CII Policy Watch: Manufacturing

1policy watch

this IssueInside
Message From the
Director General............ 1
Chandrajit Banerjee,
Director General, CII
Industry Voices�� 26
Factfile�� 28
CEO Speak...........................................................2
Policy Barometer................................................20
CII ASCON Survey...............................................24
August 2015, Volume 4, Issue 3
Policy
T
he manufacturing sector is
centre stage in the Government
of India’s economic agenda. A
number of initiatives in the form of policy
amendments, procedural simplifications and
promotional measures have been taken in
recent months. As a result, manufacturing
growth seems to be gaining momentum.
While some traction has been observed
in the implementation of manufacturing
projects, there has been growth in industrial
activity also. Since April 2014, IIP growth
has been negative only once, compared to
six times in FY 2014, indicating a pickup in
demand following lower interest rates.
The ’Make in India‘ campaign launched by
the Prime Minister in September 2014 is
one of the most powerful and visionary
initiatives launched. A notable aspect
of the mission is the thrust on ‘Ease of
Doing Business’ and creating a ‘Liberal
Investment Regime’. To take this forward,
a Joint Task Force has been constituted
between the Department of Industrial Policy
Promotion (DIPP), Ministry of Commerce
Industry and CII. The Task Force would
develop an action plan for manufacturing,
work closely with the Central and the State
Governments for creating a conducive
environment for manufacturing; prepare an
integrated policy roadmap for the critical
subsectors of manufacturing; and create a
success model by building a framework for
manufacturing competitiveness.
CII is deeply engaged with the ‘Make in
India’ campaign and is supporting the
Government’s reform agenda to attract
investments in the manufacturing sector.
A detailed State report has been prepared
for each State, containing the status of its
manufacturing sector, emerging areas and
potential and an action plan with specific
reference to ease of doing business. CII
has formed a Task Force on Ease of Doing
Business to specifically help catalyse this.
In addition, DIPP has partnered with CII for
organizing workshops on ‘Make in India’
across different States in India to create
awareness about the new initiative. 23
workshops will be organized covering 7
States from Northern Region, 5 States from
Southern Region, 4 States from Western
Region and 6 States from Eastern North
East Region.
As we strive to converge our work-plan
around CII’s theme for the year – ‘Build
India - Invest in Development, A Shared
Responsibility’ - a major focus would be
on building manufacturing competitiveness.
We would articulate a framework which
serves as a template for the success
of manufacturing companies in India.
This will entail identifying individual
building blocks for achieving manufacturing
competitiveness and identifying relevant
levers and interventions.
For this, CII, through its Centres of
Excellence, aims to impact at least 5000
companies in the next two years across
various dimensions of manufacturing
excellence. CII had pioneered the Quality
Movement in the 1980s, and is committed
to drive the second competitiveness
movement under ZED (Zero Effect, Zero
Defect) to support the ‘Make in India’
campaign. The CII Institute of Quality
has launched a national ZED campaign.
This will serve as a basis for capacity
building as well as a guide for progression
towards world class for MSME and large
companies.
Other than the above initiatives, CII has
an ongoing focused policy advocacy
agenda for the overall manufacturing
sector along with sector specific issues
and recommendations which will help in
enhancing the share of manufacturing.
As the ‘Make in India’ campaign
gains momentum, we are hopeful that
manufacturing in India will undergo
a transformation. Measures taken to
improve ease of doing business and
attract investment in manufacturing and
infrastructure will facilitate revival of the
capex cycle and accelerate economic
activity. A thrust on innovation will spur
new products and perhaps even new
industries. Indian industry will steadily
integrate much deeper with global supply
chains. The manufacturing sector will
become an employer of choice and regain
its position as the engine of economic
growth for the country. n
Chandrajit Banerjee
Director General
Confederation of Indian Industry
Focus: Manufacturing

2 policy watch
CEOSpeak
The manufacturing sector in India has
received a huge boost with the launch
of the seminal ‘Make in India’ campaign
of the Government. This one vision has
created a unifying aspiration across the
country and 25 sectors have been identified
as catalysts for making this a reality. The
230-odd specific recommendations for
the immediate, short and medium terms
that have been identified as part of
the initiative, along with a strategy for
improving the ease of doing business and
enhancing skills will serve as foundation
stones for a robust framework to accelerate
growth for Indian manufacturing as well as
for the Indian economy as a whole.
To realize the ‘Make in India’ vision of
taking manufacturing growth to 25 per
cent of GDP by 2022, the sector will
need to grow at 14 per cent year-on-year
(YoY) for the next 7 years. Therefore, it is
imperative for India to address the issue of
manufacturing competitiveness and attract
higher investments in the sector.
So the root question is, what strategy should
be followed to promote rapid manufacturing
led growth?
The CII Manufacturing Council is committed
towards undertaking the initiatives that will
help the manufacturing industry claim
its rightful place in the global arena.
As part of the work programme, we are
in the process of evolving a recipe for
success that aims to build manufacturing
competitiveness and take manufacturing
growth to the next level. This would require
specific interventions to be undertaken
at three levels: the domestic eco-system,
the global eco-system and at the level
of the firm.
The Domestic Eco-system
The Government has done much in the
past 15 months to create an enabling
environment for business and reviving
investment in manufacturing. After the
launch of the ‘Make in India’ initiative
in September 2014, there was a 48 per
cent increase in FDI equity inflows during
October 2014 to April 2015 over the
corresponding period last year. A positive
response has been received from within
the country and globally for the ‘Make in
India’ initiative. Several countries such as
Japan, China, France and South Korea have
announced their intention to make huge
investments in India in various industrial
and infrastructure projects.
The slew of measures taken as part of ease
of doing business has resulted in significant
policy and procedural streamlining. These
include initiatives such as the eBiz Portal,
integrating 14 Central Government services,
simplifying the process of starting a business,
making the process of obtaining environment
and forest clearances online, simplifying
labour laws by streamlining the cumbersome
compliance process by launching the Shram
Suvidha portal.
Along with pushing for the pending reform
agenda, the progress on some 230-odd
specific recommendations across sectors,
for the immediate, short and medium terms
that were identified in December 2014
are constantly being monitored to keep
the ‘Make in India’ mission on track. The
Government has promised to make rapid
Creating A Recipe For Success For
’Make in India’
Anant J Talaulicar
Chairman, CII Manufacturing Council and
Vice President, Cummins Inc. and
Chairman Managing Director,
Cummins India Group
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3policy watch
CEOSpeak
strides towards announcing sectoral policies
for steel, chemicals and textiles which are
much-awaited. As the action moves to
the State-level, percolation of policies and
procedural simplification will need to be
accelerated. CII will play a central role in
facilitating this progress.
In our view, the ‘Make in India’ strategy
needs to comprise a policy mix that not
only encourages large scale manufacturing
but takes along the Medium, Small and
Micro Enterprises (MSMEs) in the process
of development. This would require defining
a strong manufacturing vision/roadmap for
strategically championing focus industries
and creating requisite enablers to spur
India’s manufacturing growth both for
advanced manufacturing (auto, defence,
electronic manufacturing etc) along with
labour intensive industries (textiles, leather,
etc).This would make our progress inclusive.
CII is actively engaging with nodal Ministries
for seeking support in clearing the issues
that have been affecting the growth in the
various identified sectors. To give focused
policy steer, a joint task force has been
constituted between DIPP and CII to support
the realization of ‘Make in India’.
Betting on Innovation and Technology:
Developing innovation and technology has
been identified as an important strategic
step for Indian manufacturing. This
would require increasing RD spend by
providing incentives for RD (including
design and procurement of IP) that would
help industry translate research outputs
to commercial production; incentivizing
patent application and commercialization;
defining clear guidelines which enable
manufacturing companies to match world
class standards and ensuring conformity
of Indian standards with global norms,
to name a few.
Skills and Employment: A skilled
workforce is a critical factor for the success of
‘Make in India’.While CII has been delighted
to see the focus on the entire spectrum
of the talent pipeline unleashed through
the recently launched ‘Skill India’ mission,
the new Ministry of Skill Development and
Entrepreneurship as well as by giving a
fillip to the network of IITs and IIMs, there
is a need for deeper understanding of the
nature of ’skills constraints’ on the growth
of manufacturing.This will be key to reaping
our demographic dividend.
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CEOSpeak
Building A Conducive Export And
Global Eco-system
For India to become a preferred manufacturing
hub, urgent attention is required on
integrating India with global supply chains.
Increasing our share of manufactured
exports will be a critical aspect of this. To
pitch for a larger share in global exports
we will need to leverage FTAs and other
agreements by strategically negotiating
tariff lines where we want market access.
New trade agreements will need to be
more strategically negotiated taking into
account the interests of India and Indian
industry and create level playing fields of
international trade.
Moving forward, India’s focus should be to
ensure the efficient implementation of the
initiated and defined industrial zones (SEZ,
NIMZ and industrial parks), smart cities
and industrial corridors projects by fostering
greater alignment across the Centre, State
and local bodies and addressing the current
impediments to project execution such
as land acquisition, faster clearances and
providing ready infrastructure for business
to be conducted. Drastic improvement in
road and railways connectivity to ports
should be a top priority for improving India’s
competitiveness.
Policy reforms for simplification of taxes
and promotion of exports would further
boost growth. Brand India also needs to
be strengthened across the globe for an
increased acceptance and preference for
’Make in India’ products.
Firm-Level Competitiveness
In the long term, however, the one critical
differentiator that will be central to the
recipe for success for ‘Make in India’ will
be the ability of individual companies to be
competitive and many of these factors are
under our control. CII has always been at the
forefront in helping guide companies in their
quest for manufacturing competitiveness,
best embodied through the nine Centres
of Excellence around the country.
Building on this wealth of knowledge
and the bank of case studies, the CII
Manufacturing Council has identified
parameters of excellence - both functional
and in the ways of working (WOW) – that
create the secret sauce for manufacturing
competitiveness. While the functional
dimensions – marketing, technology, supply
chain, operations, finance, human resources,
information technology - are intrinsic to all
companies, it is our belief that the WOW
factors – whether they be product, process or
governance standards related, they will act
as genuine accelerators to competitiveness
and give companies a clearly discernible
edge amongst their peers.
In conclusion, a good start has been made
and it’s an amazing window of opportunity
that has been presented to all of us in India.
Going forward, the recently announced
measures, once implemented, will prove to
be highly beneficial in pushing manufacturing
growth in the country. Given that India
enjoys favorable demographics, availability
of natural resources, huge domestic market
and is increasingly becoming the cynosure
of global investment attention, this is one
of the best of times to bring about a
manufacturing revolution in the country. I
would request that each one of us actively
engage with our teams as well as CII and
the Government to drive India in becoming
a vibrant, growing, fair, inclusive, market
oriented economy that creates wealth
for all its citizens and those around the
world. n
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Source: Bachoshutterstock.com

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CEOSpeak
About 50 years ago,the manufacturing sector’s
share of global GDP was roughly 50 per cent
more than what it is today. As an engine
of growth, manufacturing was more of an
afterthought, as countries and economies shift
employment from manufacturing to services
and beyond. Yet a major transformation is
under way, as ‘the fourth industrial revolution’
is about to begin.
The concept of Smart Manufacturing isn’t
entirely new to the industry (e.g., machine-
to-machine), but certainly recent technology
advances allow us to bring together data
capture, connectivity, remote control and
most importantly, analytics to deliver on the
promise of a cyber-physical manufacturing
sooner than we may anticipate.
The vision of Smart Manufacturing or‘Industry
4.0’ is for ‘cyber-physical production systems’
in which sensor-laden ‘smart products’ tell
machines how they should be processed.
Processes would govern themselves in
a decentralized, modular system. Smart
Innovation funding is one of the core priorities
of India’s Five-Year Plan (2012‑2017) which
provides for an increase in public and private
RD investment to two per cent of GDP. In
2011, the ’cyber-physical systems innovation
hub’ project was launched under the
auspices of the Ministry of Communications
and Information Technology to conduct
research into a variety of areas, including
humanoid robotics. Both the Fraunhofer-
phone, luxury and automobile brands, among
others, have set up or are looking to establish
their manufacturing base in the country. The
Government’s impetus on developing industrial
corridors and smart cities aims to ensure holistic
development of the nation.The corridors would
further assist in integrating, monitoring and
developing a conducive environment for
industrial development and will promote
advance practices in manufacturing.
A range of technological changes, including
advanced robotics, large-scale factory
digitization, 3D printing, etc are going to
shift the manufacturing paradigm in times to
come. Digital factory is no longer a fantasy and
the focus should not just be on smarter and
efficient production, but also creating policies
on development for the skills and capacities of
the workforce to handle increasingly complex
products and individualized demand. Even
today, according to a study by the Zebra
Tech Company, Indian businesses are world
leaders in terms of take-up and use of IoT
technology.
Smart Manufacturing:A Revolution In The
Making
Jayant Davar
Co-Chairman, CII Manufacturing Council and
Co-Chairman Managing Director,
Sandhar Technologies Limited
Source: a-imageshutterstock.com
Gesellschaft and several top Indian research
centres are participating in this project in
an advisory capacity.
With the launch of the‘Make in India’ initiative,
Narendra Modi, the Prime Minister of India,
aims to give global recognition to the Indian
economy and also place India on the world
map as a manufacturing hub. Several mobile
Indian manufacturing industry
should seek to maintain its global
market leadership by consistently
integrating information and
communication technology into
its traditional high-tech strategies
so that it can become the leading
supplier of smart manufacturing
technologies. Social machines,
thinking factories, global facilities,
smart products and virtual
production shall advance productivity
by making us agile and responsive
to market needs. This intelligence
also preempts and mitigates safety
risks – key, if world-class businesses wish
to make in India.
The challenge, apart from the expensive
infrastructure improvements, is that the
smart factories will only become a reality
when everyone works together; if different
factories create their own proprietary systems
we, as a nation, will not succeed. n
embedded devices start working
together wirelessly either directly
or via the internet ‘cloud’ – the
Internet of Things (IoT) - to once
again revolutionize production.
By combining components of
the cyber and physical world,
industry is moving towards making
manufacturing systems flexible and
integrated, with an increased focus
on collaboration. New technology
applications will give us the ability
to access and understand every
measurable parameter in our plants
and their interactions.
In Germany this impending revolution
is known as 'Industry 4.0', with the
Government shoveling close to €500
million (£357 million) into developing the
technology. In China, Japan, South Korea
and the USA, big steps are being made to
create global standards and systems that
will make factories smarter.

6 policy watch
CEOSpeak
Steel demand in India in FY 2015 was 76
million tonnes (MT). It is projected that in a
business as usual scenario, the demand will
increase to 155-170 MT by 2025 at a CAGR
of a little over 7 per cent. With the ‘Make
in India’ push, steel demand can touch 250
MT per annum (p.a.). The Government has
therefore embarked on an ambitious project to
ensure 300 MT p.a. installed capacity in India
versus the existing capacity of 100 MT p.a.
Creating A Level Playing Field For
Indian Steel Industry
Globally, there is an excess capacity of 580
MT over nameplate capacity and 240 MT
over effective capacity. In addition to this,
several steel exporting countries have had
the relative comparative advantage of their
domestic currencies depreciating rapidly in
the recent past. The Indian Rupee has been
relatively stable. In response to this, exports
have jumped, prices have dropped and many
countries have put up trade barriers in one
form or another. While we pride ourselves
as being the fourth largest steel producer
in the world, China produced more than ten
times what we did and last year exported
more steel than we produced! Besides
dropping prices, India has seen a significant
increase in imports. Imports in Q4 FY 2015,
have increased by 96 per cent over Q4 FY
2014. This increasing trend has continued
in the current quarter too. Further imports
from FTA countries are a large percentage
of the total.
In such a scenario, both industry and
Government have to act quickly and
significantly. Cost reduction measures have
to be pursued even more aggressively. Indian
industry has a severe disadvantage in interest
rates. It varies from 2 to 6 times compared
to that paid by major steel producing and
exporting countries. Unfortunately, in the
recent past domestic steel demand growth
has been negligible - less than 1 per cent
in FY 2014 and around 3 per cent in FY
2015. This is much lower than growth rates
of around 6 per cent that we saw during the
period 2009-2013. While the Government
is taking action to increase steel demand
through the ‘Make in India’ campaign, this
will take time and Government must act in
the interim to ensure that India does not
become the global market and dumping
ground for steel. Surely we do not want
the ‘Make in India’ campaign to become
‘Make in India with foreign steel’ campaign.
Many countries have restricted imports into
their countries and so should we, given the
circumstances described above.
Restriction of imports, to counteract the un-
level playing field, can be done in various
ways.The Government has recently increased
the import duty marginally from 7.5 per
cent to 10 per cent. There is a scope to
increase this further without hurting the
downstream industries as steel prices have
dropped sharply.The Government should also
explore and implement safeguard duty, anti-
dumping duty and non-tariff barriers. Many
countries have done this. Anti-dumping and
Countervailing duty in the US for hot rolled
plates is 54 per cent; it is 40 per cent for hot
rolled coils in Indonesia and 22 per cent for
non-alloyed flat products in Thailand.The time
has come for us to act in this direction.
Raw Material Pricing
In the recent past the Indian steel industry
has had the serious disadvantage in that
while Indian steel prices fell in line with
international steel prices, the iron ore prices
did not follow the same trend. This was due
to several factors including supply shortage
due to Supreme Court restrictions in iron
ore mining. Steel export prices from China
fell by 70 $/T from January 2014 to Dec
2014 and Indian steel prices fell by 64 $/T
during the same period. While iron ore fine
prices in CFR China fell by 61 $/T, Odisha
A Shared Vision Essential For Realizing The
Ambitions Of The Steel Sector
Firdose Vandrevala
Co-Chairman, CII National Committee on Steel
and Executive Vice Chairman,
Essar Steel India Limited
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CEOSpeak
After much deliberation and delay the Mines
and Minerals (Development and Regulation)
Act, 1957 has been revised and passed by
the parliament. The new Mines and Mineral
Development and Regulation (Amendment)
Act, 2015 aims to legalize the system of
auction of mines to enhance transparency
in mineral allocations by removing discretion.
The passing of this Act has been considered
a welcome change in the sector and it
is expected to bring an increased share
of revenues to the Government from the
mining sector.
Under the Act, the tenure of the mineral
concession has been increased from the
existing 30 years to 50 years, thereafter
the mining lease would be put up for
auction. Addressing the issue of second
and subsequent renewals which has led to
closure of a large number of mines, the Act
has provided that the mining leases would
be deemed to be extended from the date
of their last renewal to 31 March, 2030
(for the captive miners) and till 31 March,
2020 (for the merchant miners) or till the
completion of the renewal already granted,
if any, whichever is later. It is expected that
this would immediately permit such closed
mines to start their operations.
There are a few crucial additions/exceptions
which have been added with the expectation
of improving the mining laws of India and
iron ore fines remained almost constant.
Since then there has been some reductions
in the Indian prices.
We are short on coking coal. It is, therefore,
most surprising and disappointing that
the Government has imposed import duty
on Coking Coal. There are already serious
disadvantages to the Indian steel industry
and this has further compounded the
problem on cost competitiveness.
Raw Material Availability
The output of iron ore has still not picked
up. It fell 38 per cent between FY 2010 to
FY 2013 and rose 9 per cent (Base FY 2010)
between FY 2013 and FY 2015. While the
new Mines and Minerals (Development and
Regulation) Act has been promulgated, there
are still concerns over clarity on some issues.
The Government should expedite the same
and ensure that production ramps up and
exceeds levels achieved 5 years ago.
Another raw material that is often out of
sight is natural gas. Based on commitments
given by the Government, approximately
10 MT of gas based iron production has
been put up in the country. Due to several
factors like lower than expected production
from new gas fields, preference given to city
gas distribution system and other industrial
Mining Sector Has The Potential To Create
10 Million New Jobs By 2025
Narendra Kothari
Chairman, CII National Committee on Mining
and Chairman Managing Director,
NMDC Limited
segments, the steel industry could operate
only 25 per cent of the installed gas-based
capacity. Treating gas based steel industries
at par with power sector and allocating gas
to both these sector from a universal pool is
an option Government should consider.
Infrastructure Support
For every tonne of steel produced,
approximately four metric tonnes of material
needs to be transported. The freight yield
(USD/Tonne-KM) for Indian railways is
approximately 40 per cent higher than that
in China.This extra cost ultimately translates
to higher cost of steel production. India
needs to achieve the economies of scale and
efficiencies achieved in developed countries
in the logistics sector.
Alternate transport solutions like iron ore
fines transport through slurry pipelines
can provide transportation at 80 per cent
lower cost than current railway freight. Such
technologies need to be encouraged by the
Government by way of speedier regulatory
clearances.
Improving Long Term Sustainability
Steel industry is a capital intensive industry
with long gestation periods, hence long
term sustainability should be given due
consideration. It is estimated that around 20
per cent EBIDTA margin is required to ensure
long term sustainability of the industry so that
adequate funding is available for innovation
and capital expenditures. Unfortunately only
a handful of companies worldwide, mostly
established companies with linkages to raw
materials, are operating with such margins.
With severe squeeze in margins and interest
payments on borrowed capital starting in, the
debt to EBIDTA ratio of the steel industry
has almost tripled to 18 per cent between
FY 2010 and FY 2015.
RBI has tried to address the issue of high debt
cost for industries with long gestation period
through the refinancing policy guideline
which is being popularly termed as the
‘5/25’ structure. Industry now requires active
support of banks and financial institutions to
implement this policy quickly.
Conclusion
Steel industry is considered a core sector
industry. No nation can grow if it is dependent
on other countries for this basic material.
Unfortunately the scenario today does not
give any confidence to investors or to lenders
for investing in steel business. Joint action
by all stakeholders is urgently required to
ensure the health of existing investments and
encourage new capacity building. n

8 policy watch
CEOSpeak
putting a check on illegal mining license and
improving the lifestyle of the communities in
and around mining lands. The Act has given
considerable rights to State Governments
in granting mining lease and at the same
time provided for relevant interference and
approval from the Central Government on
selected matters.
Along with regularizing mining auction,
the Act also aims at developing the
backward areas of the country through
mining projects and bringing those areas
into the mainstream society. There is a
provision to establish District Mineral
Foundation (DMF) in the districts where
mining takes place. There is a separate
provision for contribution to the DMF
not exceeding the royalty rate in the
respective minerals.
To promote explorations, the Ordinance
proposes to set up a National Mineral
Exploration Trust (NMET) which will be
financed by an amount equivalent to 2 per
cent of the royalty paid by leaseholders. This
would allow the Government to have a
dedicated fund for undertaking exploration.
In addition, the transferability provision (in
respect of mining leases to be granted
through auction) would permit flow of
greater investment to the sector and increase
efficiency in mining.
In respect of ten minerals in Part C of the
First Schedule, the Amendment removes
the need for such ‘prior approval’ from the
Central Government, thereby making the
process quicker and simpler.
In order to bring a check on illegal mining,
the penal provisions have been made further
stringent. Further, a provision has been
made for constitution of special courts by
the State Government for fast track trial of
cases related to illegal mining.
Concerns / Contention of The Indian
Mining Industry
Mining sector has the potential to increase
its share in GDP to as much as 5-6 per
cent in the next 5 years, and create 10
million additional jobs by 2025 under the
‘Business As Usual’ (BAU) scenario (total of
16 million jobs in 2025) under a favorable
policy environment. While the recent MMDR
Amendment 2015 has introduced some
clarity, it has not initiated mining activity
in the country. Given the sector’s immense
potential in reviving growth and generating
employment, CII would like to recommend
the following for reviving the mining sector
in the country:
Address the concern of India’s lack of•
exploration
Provide clear guidelines and review––
mechanism to ensure effective
implementation.
Provide a platform for improved––
access of data and mentorship from
PSEs to private sector.
Incentivize exploration as a viable––
activity as only 5 per cent of India
has been explored. Exploration by
private sector can be facilitated
through an Exploration Fund for
scarce minerals.
Develop robust implementation•
framework for auction
Study 4-5 cases for end-to-end––
implementation from auction to
production for allocation of new
mines, based on current MMDR Act
for identification of best practices.
Undertake progressive steps for––
implementation of MMDR at State
level to overcome delays in extension
of leases.
Protection of sustainable margin•
High taxation on mining: Rationalize––
taxation that can get as high as 80
per cent in some cases.
Increase royalty and imposition of––
additional DMF (District Mineral
Foundation), NMET (National
Mineral Exploration Trust), and CSR
(Corporate Social Responsibility).
Improve logistics carrying capacities•
mainly in railways
Long term plan of creating a––
multimodal logistics network for
optimizing freight cost for bulk
industry needs to be developed.
Schemes to attract non-rail companies––
to create lines has been announced
by IR, but there is a need to promote
it, for it to gain traction. n
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CEOSpeak
What is the present status of the
Indian capital goods and engineering
sector? What are the growth prospects
in your perspective?
The capital goods sector serves as a
strong base for its engagement across
sectors such as engineering, construction,
infrastructure and consumer goods. For the
past few years, the sector has witnessed a
significant slowdown in production. Poor
demand from infrastructure and industrial
sectors and a lack of fresh investments
continued to weigh down on the capital
goods sector’s performance.According to the
Index of Industrial Production (IIP) data, after
witnessing a contraction for three consecutive
years from FY 2012 to FY 2014, the capital
goods sector has registered a positive growth
of 6.2 per cent in the FY 2015.
Going forward, on the back of the astute
policy reforms and the strong commitment on
‘Make in India’ by the present Government,
the industry is hopeful that a springboard
for renewed growth is well in place and the
capital goods industry is optimistic about
witnessing a revival in growth momentum in
equipment, plastic processing machinery,
printing and packaging equipment which has
usage across varied industries such as oil and
gas, power, defence, railways, infrastructure
and textiles.These sub-sectors deploy different
technologies and face different challenges.
As per the 12th
five year plan projections, the
capital goods industry production is projected
to reach USD 113.5 billion by 2017. However,
at present, the production of capital goods
industry in India is USD 32 billion and the
capacity utilization varies between 40-60 per
cent depending upon the sub-sector. On one
hand, there is excess capacity and on the
other hand, India imports almost 35-40 per
cent requirement of capital goods.
Several other factors such as lack of demand,
issues of inverted duty structure, market
access, increase in imports due to FTAs
and other agreements, import of second
hand machinery, high interest rates, lack
of technology availability, upgradation and
modernization etc, have made it difficult
for the industry to function within the
current economic environment. Lack of
support infrastructure in the form of a
Capital Goods And Engineering: Key For
’Make in India’
Vipin Sondhi
Chairman, CII National Committee on
Capital Goods Engineering and
MD CEO, JCB India Limited
railways etc are expected to have a positive
cascading impact for the domestic capital
goods sector.
What, in your view, is making the capital
goods and engineering sector more
complex and challenging? What are the
key issues faced by the sector?
The capital goods sector comprises seven
different sub-sectors:heavy electrical and power
equipment, textile machinery, construction
equipment, machine tools, process plant
Source: sergeisimonovshutterstock.com
the sector in the next half of 2015.
The recent announcements of the
Government, such as the Plug and
Play projects in core infrastructure
sectors and to start with 5 Ultra
Mega Power projects (UMPP) will
be good for the capital goods
industry which has been hurt by
subdued order finalization in the
domestic market. Projects such
as ‘Electricity to all households
by 2022’ is expected to increase
investment in the power sector
which will translate into increased
opportunity for the domestic
capital goods sector. Also various
initiatives in infrastructure such
as ‘Housing for all by 2020’ and
announcement of projects such
as 100 Smart Cities, Bharat Mala,
Sagar Mala, Industrial Corridors,
Make in India for defence and
strong indigenous supply chain
is another key barrier.
How are initiatives like
‘Make in India’ taken by
the Government helping
the sector? Do you think
the campaign will help the
sector grow?
The ‘Make in India’ campaign
underscores a strong commitment
on the part of the Government to
revive and accelerate manufacturing
growth in the country. As the
capital goods sector serves, in
many ways,as the engine of India’s
industrial growth, a strong capital
goods sector is critical to achieving
the aspiration of the ‘Make in
India’ campaign.

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The Department of Heavy Industry is partnering
with industry leaders for seeking remedial
measures that need to be adopted to ensure
the success of ‘Make in India’.As part of their
commitment, the Ministry of Heavy Industries
and Public Enterprises has constituted a ‘Joint
Task Force’ between the Department of Heavy
Industry (DHI) and CII which aims to evolve a
roadmap for the capital goods sector.
The Ministry is also actively participating and is
pushing for fast tracking the formulation of the
National Capital Goods policy. The proposed
policy aims to increase the share of capital
goods contribution from present 12 per cent to
20 per cent of total manufacturing activity by
2022. Such initiatives will surely help creating a
framework which will carve the path of growth
for the industry in times to come.
What steps do we need to take to
make ‘Make in India’ possible?
The capital goods industry has the potential
to be a growth driver of the manufacturing
sector in India. It is increasingly being
recognized that several initiatives are
required for development of demand,
both for domestic and export market. At
present the industry is facing the issue of
underutilization of capacities which were
created during the 12th
Five Year Plan.
Domestic demand needs to be sourced
by local industry to address the same. The
‘Make in India’ campaign has come as a
big boost to the manufacturing sector and
the capital goods sector is at the core
for all manufacturing. Following are the
key policy support advocated by the CII
National Committee on Capital Goods and
Engineering:
Focused policy framework to facilitate•
creation of an enabling environment
for the capital goods sector.
Fast track implementation of approved•
projects announced in infrastructure and
power projects.
Correction of anomalies due to inverted•
duty structure.
Preference to domestic capital goods•
companies for mega infrastructure
projects.
Review PSE contract conditions and•
introduce purchase preference policy.
Regulate import of low-quality second-•
hand machinery.
Enabling schemes for technology transfer,•
upgradation,innovation and development
of indigenous technology.
The need of the hour is to build a brand
of our own in manufacturing, showcase
our strengths and send a common message
across that, we in India, are ready to
manufacture products that are globally at
par in order to attract global investors.
The industry needs to partner with Government
and gear up to position itself as one of the
world’s major suppliers by integrating and
becoming part of global value chains. n
The chemicals industry is vital for the
sustainable development of any national
economy. Chemical products are essential
inputs for almost every other field
of commercial enterprise. Without a healthy
and vibrant chemicals industry everyone
else’s success is diminished.
India’s chemicals sector has the potential
to grow to a USD 290 billion business
by 2017 from its present value of USD
108 billion. It now accounts for 3 per
cent of the global chemicals industry.
Prime Minister Modi’s signature
campaign `Make in India‘, along with
the Swachh Bharat (Clean India) and Smart
Cities initiatives, can be the perfect catalyst
to unlock the industry’s potential. `Make in
India‘ has galvanized the interest of in-bound
investors in the automotive, pharmaceuticals,
energy, and infrastructure sectors. We
know for example that Japan intends
to invest in India to boost automobile
manufacturing. This directly translates
into opportunities for Indian chemicals
revenues to USD 80 billion in the coming
decade. However, the immense potential of
the specialty chemicals industry may well
remain underutilized for want of appropriate
consumption standards. These are essential
to enhancement of safety and performance
of the world one lives in. CII, through the
Sub-Committee on Standards Regulatory
Regimes, has been closely working with
the concerned stakeholder group on this
subject and considerable progress has
been made, particularly in the area of
flame retardants. Draft standards for flame
retardants in technical textiles are already
in place and CII is committed towards
delivering the objectives of performance
and safety contemplated by these standards.
The specialty chemicals business will also
expand as a result of the implementation of
these standards. More areas across multiple
sectors need to be reached out though.
While the opportunities are great, there
are hurdles that impair growth and blight
India’s attractiveness as an investment
The Indian Chemicals Industry: Enabling
Industries To ‘Make in India’
Nadir B Godrej
Chairman, CII National Committee on Chemicals
and Managing Director,
Godrej Industries Limited
companies with automotive solutions. Indeed
all these sectors will need chemicals.
As the supplier of vital feedstock to other
manufacturing sectors, the chemicals
industry can drive growth across the
spectrum and ensure economic momentum is
sustained.
Currently a market of USD 20 billion,
India can quadruple its specialty chemicals

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Where does the Indian textiles industry
stand today and what are its unique
offerings?
The Indian textiles industry is one of the
largest in the world. It is a USD 100
billion industry. The domestic consumption
is estimated at USD 67 billion whereas
the exports are about USD 33 billion.
The domestic textile and apparel industry
in India is estimated to reach USD 141
billion by 2021. In addition to providing
one of the basic necessities of life, the
textiles industry in India plays a vital role
through its contribution to industrial output,
employment generation, and the export
earnings of the country.
country after agriculture. The industry
provides direct employment to more than
45 million and indirect employment to
some 110 million.
The textiles industry is a powerful means
of inclusive growth. The industry provides
the most unique opportunity of gainful
employment close to home to the rural
population, particularly women. Talking of
the rural population, with the increased
need for mechanised farming, the garment
sector has better wage earning potential
for those involved in farming. Across the
country, there are innumerable stories of
women from deprived backgrounds who
have become successful entrepreneurs and
Inclusive Growth Driven By An Integrated
Value Chain
Manikam Ramaswami
Co-Chairman, CII National Committee on
Textiles and Chairman Managing Director,
Loyal Textile Mills Limited
The Indian textiles industry is the largest
employer in the manufacturing sector
and the second largest employer in the
destination. On various fora, CII has shared
its short-term, medium-term and long-term
recommendations for helping the industry
to claim its rightful place.
India is currently challenged due to
inadequate availability of feedstock and
building blocks in comparison to the
competing countries blessed with oil and
gas resources. India imports much of its
feedstock, which poses a huge imbalance
in ability to sustain growth. In this regard,
CII’s Sub-Committee on Feedstock examined
ten important raw materials and released
specific recommendations in the CII Report
on ‘Key Feedstock for Specialty Chemicals’
in 2013. It is encouraging to note that the
Ministry of Chemicals Petrochemicals is
in the process of reviewing the Petroleum,
Chemicals Petrochemicals Investment
Regions (PCPIR) policy. Such review,
amongst other things, was recommended
by the CII Report as well. With this
progressive step in place, the industry is
hopeful that the Government will consider
other recommendations on the subject
too including integrating upstream and
downstream industries and special pockets
for specialty chemical manufacturing.
Specific policy directions on encouraging
utilization of alternate feedstock will also
be welcome.
The industry keenly awaits the release of
the National Chemical Policy. CII, through
its National Committee on Chemicals, made
specific recommendations on key areas
including evolution of a comprehensive
‘Chemicals Management Framework’
investment; investment in RD with a focus
on sustainability and green technologies;
enhancement of the social image of the
industry; promotion of human resource
development and need based skill sets for
the chemical industry and inventorisation
of chemicals manufactured and used in
the country.
The industry continues to suffer on account
of inverted duty structure, often emanating
from FTAs. While some issues have been
considered, most are pending and need quick
redressal for ensuring that manufacturing in
India remains feasible.
There is a need to bridge the
knowledge gap between business and
government. CII’s Chemistry Everywhere
campaign is one way in which we’re seeking
to do that. It brings together experts from
business, Government and academia, and
encourages knowledge exchange. Through
lectures, conferences and seminars, it
provides a platform to highlight the
opportunities that lie untapped in India’s
chemicals industry.The campaign also seeks
to raise awareness among those creating
value in all other parts of the manufacturing
sector and of the innovations taking place in
our country. Ultimately it is to the benefit of
us all to share our experience and expertise
to find solutions for India in India.
Chemistry is a branch of science which has
seeded an entire industrial sector. And a
sector that is vital to every other sector. Its
significance often goes unremarked, its
contributions unsung. Yet it is with us
every day, improving the quality of our
lives constantly. Chemistry is everywhere. n
Source: Mrs_yashutterstock.com

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won respect in society and in their families
through weaving, garment embroidery and
other such skills. They have also motivated
other groups of women to achieve social
and economic inclusion.
Can you elaborate on the ways in
which the Indian textiles industry can
contribute towards ‘inclusive growth’
of the country?
In a predominantly agriculture based
country like India, where 30 per cent of
the rural population still lives below the
poverty line, there is an urgent need to
promote activities which help farming
families have a second and a steady source
of income not dependent on the vagaries
of nature. Fortunately, given the huge fabric
base available in India and the global
competitiveness of Indian textiles, garment
industry, if tapped correctly, can prove to be
a virtual Kaamadhenu. Garment industry
is a non-polluting, non-power intense, easy
to learn, easy to work industry where
even tiny units can have their own skill
development initiatives. Such initiatives are
already in place in many units, which are
able to create reasonably skilled workforce
capable of producing quality goods at
internationally competitive costs within
60 days and without any Government
assistance.
What are CII’s recommendations for
India to claim its rightful place as a
Global Textiles Hub?
I would like to reiterate CII’s vision of
creating a strong and competitive textile
and apparel manufacturing value chain with
employment and value addition in focus.
It aims to create a platform for sharing,
nurturing and disseminating information
on industry best practices and assisting
industry and Government in making
India a preferred destination for textile
manufacturing.
Given the unorganized nature of the textile
industry, the ‘hub spoke’ model provides
an attractive cost proposition to enterprises
while allowing vendors to deliver seamless
services.
Standalone small units operating in villages
when attached to a central unit, which acts
as a hub and feeds the spokes, can create a
huge value out of the combination. A large
company with capability to export/market
the finished garments which becomes the
hub, will take care of fabric sourcing and
selling of garments, perform jobs that
need special purpose machines, send the
semi-made components to the satellite
With a focused effort and with the
understanding of the immense potential of
this model to create rural jobs for women,
this model can be scaled up, combining
various Government schemes as it would
result in a hugely competitive garment
manufacturing supply chain.
The total cost of the garment thus made
will be hugely competitive and of good
quality as the large unit gets involved in
improving the training and quality culture
of the satellite units.
Currently, India has a mere 3 per cent
of the global market share in garments
in spite of the advantage of availability
of cheap fabrics. China, on the other
hand, has a gigantic 35 per cent market
share. With China becoming an expensive
option, we can look at easily increasing
our exports. A mere 10 per cent drop in
China's exports can provide us with an
opportunity to double ours.
In order to effectively position India as a
Textiles Global Hub, it is essential to:
• Proactively develop a location strategy,
adapt and standardize operations across
locations. For instance, the total cost of
the garment would be far lower than
today’s cost when factories located in
large towns bring migrant workers to
live in hostels. Cost of the semi-urban
land and factory and workers quarters
is 75 per cent of the total investment
and in the model proposed it would be
hardly 25 per cent as only the hub needs
to be located in semiurban area.
• Invest in technology and ensure
compliance with global regulatory
standards.
• Work on reducing the relatively higher
tariffs. India’s exports suffer when
compared to our competitors in most
of the consuming geographies like EU,
Canada, Australia and China.
We can create a few million more jobs
in quick time. Providing jobs to rural
women near their home will create both
geographical and gender inclusivity and in
the process create an inclusive India with
prosperous times for all. n
Source: silentwingsshutterstock.com
HUB
(large company)
units to complete the garment assembly,
thus making the task of the rural unit
easy and help them to stay focused on
production and quality. The hub then can
get back the finished garment, for the final
inspection, ironing, packing and logistics
to market place.

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The information communication technology
and electronics (ICTE) sector in India is
witnessing an uninterrupted growth in
consumption, which is presently placed at
USD 100 billion. However, over two-third of
the consumption is met through import.
Electronics production, which accounts for
about 10 per cent of the manufacturing
GDP, can become the key driver of growth
in the manufacturing sector.
Recognizing the importance and the need
for domestic electronics production, the
Government announced the National Policy on
Electronics in 2012. The strategies outlined in
the Policy are aimed at creating an eco-system
for a globally competitive electronics system
design and manufacturing (ESDM) sector. The
objective is to achieve a turnover of about USD
400 billion by 2020, investments to the tune
of about USD 100 billion and create additional
employment for around 28 million people.
In order to attract investments in the sector,
the Government has announced several
policies and schemes like the Modified Special
Incentive Package Scheme and the Electronic
Manufacturing Clusters Scheme, preference
for domestically manufactured electronics
products (DMEP) in Government purchases,the
Electronics and InformationTechnology Goods
(Requirements for Compulsory Registration)
Order, 2012 to safeguard consumer interest,
Electronics Development Fund (EDF).
CII, through its National Committee on
Information Communication Technology
and Electronics (ICTE) Manufacturing is
privileged to be associated with several of
the initiatives aimed at developing India as
a global manufacturing hub.
India can become a major player in the
global ICTE production market if it seizes
the opportunity that the changing global
market presents.
For achieving the targeted production levels
and the vision of zero net imports, the
challenges faced by the industry for production
and exports would need to be addressed.
The key challenge is of making the existing
investments competitive.
to the disabilities is provided for as a
deduction in Profit Before Tax (PBT).
Through Indirect Tax: An incentive•
equivalent to 20 per cent of the value
addition may be given (this presumes
the GST rate of atleast 20 per cent. To
prevent misuse, the incentive percentage
should be lower than or equal to the
applicable duty/tax rate).
The measure of value addition is the amount
of duty/tax payable from PLA. This incentive
could be either in the form of deferred
payment for 7 years or in cash.
Level Playing Field For Taxation
There is need for a level playing field with•
respect to taxation on locally manufactured
products vis-à-vis imports.
For institutional imports, in addition, a•
duty equivalent to the applicable VAT
should be levied on imports.
Electronics industry may be exempted•
from Special Additional Duty (SAD) of
4 per cent.
Abolition of Central Sales Tax (CST) of 2•
per cent for electronics industry.The total
incidence of CST could cascade to over
6.5 per cent. This places the domestic
manufacturers at a disadvantage as
compared to imports as there is no
equivalent levy on imports.
India Can Become A Major Player In The
Global ICTE Production Market
Vinod Sharma
ICTE Manufacturing and Managing Director,
Deki Electronics Limited
Compensation Of Disabilities
The ICTE sector suffers from disability on
account of high cost of finance, power and
transportation/logistics which is estimated
to be about 10 per cent for 50 per cent
value addition. The disability increases
with value addition in step with increasing
exposure to domestic resources and impacts
competitiveness. ICTE manufacturing as a
result is limited to the confines of low value
addition. To compensate for the disabilities,
incentives based on value addition should be
introduced. Following two approaches are
suggested in line with value addition:
Through Direct Tax: In this methodology,•
weighted deduction in respect of interest
paid, power cost and freight in proportion
Source: Smart7shutterstock.com

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Reducing Transactions Cost
Compliance to stipulated procedures for
import of Goods at Concessional Duty (IGCD)
for manufacture of excisable products leads
to delays, disruption of production schedules
and blocked capital. This contributes to a
higher end-product cost and erosion of
competitiveness.All import clearances should
be on self declaration basis.
Encouraging Electronics Exports
The reward rates on electronics export for
categories-A,B C countries as available
under Focus Product Scheme/ Market Linked
Focus Product Scheme (FPS/MLFPS) to the
new Merchandise Exports from India Scheme
(MEIS) (FTP 2015-20) be restored.This would
be a step moving towards realizing the vision
of ‘Zero Net Import’ for the sector.
Tax Refund For Suppliers To Domestic
Manufacturers
The policy provision of Domestic Tariff Area
(DTA) sales of ITA-1/zero duty (ICTE products)
being given the same benefits as for physical
export (Paragraph 2.1(b) of NPE 2012) needs
to be implemented. With implementation
of this provision, all suppliers to domestic
manufacturers of zero duty ICTE products
would be eligible for duty/tax refunds and
eliminate the inverted duty structure at Tier-2
industries which is considered important for
supply chain development.
Parity of Taxation in the DTA and export
oriented schemes for sales in DTA
In order to encourage domestic•
manufacturing, attract investments and
create jobs, ‘basic custom duty’ has
been raised on several electronics items.
Manufacturing of these products is also
being undertaken by a manufacturer
operating from an Electronic Hardware
Technology Park Scheme/ Export oriented
Units/ Special Economic Zone (EHTP/
EOU/SEZ) in India. The sales in DTA from
these units as a result is uncompetitive
as compared to the manufacturers
located in DTA.
Products manufactured in EHTP/EOU/•
SEZs should be considered at par with
DTA manufacturers in as much as levy
of duties/taxes on domestic sales is
concerned.
Charging Duty/Taxes on Domestic Sales•
from EHTP/EOU/SEZs on taxes/duty may
be on duty/tax foregone basis.This would
bring parity in taxation with the units
manufacturing in DTA and support the
Government’s ’Make in India’ initiative.
Preferential Market Access (PMA) in•
Government purchases as per notification
shouldbeimplementedforpurchasebyboth
the Central and State Governments.
Electronics industry to be given priority•
status for financing by banks.
Notifying the revised Modified Special•
Incentive Package Scheme (MSIPS) and
extending it beyond 26 July, 2015 for
atleast 2 years
In recent years, China has been losing its
appeal as a manufacturing hub because of
issues related to wages and finance costs and
investors are seeking alternative investment
destinations.Also, globally manufacturers are
looking at locating manufacturing closer to
the large markets. India can be positioned
as a premier electronics system design and
manufacturing (ESDM) hub. n
How would you describe the current
status of the leather and footwear
industry?
The leather industry occupies a place of
prominence in the Indian economy in view
of its huge consumption potential with a
population base of 125 crore, 20 per cent
CAGR foreseen for the next two decades,
massive potential for employment and
substantial export earnings. The Indian
leather industry is now infused with new
enthusiasm - thanks to the Prime Minister’s
‘Make in India’ programme under which it
has been declared a focused sector.
Under the leather sector, footwear segment
is very significant, rather, it is the engine
of growth for the entire Indian leather
industry. India is the second largest global
producer of footwear after China. The
Indian footwear industry has a potential to
create about 20 lakh new blue collar jobs,
attract investments of Rs. 10,000 crore and
increase excise revenue by Rs. 400 crore
p.a. (even with reduced rates, owing to
increased compliance, higher production and
footwear industry. Footwear is subject to
among the highest excise duty and other
taxes across any product category (about
26-28 per cent of ex-factory price).While the
excise duty rate has been reduced to 6 per
cent for just one of the segment i.e. leather
footwear with MRP exceeding Rs. 1,000
per pair (in the Union Budget for 2014-15),
the industry is of the view that the limited
concession introduced will not subserve the
objective of promoting manufacturing in
the domestic sector, attracting investments,
generating employment and ensuring growth
of the industry as most footwear (including all
leather footwear) will continue to be charged
an exorbitant excise duty rate. This is due to
the fact that non-leather footwear in India
and globally also constitutes 80-90 per cent
of the footwear market. CII has requested
the Government to review the excise duty on
footwear and extend the rationalized rate of 6
per cent to all kinds of footwear without any
artificial MRP ceiling. Issue of abatement from
35 per cent to 25 per cent needs to be rolled
back immediately to avoid further damage to
the domestic manufacturing sector.
Making India A Footwear Manufacturing Hub
Adesh Gupta
Leather and Chief Executive Officer,
Liberty Shoes Limited
integration of unorganized into organized
sector) over the next 4 years.
What support would you seek from the
Government on behalf of the leather
and footwear Industry?
To realise the ‘Make in India’ vision for the
sector, urgent attention is required towards
addressing some pressing issues impacting
the competitiveness of the leather and

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What is the vision of the cement
industry in India?
The cement industry is a classic example of
how license de-control helped its complete
transformation. The industry was partially
de-controlled in 1982, and fully decontrolled
in 1989. While the industry took almost 84
years to touch 100 million tonnes capacity, the
next 100 million tonnes capacity was added
in only 10 years, and the next 100 million
tonnes took only 4 years. Such has been the
growth of the industry that today it claims
the 2nd
spot in the world in terms of total
capacity.The transformation in the industry has
also been in terms of technological evolution.
Today, Indian plants are some of the most
technologically advanced globally.
India will soon become a USD 3 trillion
etc. are the way forward. The Government
is also focused on streamlining policies
(coal block auctions, automatic renewals
of mining leases, etc). In addition, State
Governments are attracting investments from
companies, both domestic and foreign. All
these initiatives will definitely help bridge
the demand-supply gap.
What is the export and growth
potential of the industry?
The Indian cement sector is largely localized.
More than 97 per cent production is used
domestically. Largely, coastal plants (those
lying around Gujarat coast South India)
export cement and clinker to neighboring
countries (Sri Lanka, Bangladesh, Nepal) and
to Gulf countries. However, the quantum of
export is very limited.A couple of key factors
Cost Efficiency And Sustainability Will Pave
The Way For The Cement Industry
Ajay Kapur
Chairman, CII Cement Industry Division and
MD CEO,
Ambuja Cements Ltd
economy, and cement will be an integral
part of this growth. Recent initiatives such as
‘Make in India’, ‘Smart Cities’, ‘Housing for
All’, concrete roads, rail and freight corridors,
To project India's manufacturing capabilities
in the footwear and leather products sector
both in domestic and international markets,
the CII National Committee on Leather has
advocated initiatives like the formation
of a Domestic Council exclusively for
footwear and leather products, developing
a framework for quality benchmarking and
certification to enable creating an Indian
brand, creating an Indian leather mark
and improving the image of the sector in
capital and stock markets, with banks and
financial institutions.
The CII National Committee on Leather has
also been highlighting the issue of high
taxes that are further marring the growth of
domestic leather and footwear manufacturing
and giving an undue advantage to cheap
imports from South Asian countries such
as China, Vietnam, etc. India suffers a cost
disadvantage in footwear manufacture vis-
à-vis China to the tune of 32-34 per cent.
Indian companies today are relying heavily
on imports to leverage the disadvantage
suffered by India in manufacturing, which
has led to a surge of imports from China
in the last few years to the tune of 200
million pairs / year alone.
Further, footwear companies are increasingly
preferring to manufacture in China and
import into India, instead of setting up
new capacities in India. This is in contrast
to the very tenets of the ‘Make in India’
campaign which focuses on making India
a manufacturing hub. Countering the influx
of Chinese goods into India would require
forging a free-trade pact with USA, UK, EU,
Middle East under which duty barriers are
brought down in those countries so that
quality goods that are price-competitive
could find free entry in both countries.
What are you recommendations for
leveraging the opportunities for the
sector and boosting exports from the
sector?
While the Government has already defined
various short to medium term initiatives
under ‘Make in India’ to boost the sector
there is further need for a more purposeful
and useful policy intervention on several
fronts including provision of raw materials
at affordable cost, flexible labour policy and
an enabling environment for hassle-free
conduct of trade, both in the domestic and
overseas markets among others.
As the country holds a minuscule share of
3.05 per cent in the global leather trade of
USD 160 billion, more needs to be done by
the authorities to enable the industry leave
its footprints across the global market by
process and product improvements. More
attention is required to augment raw material
base through modernization and technology
upgradation of leather units, addressing
ecological concerns, human resource
development, bolstering traditional leather
artisans and infrastructure constraints and
putting in place institutional facilities. n
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16 policy watch
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limit the export potential. Firstly, the logistics
costs involved in exporting cement / clinker
beyond a certain distance make exports
unviable. Secondly, the countries mentioned
above, which have seen exports from India
have had new capacities in the recent past.
This has reduced their dependence on India,
and further limited the export potential.
What are the issues and challenges
that are hampering growth? What role
can the Government play in alleviating
some of the challenges?
The cement sector is poised for a high
growth era. However, there are some issues
which need to be addressed so that the
industry can achieve the expected growth.
One of the major issues faced is low demand.
The Government’s initiatives will generate
substantial cement demand required for
building the necessary infrastructure. In
addition, all these measures will also help
increase the country’s GDP, which will
increase disposable incomes of people and
generate additional demand potential from
individuals.To add to this are high taxes as
compared to other sectors. For example, both
cement and steel are an integral part of the
infrastructure sector, but steel attracts a low
VAT rate of 4 per cent, as compared to the
12-15 per cent for cement.
Availability of rakes for transportation of
cement and clinker is another issue the
industry is facing. Cement industry is the 2nd
largest revenue source for Railways. Despite
this, rake availability is always an issue. The
Government is taking steps to make rail
operations more efficient and resolve the
challenges, which is a welcome step. However,
there is an urgent need to increase rake
availability immediately. Authorities should
also consider mechanization of railway
sidings, yards and dumps. They should relook
the entire process to remove inefficiencies
and provide for faster turnaround.As railways
are a more environmentally friendly mode of
transport than roads, the authorities should
encourage higher railway usage.
What are the recommendations to the
Government on behalf of the cement
sector?
Indian cement industry being one of
the major player in the global market
faces some issues which need to be
addressed for making it more sustainable
and competitive. Following are few of the
key recommendations:
Inclusion of Cement Kiln Co-Processing•
Technology under the Draft Hazardous
Waste Management (HWM) Rules 2015.
This simple step would take the Indian
cement industry on the course to achieving
the ‘Thermal Substitution Rate’ closer to
the target of 5 per cent by 2017 rather
than the current rate of just 1 per cent.
Relaxation of current emission norms.•
Rationalization of tax structures for cement•
and other raw materials for making the
cement industry more cost competitive.
Improve the quality of present logistics•
infrastructure. Strengthen the railway
infrastructure in key cement-producing
and consuming belts. Ensure wagon
availability by increasing the supply of
wagons and modernizing the railway
sidings, taking industry requirements into
account. Establish faster linkage of new
plants and mines to state and national
highways to facilitate speedier movement
of materials and product.
Expedite clearance of stalled cement•
projects where investments have already
been made.
Help industry remove bottleneck input•
resources to enable growth. Streamline
land acquisition process for greenfield
expansion. Reduce minimum no-objection
requirements to ensure smooth approval.
Ease the supply of limestone and•
gypsum. Fast track allocation of new
limestone mining licenses and renew
existing licenses by streamlining the
administrative procedures.
Support the industry’s efforts in increasing•
the adoption of alternate fuels in cement
manufacturing. Develop robust guidelines
to shorten the permitting process and set
up minimum pre-qualification criteria for
cement plants utilizing waste considering
environment, safety and cement quality
parameters.
Allow free import and use of tyre waste•
as an alternate fuel till the market gets
developed.
How can the ‘Make in India’ campaign
contribute to the cement industry in
India?
The ‘Make in India’ campaign consolidates
all efforts on enhancing India’s business
potential. Specifically for the cement sector,
the campaign is very beneficial. Firstly,
establishment of manufacturing hubs as
well as Special Economic Zones (SEZs) to
promote manufacturing activity ensures
higher consumption of cement required to
build the infrastructure (buildings, roads,
warehouses, etc.).
The campaign also lays thrust on skill
development and increasing the skill capital
of India. By promoting development of
technical training institutes, the ‘Make in
India’ campaign benefits the cement sector,
among the other sectors, by providing skilled
manpower in adequate numbers.
What is the way forward?
The industry is currently seeing a slight
slowdown in demand.The immediate task at
hand will be to ensure sustainable demand
generation. It will be imperative to identify
demand pockets and work on servicing
these in the most optimum manner. With
the Government focusing significantly on
infrastructure development, the cement
consumption is bound to increase. With
the country’s growing economic potential,
cement consumption from the retail segment
(e.g. individual home builders), which form
a large chunk of the cement demand today,
will also see a spike.
Also, the industry should continue towards
cost efficiency and sustainability. We should
promote use of alternative fuels, industry
rejects, as well as increase proportion of
blended cements.These measures will help the
cement industry (which is inherently carbon
intensive), to reduce its carbon footprint.
How can the CII Cement Industry Division
promote the cement industry?
The CII Cement Industry Division is an ideal
platform for all cement industry stakeholders
to interact on the various issues and resolve
challenges by pooling together the combined
expertise. CII’s understanding of the overall
Indian industry as well as easy access to
multiple stakeholders in the country becomes
an important element in conveying the view
points of the industry to various authorities
and regulators.
Bringing together the sector expertise onto
one platform also ensures sharing of global
best practices, as well as resolving certain
challenges through adequate brainstorming.
At the same time, by ensuring adequate
interactions with other divisions of CII,
there can be cross-pollination of knowledge
across the various verticals of CII. The
division can be an integral part of various
Government initiatives in the areas of housing,
infrastructure development, skill development,
sustainability, and many more. n

17policy watch
CEOSpeak
What is the present status and growth
potential of the Indian transmission
industry?
The Indian power transmission industry
has witnessed reasonable progress over
the years. Planned generation capacity
enhancements have led to the expansion of
transmission network across India. However,
the current transmission and distribution
(TD) infrastructure in the country is highly
inadequate/ imbalanced which manifests
into massive growth prospects for the
industry. Presently, in value terms, the size
of the Indian TD industry is estimated
at Rs. 1,10,000 to 1,20,000 crore. The
industry is mature and caters not only to
domestic demand but also international
demand. Performance wise, while the
overall electrical equipment industry has
grown by 10 per cent YoY in FY 2015,
transmission line industry in particular has
witnessed a nominal decline of around
0.7 per cent. However, during the last 2
quarters of FY 2015, a pickup in growth
was witnessed mainly backed by increase
in orders from Power Grid Corporation
of India Limited/ State Electricity Board
(PGCIL/ SEBs).
Thrust on overall infrastructure development
by the Indian Government would also
culminate into high growth prospects for this
sector. Focused emphasis on development of
solar energy, green energy corridors, inter
and intra-state transmission lines, initiatives
pertaining to strengthening of transmission
and distribution system in the Northeastern
region, doubling of existing capacities,
refurbishment demand etc. entails additional
transmission infrastructure development. In
addition, the proposed development of smart
cities is also expected to generate good
opportunities for the industry. On ground
level, we are also seeing a revival in stalled
projects, a move necessary for expediting
the growth of this sector.
Globally also, demand from under-developed
and developing nations as well as overall
demand from developed countries is
expected to ensure a long term positive
outlook for the Indian transmission line
players who are well placed and have the
capacity to cater to increase in domestic as
well as global demand.
What are the factors affecting the
growth motion?
I would say progress is largely hampered due
to difficulties in land acquisition and getting
Right of Way (RoW) and forest clearances,
approvals for which continue to be highly
time consuming. Delay on account of this
creates uncertainties, disrupts the targeted
completion time of the projects and also
leads to cost overruns.
Another critical issue is that transmission
line industry is not treated as part of
infrastructure industry. Transmission
lines being an important part of overall
infrastructure development should be
covered under the infrastructure sector and
should be granted infrastructure industry
status.The CII Transmission Line Division has
taken up this issue with the Government and
is proactively working with the Government
for resolving the same.
Other issues include funding constraints
for RD, inadequate testing facilities and
lack of enhanced Government support and
incentives for exports.
What is the way forward for the industry
to overcome these challenges?
Considering the huge funding requirements,
emphasis on public private participation
seems to be the apt route. The industry
is quite enthusiastic with regard to the
Public Private Partnership (PPP) mode. The
PPP mode would also pave the way for
faster development of new technology/
systems. Speaking of which, I would say
companies in the Engineering, Procurement
and Construction (EPC) space are also
engaging and adapting newer construction
technologies.
Further, towards the development of the
entire electrical equipment sector, the
Ministry of Heavy Industries and Public
Enterprises, in consultation with the
industry and related bodies has already
launched a compressive mission plan
(2012-2022), which will pave the way for
future development and enhance global
competitiveness of this sector thereby
Opportunities Unfolding In The Indian
Power Transmission Space
Vimal Kejriwal
Chairman of CII Transmission Line Division and
Managing Director CEO,
KEC International Limited
Source: Kagai19927shutterstock.com

18 policy watch
CEOSpeak
ensuring achievement of its vision by
the year 2022 which is to make India
the country of choice for the production
of electrical equipment and reach an
output of USD 100 billion by balancing
exports and imports. The CII Transmission
Line Division is an ideal platform for
all transmission industry stakeholders
to interact on the various issues and
resolve challenges by pooling together
the combined expertise. CII, through its
seminars and conferences, is promoting the
mission of the Government to make India
the choice of import destination.
Going forward, for rapid development,
there is a need for sustained, proactive
and cohesive efforts by all the stakeholders
in the industry including the Government.
Steps have to be taken towards building
on the strengths of the industry and
enhancing exports. There is a need to focus
on innovation, technology, RD, developing
local talent, logistics management and
cost competitiveness. Indian companies
must benchmark themselves against
global best practices being followed across
processes.
What support will the CII Transmission
Line Division seek from the
Government?
CII would like to recommend the following
to the Government to expedite the progress
of the Indian transmission line industry:
Remove procedural bottlenecks: First•
there is a need to expedite and remove
the execution and procedural bottlenecks
for which strong Government intervention
and support is required. Remedies like
the Plug and Play model, creation of a
special purpose vehicle which will seek
all the approvals etc. are some of the
ways which will boost the progress of
this sector. Although the Government is
taking steps, there is a need to address
these issues more expeditiously.
Support required on export front:•
Indian electrical equipment and project
management capabilities are accepted
globally as credible and reliable. A
large number of Indian companies
have successfully executed projects in
many underdeveloped, developing and
developed nations. However, the overall
electrical equipment industry’s share
of exports to country’s total exports is
marginal, accounting for about 1-1.5
per cent only. Hence, there is a need to
enhance exports for which policy level
and incentive level support is required
from the Government. The Government
of India should extend the support to
domestic players as is enjoyed by our
foreign competitors in their respective
countries like China. Also, in the recently
announced Foreign Trade Policy (year
2015‑20), the Government has done
away with lot of benefits i.e. withdrawn
incentive support which is needed in
order to facilitate and expedite the
growth of exports.
Financial Support:Support is also required•
towards funding for developmental
and RD initiatives, manpower
planning and skill upgradation for the
transmission line industry. As there is
a severe shortage of skilled technical
manpower, more dedicated programs
and initiatives specifically pertaining
to transmission line industry have to
be designed and commenced jointly by
the Government in conjunction with the
industry and CII. n
What is the present status and vision
for the valves industry?
The global valve industry is estimated to be
around USD 60 billion and is expected to
grow at a CAGR of 4.3 per cent between
2015 and 2019, whereas the Indian valve
industry is around USD 2 billion and is
expected to grow at 7.3 per cent during
the same period.
Currently we export to the tune of around
USD 600 million, which is around 1.7
per cent of the global valve market and
considering the huge potential for exports,
Indian valve industry can aim to double the
current level of exports, if not more.
Buoyed by technology innovation in valve
systems, the market is expected to witness
a strong growth in the coming years. CII
Valves Actuators Division’s vision is to
achieve USD 4 billion by 2020.
and working capital. It is a high labour
intensive industry and provides employment
opportunities across the value chain from
raw material to commissioning and after
sales service functions. It has the high
potential to spur economic growth of the
country. Indian valve manufacturers as well
as global majors will have tremendous scope
to manufacture engineered valves in India,
by taking advantage of availability of quality
foundries and technical skills available in
our country.
As mentioned earlier, current valve exports
from India is only around 1.7 per cent,
leaving a huge scope for increase in exports
and profitable growth.
How will Merchandise Exports from
India Scheme (MEIS) of FTP (2015-20)
enhance valves export?
Indian Valves Industry: Going Global
N V Venkatasubramanian
Chairman, CII Valves Actuators Division and
Chief Executive, LT Valves
What is the investment and export
potential of the industry?
Today many of the global companies have
already set up manufacturing facilities in
India and many more are looking to set up.
Valve industry is a capital intensive industry
both for specialized capital equipment

19policy watch
CEOSpeak
To partially offset the inherent infrastructural
inefficiencies, MEIS scheme will definitely
provide Indian valve manufacturers a level
playing ground to compete with the global
manufacturers and also help in promoting
’Make In India’.
What are the barriers in the growth
of the industry?
Valve industry is labour intensive and our
labour laws require urgent reforms so that
we become competitive in the global market.
Being a highly fragmented industry, not
much work has been done in core RD.
Investment in research and development
needs to be improved substantially to bring
in latest technology. Inability to attract
and retain the best talent, especially in
foundries is a big challenge. Dependable
supply of high quality power, especially to
foundries would enable manufacturers to
meet the commitments on deliveries made
to the international customers. Infrastructure
constraints in terms of transport efficiencies
as well as procedural delays impact the
overall ability of this industry to compete
in the global market.
What support will the industry seek
from the Government?
• Innovation: Set up a USD 100 million
fund for valve innovation and research.
• Incentives: Forge shops for valves,
promote setting up supplier base for
large valve forgings by giving incentives,
so that Indian valve manufacturers can
compete on level playing ground with
MNCs.
• Brand building: To promote Indian valve
industries’ strengths, there is a need to
conduct powerful campaigns on a global
scale.
• FTAs: Ensure FTAs benefit the Indian
valves industry.
• Modernization and Technology
Upgradation for the valve industry:
Establish a scheme similar to the
Technological Upgradation Fund Scheme
(TUFS) for the textiles industry.
• Taxation: Expedite implementation of
GST and correct anomalies related to
inverted duty structure.
• Ease Labor Laws: Introduce reforms in
labour laws for ‘ease of manufacturing’
in India.
• Skill development: Set up new ITIs,
vocational training institutes and
diploma institutes. Encourage new
private institutions upto the level of
deemed universities.
• EXIM Bank sponsored projects: In
overseas projects sponsored by EXIM
Bank of India, there should be conditions
that the Indian manufacturers and
suppliers should be given preference for
the equipment used in the project.
What is the way forward for the
industry?
Valve industry should focus on value-
addition to customers through continuous
innovation and breakthrough technology.
Consistent quality benchmarking with global
majors and adherence to commitments are
of paramount importance in this industry.
Industry should focus on improving
the operational efficiencies in terms of
productivity, quality, delivery and reliability
which are comparable with global best
practices to be competitive in the global
markets.
What role has the CII Valves and
Actuator division played in promoting
this sector?
On the policy advocacy front, CII Valves
and Actuator division has been constantly
engaging with the Government and taking
up the issues impacting the sector. In
order to promote exports, CII pursued
with Directorate General of Foreign Trade
(DGFT) / Department of Heavy Industries
(DHI) / Department of Industrial Policy and
Promotion (DIPP) etc for Focus Scheme
Product status for valves and has successfully
convinced the Government to accord FPS
(MEIS) status for valves.
Indian standards for valves are outdated. In
order to be competent in the global market
and gain market share, there is a need to
revise the national standards, aligning them
globally. The division has also taken up the
issue of standards for valve industry with BIS,
to revise the standards and specifications
for valves.
Also, through its various activities i.e.
conferences, exposition, interactive sessions,
meetings etc., CII Valves and Actuators
division provides a platform for its members
to showcase their capability, avail networking
opportunities with other stakeholders and
have a dialogue with the Government. n
Source: Photo smileshutterstock.com

20 policy watch
Policy Barometer
Key CII Recommendations For The
Manufacturing Sector
Issues Recommendations
Create demand by fast-
tracking stalled projects to
revive capex cycle
Short-term
Expedite regulatory clearances for stalled projects to kick-start the capex cycle.•
Regular monitoring of clearances and approvals so that they are implemented as quickly as•
possible.
Address issues which come in the way of obtaining last mile State-level project•
permissions.
Medium-term
Bids should be offered after obtaining sovereign clearances.•
FDI should be especially invited to these large projects through intensive marketing and•
roadshows.
Ensure timely completion of
big-ticket projects
Short-term
Identify and implement 100 must-do infrastructure projects such as high-speed rail, dedicated•
freight corridor, Delhi Mumbai Industrial Corridor, Smart Cities etc which are vital for providing
a fillip to the manufacturing sector.
Review the progress of key infrastructure projects in the railway, road, power, coal, petroleum,•
and renewable energy sectors.
Create a coordinating body comprising Centre and State Government officials to ensure that•
big infrastructure projects like the Delhi Mumbai Industrial Corridor, dedicated freight corridor
projects and National Investment Manufacturing Zones (NIMZ) are completed on time.
Medium-term
Aim to achieve targets in key infrastructure sectors such as coal, power, roads, railways and•
ports. This will act as a stimulus to private investments and help achieve faster growth.
Incentivize investments Short-term
Lower the interest rates which would make more projects financially viable and revive•
investments in critical sectors including manufacturing.
Medium-term
Consider withdrawal of minimum alternate tax (MAT) and Dividend Distribution Tax (DDT) and restore•
the SEZ policy to its original form to attract domestic and foreign investment in the SEZ.
Withdraw surcharge on domestic companies. While the additional surcharges introduced in•
the budget last year were to be limited to FY14, surcharge has been further increased by
2 per cent in the current budget if the total income of domestic companies exceeds Rs. 10
crore. It is suggested to withdraw surcharge on domestic companies.
Allow 150 per cent deduction of capital expenditure for infrastructure industries like steel etc.•
Deduction u/s 32AC. Keeping in view the intention of the Government to promote investment•
in plant and machinery, benefit of investment allowance should be allowed if the new plant
and machinery has been acquired and installed during the period beginning from 1 April,
2013 and ending on 31 March, 2017.
Rationalize mining taxes and implement DMF with step wise approach.•

21policy watch
Policy Barometer
Enabling business friendly
environment for attracting
investments
Short-term
Effective implementation of single window clearance system for approvals relating to starting•
a new business.
Stipulate time-bound approvals by introducing ‘deemed approvals’ in case of delays beyond•
prescribed limit.
Facilitate sharing of best practices amongst States in four areas: land acquisition; starting a•
new business; dealing with construction permits; contract enforcement and taxation.
Take steps to lower transaction costs for exports.•
Medium-term
Implement GST.•
Apart from GST, custom duty also needs to be rationalized to correct inverted duty structure•
that promote imports at the cost of domestic manufacturing.
Early passage of LARR (Amendment) Bill, 2015.•
Contract Enforcement: Implement electronic case filing system; implementation of e-courts;•
creation of alternate dispute resolution system, etc.
Sectoral thrust to boost
manufacturing
National policies for strategic sectors must be devised under the ‘Make In India’ campaign,•
such as textiles, chemicals and electronics, along with comprehensive agendas for making
India a manufacturing hub for the global markets.
Provide special focus to sectors which are of national strategic importance and labour•
intensive in nature such as defence, automobiles, chemicals, electronics, textiles, capital
goods, steel, etc.
Automobiles: Undertake fleet modernization, modernize urban transport across cities and•
incentivize truck purchase for a boost to automotives; introduce ‘Scrappage Policy’ for
commercial vehicles.
Chemicals: Develop standards for key focus areas like flame retardants; increase attractiveness•
of Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs); improve chemical
logistics; explore alternate feedstock options such as coal gasification, syngas, pet coke,
etc; set up a fund for chemical innovation; build positive image for the industry through
effective campaigns; ensure FTAs benefit the industry; establish a scheme similar to the
Technological Upgradation Fund Scheme (TUFS) for textiles; examine and correct anomalies
related to inverted duty structure.
Textiles: Establish textiles clusters and build the entire supply chain in these clusters to•
promote competitiveness of the textiles industry; amend relevant statutes of labour laws
to allow flexibility in working hours, women to work in night shifts, overtime for workers
to work (if willing) beyond current cap of 50 hours in a calendar quarter, fixed term
employment through an administrative order; address duty disadvantage vis-à-vis countries
like Bangladesh, Vietnam, Cambodia, Pakistan, Sri Lanka etc.; expedite negotiations with EU
on FTA; formulate standards for technical textiles.
Capital Goods: Review FTAs on a continuous basis; remove all inverted duty structures;•
preference to domestic capital goods companies for mega infrastructure projects; introduce a
strong procurement policy; review PSE contract conditions and introduce purchase preference
policy and regulate import of low-quality second-hand machinery.
Steel: Seek preservation and growth of market share by strategically excluding select steel•
tariff lines from the RCEP negotiation; promote steel usage by energizing bodies like
INSDAG; undertake/expedite mega infrastructure projects predominantly in railways. CII also
called specifically for a National Steel Policy with focus on availability of ores and coal, a
reasonable tariff regime, long-term financing and skill development.

22 policy watch
Policy Barometer
Mining: Undertake progressive steps for implementation of Mines and Minerals Development•
and Regulation (MMDR) at State-level to overcome delays in extension of leases. Exploration
by private sector can be facilitated through an Exploration Fund for scarce minerals.
Public Sector Enterprises Short-term
The board of Public Sector Enterprises (PSEs) should have all functional and independent•
directors for efficient functioning and maximum utilization of the powers of board. Orders
for Chairman cum Managing Director (CMDs) and Functional Directors to be issued before
the superannuation of the present incumbents so that there is a continuity.
Medium-term
Steps to be taken to enhance autonomy and raise competitiveness of PSEs by implementing•
the recommendations of the Roongta Panel report on reforms in Central Public Sector
Enterprises (CPSEs).
Autonomy to be given to the profitable PSEs to decide on utilization of the surplus funds•
with them for maximizing profit on investment.
Boost exports Short-term
Reduce interest rates and ease constraints on supply of inputs such as power, raw material,•
land and infrastructure so that the borrowed capital is able to create value in the system.
Require reworking of credit costs and cost effective credit options due to steep decline of•
credit off-take to MSMEs.
Reintroduce the interest subvention scheme to make exports more competitive.•
Reinstate export credit refinance.•
Re-consideration of the recommendation of RBI’s Padmanabhan Committee report on•
exports.
Create a fund to upgrade existing products and services standards, specifically for SME•
companies.
Introduction of Export Development Fund for aggressive marketing.•
Make industry aware of participation in global value chain. Leverage benefits out of FTAs•
and mega-regionals by strategically negotiating tariff lines where we want access to global
supply chains. Simultaneously new trade agreements should be drafted taking into account
the interests of the domestic manufacturer.
To increase export revenue, India has to move towards becoming an expert in specialised•
high value production at a lower cost of production across products.
Give boost to the labor intensive export oriented sectors in view of high employment•
opportunities in such sectors coupled with the fact that many Asian countries particularly China
is gradually exiting from such sectors. There is a need for focus on the skilling component
of these sectors.
Medium to Long-term
Lower transaction costs for exports. Drastic improvement in road and railways connectivity to•
ports should be a top priority for improving India’s export competitiveness.
Develop a capital market for SMEs to raise capital, as sometimes, the risk profile of SME•
companies becomes the barrier to receive credit from conventional banking system.
Focus more on standards and enhancing their product competitiveness in the global market.•
Develop strong standards regime in India as non-tariff based Technical Barrier to Trade (TBT)
will define the flow of goods and services across boundaries.
Develop appropriate strategies to tap the new and growing markets - Africa, CIS nations,•
SAARC nations and Latin America.

23policy watch
Policy Barometer
Provide additional support to the export oriented sectors so that they can scale up production•
in a competitive manner to cater to the overseas market.
Competitiveness at firm level must be strengthened while creating awareness among•
manufacturers about opportunities of enhancing trade emerging from trade agreements with
various countries.
Examples of exporting clusters like Tirupur, Moradabad etc. need to be replicated. Within a•
cluster, it is important to launch schemes for upgrading competitiveness through dedicated
centres and shared services.
Promote RD and
innovation
Short-term
Continue RD incentives and redefine private sector’s RD to include translation of research•
outputs to commercial production including design and procurement of IP under 35 (2AA)
and (2AB) of Income Tax Act.
Reintroduce Section 80-IB (8A) of Income Tax Act, to encourage setting up ’RD Firms‘ and•
’Design Firms’.
Medium-term
Ease accreditation of private sector’s ’in-house RD‘ by a professional accreditation agency•
or self-declaration.
Consider ’Intellectual Property‘ as collateral for the finance industry (by banks and financial•
institutions) and strengthen Intellectual Property Enforcement.
Rationalize public procurement system for products developed by Indian MSME.•
Scale up successful PPP vehicles that are strengthening India’s knowledge economy•
ecosystem.
Enable deeper penetration of information technology tools in India. Facilitate technological•
alliances between Indian SMEs and global companies.

24 policy watch
CII Ascon Survey
Green Shoots of Recovery Visible
Production Trends
Improvements in the domestic macro-economic environment along with the steps taken
by the Government towards expeditious project clearances, simplification of procedures,
removal of critical constraints holding up use of land and natural resources by passing of
the MMDR Bill as well as the ‘Make in India’ initiative have contributed in shaping this
mild recovery.
Of the 93 sectors surveyed, The CII ASCON Industry Survey for Q1 (April-June) FY 2016
reveals a reversal from the earlier trend of slowing growth, with indications of a recovery
taking shape in the economy, albeit a slow one.
Comparison of Industry Performance (Q1 FY 2016 over Q1 FY 2015)
Key Findings of the CII ASCON Survey April-June FY 2016
• The share of sectors that have recorded excellent growth of more than 20 per cent in Q1 FY 2016 has surged up to 16.1
per cent (15 out of 93 respondents) as against 7.1 per cent (8 out of 112) recorded in the year ago period. This is a
clear indication of improvement over the last year.
• While the share of sectors witnessing a high growth rate of 10 to 20 per cent has reduced significantly to 9.7 per cent
(7 out of 93) in Q1 FY 2016 from 14.3 per cent (16 out of 112) during the corresponding period a year ago, the share
of sectors reporting moderate growth has declined marginally to 51.7 per cent (47 out of 93) as compared to 51.8 per
cent in the year ago period.

25policy watch
CII Ascon Survey
• At the same time, the number of sectors recording negative growth has fallen from 26.9 per cent (30 out of 112) in
Q1 FY 2015 to 23.6 per cent (21 out of 93) in Q1 FY 2016.
• A further analysis of the sectors at the aggregated level with industry being broadly classified into broad segments in
terms of performance of production viz excellent and high (above 10 per cent ) on one hand and moderate or negative
(below 10 per cent) on the other, reaffirms our perception that there are some improvements on the ground.
• This is evident from the fact that the number of sectors showing excellent and high growth has shown some improvement
in Q1 FY 2016 registering 25.7 per cent, marginally up from 21.4 per cent in Q1 FY 2015.
• This means that only about 25 per cent of the sectors surveyed have reported the output growth of above 10 per cent
and 75.3 per cent have grown at less than 10 per cent as compared to 78.6 per cent in the corresponding quarter in the
previous year.
Concerns
On the issues and concerns impacting growth, margin pressure from stiff competition, competition from imports, shortage of power,
high regulatory burden, lack of domestic and export demand, shortage of skilled labour and talent and high tax burden have been
cited as the most important constraints by more than 50 per cent of the respondents. Industrial relations, transport infrastructure
bottlenecks, cost and availability of finance have been quoted as moderately important factors impeding growth.
Outlook
The Survey’s respondents have expressed their optimism in a further improvement in the near-term growth outlook helped by
continued policy actions, implementation and enhanced business and consumer confidence. However, a sustainable recovery
would be conditional on improvement in domestic demand and investment revival.
Industry Suggestions
Respondents have stressed on the need for reviving investments in the economy to boost demand. The Survey has recommended
an array of policy measures to boost growth. Some such steps include reduction in interest rates, speedy implementation of
infrastructural projects and addressing supply-side constraints on a variety of fronts including infrastructure, energy, agriculture
and labour.
Progress on reforms such as the GST Bill and LARR (Amendment) Bill, 2015 will impart greater certainty to investors on the policy
front. Further, a proactive role by the Government towards creation of employment opportunities in the non-farm segment of
the rural sector through food processing, construction etc. enhancing of capital spending by the States, given that they are now
recipients of higher resources from the Centre, would support in the creation of demand. Such a mix of policies, if implemented,
would go a long way to revive investor sentiment which in turn would reignite growth in industry and the economy.
Methodology
The Survey tracks the growth of different industrial and services sectors of the economy and is based on the feedback collected
from industry associations affiliated to CII. The industry associations encompass wide range of sectors comprising of small,
medium and large enterprises. In most of the cases, these account for approximately 70 per cent of the total industry output
in the respective sectors.
The Survey was conducted from mid-June till end of July 2015 and tracks the estimated growth trends in terms of Production,
Sales and Exports for Q1 FY 2016. Responses have been segregated in the following four broad categories: (i) ‘Excellent’
(growth in excess of 20 per cent), (ii) ‘High’ (growth in the range of 10-20 per cent), (iii) ‘Moderate’ (growth in the range of
0-10 per cent) and (iv) ‘Negative’ (growth less than zero per cent).

CII Policy Watch: Manufacturing

CII Policy Watch: Manufacturing

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