass Rapid Transit Systems (MRTS) from 13%
in 2012 to 42% in 20173
6 Dedicated Freight Corridors (DFC) to be constructed along the Golden Quadrilateral and its diagonals3
100% FDI allowed in Railway infrastructure opportunity for capital intensive modernization and capacity augmentation projects
Contribution of Railways in GDP to increase to 3% by 20202 from 1% in 20125

Over 13 Lakh people directly employed by the Indian Railways3; millions employed in ancillary industries
Investment outlay of ` 61 Lakh Crore through PPP mode to modernize overall Railways infrastructure and passenger amenities3
Delhi - Mumbai Industrial Corridor (DMIC) to leverage the western DFC to become a global manufacturing hub and investment destination
Wide-spread rail network will promote eco-tourism, education tourism in North East and special pilgrim circuits across India
Moderate shift from road to rail will save 0.7% of India's total commercial energy consumption - rail emits 28g of CO2 per ton-km compared to 84g for roads6

Adequately mechanize warehouse operations, train logistics and port managers to help meet growing freight demand
Increase coal transport capacity for Railways to 2.5 - 3 times - coal transportation crucial for producing power and
infrastructure development
Regularize rail land records where titles are either absent or outdated. Huge values can be unleashed
Segregate regulatory, policy and operational roles currently being carried out by the Railway Board with larger
decentralization of operational powers and complete delegation of tendering powers to GMs of Zones
Institutionalize singe window clearance mechanisms for time-bound approvals
Award larger proportion of rail projects on Engineering Procurement & Construction (EPC) basis and incentivize for
timely completion of projects
Implement passenger friendly initiatives through modernized e-ticketing system, wi-fi enabled trains and stations, and
improved on-board catering
Channelize surplus Railway PSU resources towards Railway infrastructure projects and community centres, given
excellent locations
Establish a Rail Tariff Committee, introduce flexi fares with differential pricing, and explore ancillary revenue options
by offering seat selection and special meals
Raise funds through the IPO of its profit making e-Commerce company Indian Railway Catering and Tourism
Corporation (IRCTC)
Efficiently utilize Railways' land bank and buildings to generate revenue and harness solar energy through roof top
solar panels
Revamp Railways accounting practices into business accounting framework to facilitate easy access to financial
performance of Railways for prospective investors
As one of the worlds largest rail

networks, Indian Railways is the most critical
part of multimodal transport system in India
which is crucial for the economy, particularly
food & agri-business and manufacturing.
Hence, it requires consistent modernization,
capacity building and investment in
infrastructure. Immediate measures such as
IPO of Indian Railways star
e-Commerce entity IRCTC and monetization
of rail land banks will not only help in funding
the Railways but also significantly contribute
towards reducing the nations fiscal deficit.

Introduce last mile connectivity, including developing track and pit head rail infrastructure to support 8 to 10 critical
coal and iron ore corridors in mineral rich states
Maximise global collaboration opportunities with partner countries towards heavy haul freight transportation, raising
speed of trains, and station re-development into community centres
Push for integrated ICT based logistics operations across the Railway system and connected ports, warehouses and
logistics parks; focus on the rapidly emerging e-Commerce logistics market
Accelerate and segregate passenger traffic by building high speed passenger lines on high density routes; focus on
high speed Agri-Rail network to cater to specific needs of perishable Agricultural products, thereby reduce wastage
of agriproducts
Utilize atleast 10% of the total energy requirement from renewable sources - deepen eco-friendly waste
management systems with green toilets in all passenger sources
Augment skill development capacity through PPP and strengthen R&D capabilities with industry-academia
collaboration
Improve safety standards through mechanized track maintenance, upgraded disaster management facilities,
eliminating unmanned levelled crossings and construction of over bridges and under passes
Set-up dedicated Project Management Groups consisting of professionals, Railway Board and State Government
Officials for coordinating and expediting project management with respective
State Governments
Generate large fiscal surpluses with monetizing assets, greater agility and
efficient cost and productivity measures
We invite valued inputs from regulatory agencies, bureaucrats, economists, industry leaders and bankers to realise the full growth potential of the Indian Railways. Do write to us with your advice.
RENEWABLE ENERGY: Sustained conviction

A Ministry of New & Renewable Energy
initiative in partnership with IREDA
for making India a Green Nation
OPPORTUNITIES
Share of renewable energy in total power generation to increase from present 6.5% to 15% by 20191
78.1% of wind energy potential, and 99.6% of solar energy potential still remains untapped1
Solar power capacity target for 2022 to be revised from 20 GW to 100 GW1; tremendous growth potential in Solar Photovoltaic (PV) industry
5th largest wind energy producer2 and capacity to increase from 22.4 GW to 60 GW by 20223
Various Government incentives - tax holidays, Generation Based Incentives (GBIs), capital and interest subsidies, feed-in-tariffs and concessional finance
` 2 Lakh Crore to be invested in solar and wind power projects in wastelands and uninhabited border regions4
100% FDI allowed for renewable energy generation, distribution and manufacturing projects
DIRECT BENEFITS FOR THE INDIAN ECONOMY AND CITIZENS

Increased focus on indigenous renewable energy to reduce import of expensive fossil fuels, create millions of jobs and make India a 'Green Nation'
Solar power has the potential to meet 7% of our power needs by 2022, mitigate 2.6% of carbon emissions, and reduce coal import by 71 million tonnes per annum i.e.
` 33,000 Crore5
Distributed generation of energy for meeting rural energy needs and empowering people at grass roots level; 50,000 villages to receive electricity through off grid solar
by 20306
Address electricity and power shortage challenges which cost ` 4.2 Lakh Crore a year7
Solar PV to create more jobs per unit of energy produced than any other energy source8
RECOMMENDATIONS FROM ASSOCHAM: SHORT TERM

Institutionalize time-bound declaration of preferential multi-year tariffs for renewable energy projects for policy stability
Expedite implementation of Single Window Clearance mechanism for all renewable energy project development across states
Grant Must-Run status for renewable projects and priority access to grid for power evacuation and smart grid management for
integration of renewables
Create a deep nation-wide market for renewable energy projects by encouraging States to remove impediments to Group
Captive Structure and Open Access
Coordinate with State Governments to ensure land availability and Change in Land Use within the notified solar / wind zones,
with minimum documentation and standardized processes
Address irregular nature of power generation by encouraging use of Energy Storage Devices through incentives such as 150%
depreciation on equipment
Strict enforcement and upward revision of Renewable Purchase Obligations (RPOs) on the lines of NAPCC targets by all State
Electricity Regulatory Commissions (SERCs) and revival of REC markets
Incentivize investments in Solar Power through tailored bank products and innovative financing instruments such as
Infrastructure Debt Funds (IDFs) and RE bonds
Channelize funds earmarked by International Development Banks for renewable energy towards funding renewable energy
projects
Create spot market for renewable energy and ancillary market for grid balancing
India has the potential to be amongst the

top 3 countries globally in the next five years in
terms of installed capacity of renewable
energy, thereby creating millions of new jobs,
reducing poverty and achieving sustained
socio- economic development. Bold initiatives,
such as Green Energy Commitments, with
proactive involvement of industry, will enable
the Government to achieve its target of
generating 100 GW of Solar, 60 GW of Wind,
10 GW of Bio-Energy and 5 GW of Small Hydro
power by 2022.
RECOMMENDATIONS FROM ASSOCHAM: LONG TERM

Provide debt financing at feasible interest rates to bridge the debt gap for development of 100 GW solar
power by 2022
Permit banks / NBFCs to raise Haryali bonds
Introduce Model PPA and Guarantees against default by DISCOMs for large scale RE projects
Promote R&D in low-cost renewable energy technology through dedicated research institutes and also
higher depreciation and tax incentives
Set up an independent entity, on lines of Solar Energy Corporation of India (SECI), to promote inter-state
sale of wind power
Promote manufacturing hubs to
establish domestic capability to
meet large renewable energy targets
Implement integrated policies for
development of off-grid rooftop solar
units across States and efficiently
utilize PSU land banks and buildings
to harness solar energy
ASSOCH proud partner of RE-INVEST, congratulates the Government of India on securing over 200 GW of Green Energy Commitments (GECs).
ASSOCHAM Patron Members, Corporate Members and Affiliates have mobilized significant GECs of over 66 GW.
GECs starting as low as 1 MW can be made at www.re-invest.in/greenenergycommitment.aspx
YES BANK patron member of ASSOCHAM, is the Knowledge Partner of RE-INVEST Global Investor Meet
and the 1st Private Sector Bank to provide GEC for financing 5 GW of Renewable Energy projects.
1. Ministry of New and Renewable Energy
2. Department of Industrial Policy & Promotion (DIPP) 3. RE-INVEST 2015 Investors Guide 4. India Brand Equity Foundation (IBEF)
5. KPMG Report 2011 The Rising Sun: A Point of View on the Solar Energy Sector in India 6. Mckinsey Report 2014 India: Towards Energy Independence 2030 7. Easia 8. Natural Resources Defense Council (NRDC)
TOURISM AND HOSPITALITY: FOR ECONOMIC GROWTH AND

SIGNIFICANT JOB CREATION
Opportunity
India's tourism and hospitality industry, currently at ` 7 Lakh Crore, is estimated to grow to over ` 25 Lakh Crore by 20221
India has one of the highest per-capita tourist spends in the world2 Tourism and Hospitality is India's third largest foreign exchange earner3
Boom due to increase in Foreign Tourist Arrivals (FTA) and larger number of Indians travelling to domestic destinations than ever before
enabled by India's diverse offerings ranging from heritage and ecotourism to adventure, rural and wildlife tourism
FTAs estimated to increase from 75 Lakh currently, to over 1.3 Crore by 20244; revenue from domestic tourism likely to grow by 8.2% in 2014
from 5.1% last year4

Indirect and induced contribution of the industry to GDP is three times that of its direct contribution5
Multiplier effect in sectors such as agriculture, retail, transportation and financial services an investment of ` 10 Lakh creates 78 jobs in the
Tourism sector while the same generates 18 jobs in Manufacturing and 45 in Agriculture6
India will become the third fastest growing tourism destination over the next decade - by 20245, the industry will create 4.38 Crore jobs and
account for almost 8% of total employment4
52,000 new hotel rooms likely to be added by 2017 a growth of over 65% in total hotel inventory in India7
Investment in Tourism and Hospitality is expected to grow by 6.5% p.a. over the next 10 years to reach almost ` 40 Lakh Crore by 20244
SHORT TERM RECOMMENDATIONS

'Infrastructure' status for hotel projects with minimum 50-100 rooms,
from current cost-based criteria of ` 200 Crore or more; reduce
availability constraints by expanding mid-segment hotels of 2-3 star
category
Single window clearance for all approvals and permissions for
developing hotels and attractive incentives for setting up hotels in
hinterland destinations
Fast track E-Visa facility, especially for SAARC, BIMSTEC, GCC and
ASEAN nations explore 'combined visa' to encourage stopovers
Enable cashless payment ecosystem through travel cards and
e-payments
Create strong tourism footprint around international sporting events
such as Under-17 FIFA World Cup 2017, Indian Premier League,
Hockey India League
Revive Inter-State Council's recommendations on Ecotourism
Differentiate campaigns for target countries and repeat visitors,
create 24X7 tourism guidance cells, information centres and touristfocused mobile applications
Promote India as a safe destination - register all tour guides and
operators with State Governments
Indias vibrant Tourism industry has the potential to

grow four-fold, to over ` 25 Lakh Crore by 2022. To build an
inclusive, modern India, the best foundation is our culture,
heritage and natural beauty. The Tourism and Hospitality
sector can contribute significantly to economic growth by
accelerating infrastructure development, generating
livelihoods, bringing in foreign exchange and facilitating
social upliftment through education, skill development
and cross-cultural interface. Development of 50 thematic,
affordable Tourism circuits will unleash the sectors
untapped potential and create a transformational shift for
BRAND INDIA, in addition to creating new jobs by 2024.
LONG TERM RECOMMENDATIONS

Introduce uniform tax structure across States and VAT refunds for international tourists leaving India
Develop 50 affordable tourist circuits around themes such as Religion, Heritage, Culture, Himalayas, Desert, North-East Region, Coastal, Sports
and Films
India is home to most major religions of the world significant enabler for Religious Tourism such as Buddhist Tourism Circuit and Hindu
pilgrimage beyond Char Dham also explore synergy with the North East, SAARC and South East Asian countries
Promote several regional festivals for year round tourist footfall - Kumbh, Pushkar and Hornbill akin to 'Oktober Fest' of Germany
Develop world class Convention Centres for growth in MICE tourism
Develop 100 new airports in Tier II and III cities to improve air connectivity in the hinterland upgrade over 300 unused air strips
Effective collaboration with Railways to promote 'Go beyond' tourism destinations and develop Pilgrimage Rail Network
Implement River Front Development Projects in major cities, such as the 'Clean Yamuna' initiative and linking Delhi - Agra waterway
Address skill gap and provide vocational training, including soft skills for on-ground service providers at transit hubs and monuments
Tourism and Hospitality industry to integrate disaster management plan through better coordination with the Government, NDMA and other
key agencies
Align Centre and State policies to promote collaborative community-based tourism as a source of sustainable livelihood for local communities
We invite valued inputs from regulatory agencies, economists, industry leaders and bankers to realise the full growth potential of the Tourism and Hospitality sector. Do write to us with your advice.
1. Ministry of External Affairs. 2. World Tourism Organization (UNWTO). 3. investindia.gov.in. 4. Economic Impact on India, 2014 WTTC. 5. Economic Impact on India, 2013 WTTC. 6. Report Of The Working Group On Tourism Planning Commission 7. Cushman & Wakefield.
HEALTHCARE : EXCEPTIONAL
OPPORTUNITIES FOR GROWTH BY 2020
AWARENESS
AVAILABILITY
ACCESSIBILTY
AFFORDABILITY
OPPORTUNITIES
India's total healthcare expenditure is 4% of GDP (compared to 9.3% in a developing country like Brazil)1 Public expenditure to more than double from
current 1.2% of GDP to 3% by 20222
Healthcare Industry to almost treble to ` 16.8 Lakh Crore by 2020 from ` 6.25 Lakh Crore in 20143
Indian Pharma Industry currently ` 1.92 Lakh Crore4 and 10% of global production to grow to ` 3.3 Lakh Crore5 at (9.5% CAGR) and become 2nd largest in
volume terms by 2020
70% of India's Healthcare Infrastructure concentrated in Top 20 Cities6; Bed density of 0.9 per 1000 (WHO guideline: 3.5 beds per 1,000)1
India a preferred destination for medical tourism with significant cost advantage, skilled medical professionals and world-class hospitals, coupled with globally
differentiated offerings like Ayurveda, Yoga, and Unani

Capital investment of ` 19 Lakh Crore7 by 2022 to fulfil healthcare infrastructure requirement of 25-30 Lakh beds
Healthcare industry and related sectors employ nearly 90 Lakh people in India - expected to generate additional 40 Lakh jobs by 20208
Retail Pharmacy sector to grow to ` 2.4 Lakh Crore by 20205, accounting for nearly 75% of Indian pharma market
Cascading effect on development of allied sectors Medical technology sector expected to grow from ` 36,000 Crore in 2014 to ` 84,000 Crore9 by 2020 at
(CAGR of 15%)
Increased public expenditure to reduce 'out of pocket' expenditure from present 61% to 23% in 20227 resulting in growth in per capita disposable income
Medical Tourism in India to grow by 30% becoming a ` 62,000 Crore industry by 202010
IMMEDIATE / SHORT -TERM RECOMMENDATIONS

Implement the 'National PPP Policy Framework for Healthcare' and convert under - utilized Government hospitals into high - quality
medical colleges to increase bed and doctor density as per WHO standards
Include Ayurveda, Yoga & Naturopathy, Unani, Siddha and Homeopathy (AYUSH) in mainstream healthcare at a National level to reduce
urban and rural healthcare inequality
Encourage revenue sharing and leasing models for medical equipment suppliers in Government hospitals to increase private sector
participation in healthcare delivery
Single - window clearance for approvals to commission hospitals; tax breaks and annuity - based financing for setting up hospitals with
over 100 beds in Tier II & III cities
Set global standards for service quality and care provisions in healthcare delivery
Accredit Indian Healthcare through Joint Commission on Accreditation of Healthcare Organizations (JCHO) for attracting international
patients - incentivize Indian accreditors to partner with JCHO to design cost - effective healthcare delivery solutions
Streamline swift payment mechanism under CGHS, ECHS and other Government healthcare schemes to enhance viability of hospitals
Promote R&D in Pharma by incentivising capex for research and easy access to finance through Government schemes
Encourage international linkages to adopt R&D best practices for critical illnesses and specialized treatments for disease management
India is at the inflection point of a major

transformation of our healthcare sector, driven
by high quality service delivery, cutting edge
research, technology, innovation and
enhanced skill-sets to achieve scalability and
coverage for all. A comprehensive social
health protection mechanism will ensure a
safety net, adequate healthcare infrastructure,
skilled healthcare human resources, access to
affordable drugs, special medical devices and
efficient delivery models.
MEDIUM / LONG-TERM RECOMMENDATIONS

Develop flagship, nodal medical institutions in each State, equivalent of AIIMS in
Delhi
Modernize Government hospitals and medical centres with latest equipment and
world-class infrastructure with enhanced capacities
Promote PPP and Build - Operate - Transfer (BOT) models to set up Affordable
Hospitals and Medical Colleges
Ensure strong delivery of healthcare services in remote areas by setting up Primary
Healthcare Centres (PHC), Telemedicine terminals and mobile vans, trains and
boats as Mobile Health Units (MHUs) with adequate staff and equipment
Improve accessibility and affordability by implementing Universal Health Coverage
(UHC) and deeper penetration of medical insurance - schemes such as Rashtriya
Swasthya Bima Yojana to provide healthcare for citizens without insurance
Increase investment in alternate medicines like Ayurveda, Unani, Homeopathy to
develop export markets; increase public expenditure on medicine to 0.5% of GDP
from current 0.1%
Optimize healthcare value chain by setting up medical technology parks for
manufacturing medical equipment and scaling up availability of risk funding to
SMEs in the sector
We invite valued inputs from doctors, medical fraternity, regulatory agencies, bureaucrats, economists, industry leaders and bankers to realise the full growth potential of the Healthcare sector in india. Do write to us with your advice.
1. World Health Organization (WHO) 2. Planning Commission 3. IBEF Analysis 4. KPMG 5. McKinsey Indian Pharma 2020 6. PwC The Future of Healthcare 7. McKinsey - India Healthcare: Inspiring possibilities, challenging journey 8. AIMA report - 'India's New Opportunities-2020'
9. PwC - Enhancing access to healthcare through innovation Medical technology in India 10. Corporate Catalyst India Report
E E
EDUCATION: Key to Employment,

E E Entrepreneurship,
and Empowerment
OPPORTUNITIES
rd
India is the world's 3 largest education system with 700 universities, 35,000 colleges and over 2.5 Crore students enrolled
To grow Gross Enrolment Ratio (GER) in Higher Education from 19.4% in 2012-13 to 30% by 2020, investment of ` 9.5 Lakh Crore is required to
establish an additional 10,510 technical institutes, 15,530 colleges and 521 universities2
With 100% FDI allowed through automatic route, Education sector expected to nearly double from ` 3.4 Lakh Crore in 2012 to ` 6 Lakh Crore by 20153
India is fast emerging as a knowledge economy with 67 Crore people in the working age group of 15 - 59 years4
8% year-on-year GDP growth can generate 24 Crore jobs in key sectors such as Manufacturing, Housing & Construction, Retail, IT by 20225; DMIC
alone expected to employ 30 Lakh skilled workers6

1% increase in Government expenditure on education can lead to 0.11% increase in per capita GDP7
Bridging demand gap for skilled manpower - nearly 1.2 Crore people added to workforce every year in India; nearly 35 Crore skilled employees
expected in key sectors by 20228
Enhance competitiveness in specialised skills e.g. R&D, IT, Biotech, Design, Innovation & Architecture 50 Crore Indians need to be job ready by 20225
Significant improvement in job creation, earning capacity, poverty reduction and key health indicators and mortality rate
IMMEDIATE / SHORT TERM RECOMMENDATIONS

Grant 'Deemed University' status and allow necessary accreditations to private universities on clearly established criteria of
strong research programs and evolution as a comprehensive, full scale university
National Skill Development Corporation (NSDC) to engage in integrated development programs with Government and Private
Sector to complement skill augmentation and ensure livelihood security
Revitalize ITIs and similar vocational training institutes to cater to local industry and labour intensive manufacturing segments,
such as textile and hardware, with customised skill sets
Performance audits to ensure effective implementation of 'Right to Education' and 'Mid-Day Meals' scheme and similar
schemes for primary, secondary and higher education to increase enrolment and reduce dropouts
Improve equity in higher education for women, marginalized and the differently-abled; for enhanced induction in the formal
workforce
Promote Non-Formal Education (NFE) and Open & Distance learning which are at par with full time programs; establish and
provide access to e-libraries to empower teachers and students
Complementary sources of funding other than State funding; encourage philanthropy from society and alumni as well as
professional fundraising from Industry
Greater financial prudence education trusts or societies can effectively utilise better returns as a result of deregulation of
savings account interest rates
Align standardized training to national occupation standards developed by NSDC Sector Skill Councils (SSCs) for suitable
skilling and greater traction with employers
India has the 3rd largest higher education system in the world
and the 3rd largest scientific and technical manpower globally. Yet
our public expenditure on higher education is a miniscule 0.6%
of GDP. Existing challenges in Indias higher education access,
equity and quality will only intensify, unless we transform our
education and skill development model.
We will be the youngest nation in the world by 2030 - hence
high quality education and skilling of 50 Crore Indians over the
next 10 years is a gigantic but critical mission. Seamless
integration of Academia, Research and Industry is critical to
leverage Indias Demographic Dividend. We need to mobilize
existing resources and expand education infrastructure with
support from the Industry, leverage our nations potential to
build outstanding academic and research institutions.
MEDIUM - LONG TERM RECOMMENDATIONS

Ensure effective implementation of National Education Policy, and increase
Government expenditure in Education from 3.3% to 6% of GDP9
Establish University Innovation Clusters (UIC) as proposed by National Innovation
Council
Brownfield initiatives to set up 80 new universities by converting autonomous colleges
into a cluster of State Universities
Infrastructure grants to upgrade existing universities and colleges and greater
collaboration in faculty training, curriculum design, joint R&D, and student exchange
programs with global counterparts
Facilitate greater FDI flows through clarity of regulations - create a framework for
enhanced participation of investors in formal education
Promote PPP or Build-Operate-Transfer (BOT) models for setting up schools,
universities and vocational training institutes in rural and semi-rural areas
Set up large scale teacher training institutes with improved performance driven pay
scales to address teacher shortfall and improve teacher-student ratios
Effectively adopt technology-driven teaching including Flipped class rooms, Massive
Open Online Courses (MOOCs) and Central Online Knowledge Repository
Incentivize NSDC to establish framework and policies for greater focus on soft skill
development, employability, design, innovation and entrepreneurship
We invite valued inputs from academicians, educationists, bureaucrats, regulatory agencies, economists, industry leaders and bankers to realise the full growth potential of the Education sector. Do write to us with your advice.
1. Annual Status of Higher Education of States and UTs in India - Deloitte 2. International Journal of Social Science & Interdisciplinary Research 3. India Brand Equity Foundation (IBEF) 4. Consolidated Working Group Report - 12 Five Year Plan 5. Forbes India (July 10, 2013) 6. Ministry of Commerce and Industry, GoI
7. Journal of International Academic Research - The Impact of Education Expenditure on India's Economic Growth 8. NSDC 9. The National University of Educational Planning and Administration (NUEPA)
AGRICULTURE: ENGINE OF SUSTAINABLE AND INCLUSIVE ECONOMIC

GROWTH, INFLATION MANAGEMENT AND RURAL DEVELOPMENT
Opportunity
47%1 of India's workforce is employed in agriculture, however contribution to GDP is a meagre 14%, compared to Industry (26%) and
2
Services (60%) rational policies, required technologies and efficient utilization of farm resources are essential
Total global agriexports are USD 1.7 trillion India's present contribution is only 2.6%3
2
Attracted only 2.3% of total FDI in 201213
Over 400 million MT of perishables produced in India but less than 15% currently processed3 scope to substantially enhance value
addition in fruits and vegetables, dairy and poultry/meat
Agri output will more than double from R 13 Lakh Crore in 2011 to R 30 Lakh Crore by 20304 4% growth in Agriculture will ensure
8%5 overall GDP growth 8% growth in agriculture as in Gujarat, Madhya Pradesh and Chattisgarh can get India to 10% GDP growth
4
Food consumption will increase by 4% p.a. to R 22.5 Lakh Crore by 2030, from R 11 Lakh Crore in 2010
4
Per capita consumption will increase from R 9,360 per year to R 15,390 , primarily driven by high value foods indirect multiplier
impact on growth in manufacturing and services sectors
3
Increased processing levels (CAGR of 10 % p.a.Vs. current 8% ) will help Processed Food GDP contribution grow to over USD 250
billion and create over 10 Lakh new jobs by 2020
Implement Model APMC Act in all states to boost agrimarketing and supply chain
efficiencies
Replace input based subsidies to farmers with low cost credit, direct cash transfers
and investment subsidies link MGNREGA to agriculture for asset creation
Develop effective communication systems between farmers and research institutes
by setting up broadband connections and regional Kisan TV channels to disseminate
real time data
100% FDI allowed in Food Processing Industries encourage private and foreign
capital and grant priority sector status for all food processing credit requirements
Adopt scientific approach to roll out biotech applications for better yield and
nutrition
Encourage high value agriculture like horticulture, floriculture, fisheries, poultry and
dairy to enhance job creation and anchor an inclusive growth model
Setup dedicated GAF (Geographical Appellation Fund) to promote Geographical
Appellations of various Indian brands Darjeeling Tea, Nagpur Oranges, Ratnagiri
Alphonso which have the potential to become global food brands, akin to Kiwi fruit
The agriculture sector has the

potential to generate significant
employment and grow at over 8% as
demonstrated by Gujarat, Madhya
Pradesh and Chhattisgarh. Growth in high
value agriculture, increased farm
productivity and enhanced investments
will boost the sector's GDP contribution.
An enabling policy environment,
appropriate technology and supply chain
efficiency are urgently needed to address
inflation, boost investmentled growth
and ensure food and nutritional security
Facilitate further investments in agri infra and PDS storage, logistics and distribution through PPPP allow greater role
of States under Decentralized Procurement Scheme and build regional focus centred around storage deficit with fullest
involvement of States
Demarcate Agri Zones and have better policies and technologies to increase pulses and oilseeds production will
contain inflation and curb imports (over 60% of current Agriimport bill3)
Promote alternate usages of noncultivable land to boost job creation soil and seed testing labs in villages, processing
units, mega food parks
Reduce postharvest loss develop crosscountry rail network, promote clusterbased storage systems for different
crops, set up Food Processing Industries, include pulses and perishables in public distribution and mid day meal schemes
Revamp agriexports through consistent and stable trade policies and focus on integrated food processing clusters for
high value exports
Develop robust water supply network promote optimum utilization through microirrigation, rain water harvesting,
linking of waterways and rivers
Focus on dairy as a key high value segment integrated
dairy farms, breed improvement, fodder management
and quality enhancement of milk
Focus exclusively on fisheries, poultry and meat for
domestic and exports growth
Corporate Office: 5, S. P. Marg, Chanakyapuri, New Delhi 110021 | Ph: +91 11 4655 0555 | Fax: +91 11 2301 7008 | Email: believeinindia@assocham.com | www.assocham.org
1. World Bank 2. Central Statistical Organization, MoSPI 3. MoFPI, Ministry of Agriculture 4. Food and Agriculture Integrated Development Action III McKinsey Global Institute 5. Planning Commission 12th Five Year Plan
6. Summary of
Key Recommendations
Key Recommendations
I.
Tax Reforms
II.
The execution of Goods and Service Tax (GST) is expected to improve profitability of the manufacturing sector by providing full-input tax credit at each stage of the
supply chain and henceforth reducing the cost of production. It is estimated that overall cost of indigenous manufacture will reduce by 10% to 15% on replacement of
existing multiple tax regime with GST
GST would metamorphose India in a single unified market which would enhance the realization of economies of scale
Cost of export production will reduce due to zero rating of all taxes, increasing export competitiveness. Currently only some of the central taxes are partially
neutralized in the form of refund
Tax sops for MSMEs to reduce dependence on imports and thereby encourage local sourcing. Sectors such as defence, telecom, petrochemicals and steel could get
considered for such incentives
Rationalize excise duty on consumer durables which compete against international producers. Auto sector specifically has been grappling with higher costs amidst
weak demand post the expiry of tax holiday in December 2014
Allowing issuance of long-term bonds by sectors to raise investment funds; establishment of finance windows / investment funds; special incentives to start-ups;
incentives to MSMEs and SEZs for manufacturing, possibly on the lines of lower Minimum Alternate Tax (MAT)
Issuance of infrastructure bonds, further easing of entry of private sector and service tax benefits to key sectors could be other measures that can support a
manufacturing revival
Simplification of Labour Laws and focus on Skill Development
Amendment to Industrial Disputes Act: On the lines of labour reforms in Rajasthan, companies can now employ up to 300 workers and will not need the approval of the
State Government if they want to retrench staff. Previously, the limit was capped at 100 employees
52
This will provide relief to a large number of companies to realign their businesses. Because of the old norms, even though the promoters wanted to exit lossmaking businesses or lay off workers due to tough market conditions, the lengthy process to get permission only added to their woes
Amending labour union membership: Replicating new laws in Rajasthan where labour unions would require a membership of 30% of the workforce against the 15%
earlier. The lower limit allowed several unions to emerge often increasing inter-union conflicts and multiplicity
To cater to manufacturing sector growth and to be able to effectively utilize Indias demographic dividend, training labour force is critical. Focus on both quantum and quality of
skills when accompanied by talent management would be a huge step forward in bridging the job market asymmetries. Towards this -
III.
Promotion of sector-specific training for manufacturing: Initiatives to inform prospective employers about skill development courses and to encourage them to recruit
from skill institutes and investments by employers for imparting job-specific skills to the employees to cater to sectors such as textiles, food processing and defence
Vocational training to give fillip to labour intensive high value added exports
Focus on higher level education to catapult high skill intensity sectors such as pharma, bio-technology and electrical equipments
Enabling collateral free, small-ticket bank loans: With regard to funding, Government Subsidies have a legitimate place in the scheme of things, but the best way to
create an efficient ecosystem is to enable collateral free, small-ticket bank loans that cater exclusively to skill development
Encouragement of entrepreneurship
Via Angel investors, venture capital funds, and impact investors which are still at a nascent stage compared to global peers
Government funds through grants and seed funding programs such as Technopreneur Promotion Program, Technology Development Board, among others
A push to Infrastructure: The Government had earlier estimated that the country needs to spend at least USD 1 tn on infrastructure. In line with this goal, a
renewed focus on infrastructure in order to stir both domestic and international investments is warranted. The passage to build world-class infrastructure must
focus on:
Identification of Brownfield Smart Cities
Typically, urbanization happens in one of three ways - suburbanization, corridors and sleeper towns. By this principle, the model of Smart Cities in India should adopt
the concept of anchorage
History provides evidence of new cities generally getting created around an anchor, like Detroit in US (anchor: auto industry), Jamshedpur in India (anchor: steel
plant). Government must identify similar anchors (industry, university) to create brown field smart cities
Allow floating of Smart City Bonds, within the infrastructure bonds category to help finance infrastructure development in the proposed cities. Municipalities backed
by respective State Governments could act as issuers while the subscription could be open to domestic investors, FIIs, and multilateral institutions.
53
Monitoring of Public Private Partnership (PPP) projects, to
Encourage private investment in the infrastructure sector
Reduce public direct spending such that Government expenditure is channelized to other priority areas
Introduce innovation and increased efficiency from the private sector
Development of local capital market
A transparent resolution mechanism
To give an impetus to private sector investments, PPP models need to be modified such that development risks or construction risks of the project rest with the
Government. Development risks such as environment and forest clearances are best resolved by Governments. In such a case, execution risk will be lower. After
construction, the asset created can be sold to private sector with better valuations
Port-led development
Despite the fact that India has 12 major and 187 minor ports, data shows that almost every sea-based cargo coming and going from India is trans-shipped first to
mega hubs like Colombo or Singapore
54
Trans-shipment of such nature, adds to the overall cost of shipping from India, making India lose its competitive advantage
In addition to modernizing existing ports and developing new ones, Government should:
Relax the 25-30% tax on fuels used by trans-shipment Indian ships. Official estimates show that the immediate impact of such a move will lead to an annual
revenue loss of just US 10 mn but its potential in driving the use of Indian sea route is seen at an additional USD 166 mn
India imports about 185 mn tonnes of crude annually, but only 13% of it is carried by Indian ships. The Shipping Ministry should take this up, under the
proposed hydrocarbon transportation policy with the Petroleum Ministry
Improve Ease of Doing Business and focus on Sunrise sectors: The new Government has made a positive beginning to improve the Ease of Doing Business in order
to establish a favorable, flexible, liberalized and a transparent business environment. Smarter regulations towards Ease of Doing Business in high-growth multiplier
sectors (such as Affordable Housing, Tourism) must become the focus, going forward
Set-up a National Resource Policy: India needs a simple and transparent policy for natural resources. A clear outline of auctioning natural resources via a revenue-sharing
model can be a win-win situation for Government, industry as well as the people
Simplify Land Acquisition
IV.
st
The Land Acquisition Rehabilitation & Resettlement Act that came into force on 1 January 2014, by repealing the Land Acquisition Act, 1894 mandates
70% consent of affected families for PPP projects and 80% for private players
Social Impact Assessment studies
After much deliberation and debate, the Land Bill was recently passed in the Lok Sabha
Further efforts in the area could be channelized towards:
Creating a National Infrastructure Planning process: India must define a 6 stage application process for projects - Pre-application stage, Acceptance stage, Preexamination stage, Examination stage, Decision stage and Post-decision stage; along with clearly defining maximum permissible time limit for each stage
Government must allow a stage-by-stage tracking of the application by the applicant
This procedure should be applicable to only core infrastructure projects such as thermal and hydro projects, bridges and pipelines. Other linear projects such as
road, rail and power lines where the route is defined could be exempted
Integration of Foreign Trade Policy with Make in India program
Recognizing the need to develop a 'Common Economic Agenda' across all policy decisions, the Government has aligned the Foreign Trade Policy (2015-20) with Make in
India
Reducing export obligation for capital goods purchased from Indian suppliers under the Export Promotion Capital Goods (EPCG) scheme
Granting higher level of rewards under Merchandise Exports from India Scheme (MEIS) towards export for goods with high domestic content and value addition
Announcing measures to facilitate and encourage exports of defence goods
Promoting Export Oriented Units (EOUs), electronics hardware technology parks, software technology parks and bio-technology parks, via:
EOUs, Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) have been allowed to share infrastructural facilities among
themselves
Inter-unit transfer of goods and services have been allowed among EOUs, EHTPs, STPs, and Bio-technology Parks (BTPs)
EOUs have been allowed facility to set up warehouses near the port of STP units, EHTP units, software EOUs have been allowed the facility to use all duty
free equipment / goods for training purposes
55
EOUs having physical export turnover of USD 1.66 mn and above, have been allowed the facility of fast track clearances of import and domestic
It is imperative that these measures be further supplemented by:
V.
Rationalization of inverted duty structure on manufacturing goods for sectors such as Chemicals, IT products, Metals (Aluminum, Steel), Textiles among
others. In this spirit, FTA provisions with countries such as Japan, South Korea, Malaysia, and Singapore also need to be reassessed
Set up a Trade Facilitation Centre as an integral part of Indian embassies all over the world
Development of the Medium, Small and Micro Enterprise (MSME) sector: In India, the sector accounts for nearly half of domestic manufacturing output and 40%
of total exports; contributing close to 8% to GDP and creating 80 mn jobs. Going forward, key schemes in the sector must entail
Amend MSME definition: Raise cap for small and medium enterprises to USD 3.3 mn versus USD 0.83 - 1.6 mn currently, as this would enable more companies to avail
tax benefits available to the sector. Further, the definition should be in sync with international standards and also include manpower and turnover to reward employment
generation and efficiency besides investment in plant and machinery
Simplification of procedures and formulation of polices to provide safety nets to MSMEs in the form of refinance - facilities and special credit windows
Exclusive Marketing Structure: In order to withstand competition in the era of globalisation, MSMEs need to respond to changing dynamics of marketing and
innovations. In this regard, the Government has initiated various schemes such as MSME Marketing Development Assistance, establishment of Marketing Intelligence
Cell, among others. The scope of these schemes should be enlarged to include
56
A comprehensive portal to enable MSME suppliers to interact with service providers, collaborate with B2C (business to customers) and offer competitive deals by
way of e-commerce platform.
7. ASSOCHAM
Global Investors' India Forum
57
About ASSOCHAM
Global Investors' India Forum
ASSOCHAM, Indias apex Knowledge Chamber, has been playing a crucial role at
the International business level by working closely with the Government on various
foreign policy issues, expanding business opportunities for foreign investors, and
providing an effective platform for consensus building and networking, through its
focused 14 International Business Promotion Councils (BPC) based in India.
ASSOCHAM also initiated the Globalization campaign in September 2014 to
actualize the vision of 'Make in India', by opening 14 International offices at India's
top trading partner locations including UK, USA, UAE, Germany and Singapore,
amongst others, for inviting Multinational businesses to invest in India and be a part
of our nation's economic transformation.
To further strengthen the Chamber's international footprint by synchronizing the
efforts of its 14 International offices as well as 14 International BPCs and 77 Sector
and Regional Councils in India, ASSOCHAM has institutionalized the Global
Investors' India Forum (GIIF), under Mr. Rana Kapoor's Chairmanship, for
developing vibrant economic, social and cultural bonds between India and its
Strategic Partner nations. The Forum will provide a conducive and enabling platform
to Global investors for engaging and exploring investment opportunities in India to
actualize the vision of 'Make in India'.
58
Formation of ASSOCHAM
Global Investors' India Forum in March 2015
ASSOCHAM establishes
GLOBAL INVESTORS' INDIA FORUM
ASSOCHAM congratulates Prime Minister Narendra Modi for his successful visits to France, Germany and Canada
ASSOCHAM, through its 14 new International Offices (launched in September 2014), 14 International Business Promotion Councils, and 77 Sectoral and Regional Councils, under the
chairmanship of Rana Kapoor, is committed to contribute significantly to policy frameworks, vital reforms in business regulations, along with knowledge interventions, to improve
EASE OF DOING BUSINESS in India and attract and mobilize leading global investors, business leaders and Indian policy-makers to address investor appetite and concerns, and facilitate capital flows.
Our strategy for 'Make in India' requires urgent creation of new infrastructure.
The substantial enhancement in financing in the federal budget for highways, railways and
energy is a step in this direction. Work has begun on the development of Delhi-Mumbai
Industrial Corridor. My Government has pledged a stable and transparent tax regime,
reducing corporate taxes and implementing a single Goods & Services Tax in 2016.
India offers highly attractive investment opportunities for domestic and

international investors. Such investments are critical for fostering
entrepreneurship, innovation, improving infrastructure, creating jobs and
transforming India into a global manufacturing hub.
We recognize that the availability of a skilled work-force is a pre-requisite for manu-facturing

growth. My Government is giving the highest priority to the Skills India programme. We will
focus on promoting models of vocational training according to specific needs of local industry,
and to adopt best practices from abroad.
To actualize the vision of 'Make in India', ASSOCHAM is establishing the GLOBAL

INVESTORS' INDIA FORUM, which will galvanize investments into India through an
extensive network of International Business Promotion Councils and ASSOCHAM
offices/alliances across the world, and position India as the Number One
investment destination globally.
Narendra Modi
Rana Kapoor
Hon'ble Prime Minister
Chairman, ASSOCHAM Global Investors' India Forum
Key Objectives of the ASSOCHAM Global Investors' India Forum
ASSOCHAM Global Investors' India Forum: Network of International Business Promotion Councils and International Offices
GLOBAL: New International Offices and International MoUs signed

Cross-border
Business Development
Facilitate Investment and

Ease of Doing Business
Provide a common platform to pursue the
finest global companies and investors,
business market leaders, financiers and key
policy makers through Investor Road Shows
and summits in various countries to highlight
Strategic
Collaborations
Initiate strategic collaborations with
bilateral and multilateral development
organisations, International Capital
Markets, Government agencies, and
international chambers of commerce
Central International Desk

(ASSOCHAM Headquarters)
Lead outbound delegations to leading trade

and investment destinations across the
world and host inbound business
delegations and State visits to augment
NUMBER ONE
INVESTMENT DESTINATION
GLOBALLY
INDIA: International
Business Promotion Councils
AMERICAS:
India-North America
India-Latin American Countries
EUROPE:
India-EU
India-Russia and CIS
Policy
Advocacy
AFRICA:
India-Africa
Promote deeper dialogue and engagement for

ensuring effective governance, simpler
business regulations and creating a
transparent, conducive, and stable business
The pictorial presentation of the world map does not purport to be political and geographical maps of the world and India and is not drawn to scale
ASIA PACIFIC:
India-Gulf and Arab Nations
India-China
India-ASEAN
India-SAARC
For more information, please contact ASSOCHAM Global Investors' India Forum secretariat at giif@assocham.com
Corporate Office: 5, Sardar Patel Marg, Chanakyapuri, New Delhi - 110021 Ph: +91 11 4655 0555 Fax: +91 11 2301 7008 E-mail: believeinindia@assocham.com www.assocham.org
Advertisement published in The Times of India, Hindustan Times and Hindu Business Line on April 21, 2015 and the Indian Express & Financial Express and MINT on April 22, 2015
59
ASSOCHAM Global Investors' India

Forum Network
60
About ASSOCHAM
ASSOCHAM, acknowledged as the apex Knowledge Chamber of India, has emerged as a forceful, pro-active, effective and forward looking institution playing its role as a
catalyst between the Government and Industry. Established in 1920, the Chamber has been successful in influencing the Government in shaping India's economic, trade,
fiscal and social policies which will be of benefit to trade and industry. ASSOCHAM renders its services to over 4,00,000 members which include multinational companies,
India's top corporates, medium and small scale units and associations representing the interest of more than 400 Chambers and Trade Associations from all over India
encompassing all sectors.
ASSOCHAM has over 100 National Committees covering the entire gamut of economic activities in India. It has been acknowledged as a significant voice of the Indian
industry especially in the fields of Corporate Social Responsibility, Environment & Safety, Corporate Governance, Information Technology, Agriculture, Nanotechnology,
Biotechnology, Pharmaceuticals, Telecom, Banking & Finance, Company Law, Corporate Finance, Economic and International Affairs, Tourism, Civil Aviation, Infrastructure,
Energy Power, Education, Legal Reforms, Real Estate, Rural Development etc. The Chamber has its international offices in China, Sharjah, Moscow, UK and USA.
ASSOCHAM has also signed MoUs to set up partnerships with Business Chambers in more than 75 countries.
About YES BANK

YES BANK, Indias fifth largest private sector Bank with a pan India presence across all 29 states and 7 Union Territories of India, headquartered in the Lower Parel
Innovation District (LPID) of Mumbai, is the outcome of the professional & entrepreneurial commitment of its Founder Rana Kapoor and its top management team, to
establish a high quality, customer centric, service driven, private Indian Bank catering to the future businesses of India. YES BANK has adopted international best
practices, the highest standards of service quality and operational excellence, and offers comprehensive banking and financial solutions to all its valued customers.
YES BANK has a knowledge driven approach to banking, and offers a superior customer experience for its retail, corporate and emerging corporate banking clients.
YES BANK is steadily evolving as the Professionals Bank of India with the long term mission of Building the Best Quality Bank of the World in India by 2020.
61
Patel

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Make in India - Pressing the Pedal

Economics Knowledge Banking, YES BANK

YES BANK Ltd.

The Associated Chambers of

: +91 11 4655 0555

Make in India: Overview and Synopsis

Strengths of Indias Manufacturing Sector

Realizing Indias Comparative Advantage

Key Challenges for India's Manufacturing Sector

Analysis of Key Sectors: Short, Medium and Long Term Measures

Summary of Key Recommendations

ASSOCHAM Global Investors' India Forum

Make in India - Pressing the Pedal

1. Make in India: Overview

Make in India: Overview and Synopsis

Make in India - Pressing the Pedal

Pressing the Pedal Make in India

Ongoing reform efforts need to be

Make in India - Pressing the Pedal

Chart 1: Stagnant share of manufacturing in India's GDP (in %)

Chart 2: Share of manufacturing lags Advanced Economies (AE) and Emerging

Services, value added

Non Manufacturing Industry, value added

Manufacturing, value added (% of GDP)

Source: World Bank Database, YES BANK Limited

Make in India - Pressing the Pedal

Strengths of Indias Manufacturing Sector

Additional advantage stemming from abundant raw material

Rising wages in China is creating room for India

Make in India - Pressing the Pedal

Chart 3: Dependency ratio for India expected to improve up to 2040

Chart 4: Wages in India lower than offshore competitors

Average monthly wage, PPP (USD)

Source: UN Population Statistics, YES BANK Limited

Empirical Experience from Trade Theories

Make in India - Pressing the Pedal

Factor Prize EqualizationTheory

Chinas Export Miracle

Make in India - Pressing the Pedal

Chart 5: Rising wages in China

Chart 6: Changing composition of Chinas exports

Average yearly wages (USD)

Average yearly wages in

Share of light manufactures

Source: National Bureau of Labour Statistics of China, YES BANK Limited

Source: IMF, YES BANK Limited

Technology Gap Model (Posner, 1961)

Product Cycle Hypothesis (Vernon, 1966)

Make in India - Pressing the Pedal

3. Realizing Indias Comparative

Realizing Indias Comparative Advantage in

Chart 7: Significant share of export realizations with

Chart 8: Indias share of manufacturing employment less than

Merchandise exports to developing economies outside the region

Share of employment in Manufacturing Sector (%); 2013

Low & middle income

Source: World Bank Database, YES BANK Limited

Source: International Labor Organization, YES BANK Limited

Make in India - Pressing the Pedal

Textile and Garments

Make in India - Pressing the Pedal

Make in India - Pressing the Pedal