 Good afternoon ladies and gentlemen. Thank you for being here. I know you have a few sessions to choose from. We hope you enjoy the next hour and a half. How will India's commitment to boost manufacturing from 16 to 25% of GDP accelerate quality growth? That's the key question that we're going to try and answer over the next hour and a half. There are two phrases that stand out. One is commitment, the other is quality growth. And at the outset, I actually have two questions. Will commitment translate into reality? And how do we define quality growth? Now, the commitment has manifested itself in the new national manufacturing policy. It's got the objective of 25% of GDP coming from manufacturing by 2022. It's got the objective of providing employment to 100 million people by the same deadline, the same year 2022. And there is one mechanism which has been described in the policy, which is mega industrial zones, which is going to be one plank to actually achieve the objectives that have been outlined in the policy. You know, the broad framework is central government, state government and private sector collaboration with the promise within these zones of easier permits, lower taxes and easier labor laws. So we're back to the question. Will the commitment to boost manufacturing to 25% of GDP translate into quality growth? And I think I'm repeating that main question that we're going to try and answer because there are so many aspects to the answers we need to focus. Sharing their insights, we have B. Muthuraman, Vice Chairman Tata Steele, President, Confederation of Indian Industry, Rudolf Haag, Chairman, Panel P in our World Transport Holding, Baba N. Kalyani, Chairman and Managing Director Bharat Forj, Arun Mayra, Member of the Planning Commission, Sanda Vant Nurdend, Group Chief Executive, Management Consulting at Accenture, and Rajat Amnag, Managing Director, Asian Development Bank. Great to have a panel of gentlemen. I'm the only woman here. Okay, you know, I think we have to just set the ball rolling with one fundamental question. And Mr. Mayra, this is coming to you. The skeptic in me asks, what is there in the new national manufacturing policy in its design, in its conception that ensures success? How is it different from any other policy that we have seen? Thank you very much. I think that's the right question to start with. What is the new manufacturing policy? Give me a minute to explain the architecture of this new manufacturing policy, which you'll see builds into it the ability to implement and to get the results to achieve our goals. There are three components to the national manufacturing policy. These three components have been designed to address the constraints and requirements that we have to grow manufacturing. The first constraint on manufacturing in India is the physical constraint, infrastructure, power. And the infrastructure includes also administrative infrastructure, the processes of getting permissions, as you said, and easy working with the government procedures. This infrastructure provides the base only, onto which you've got to do some more important and more difficult things. And before I mentioned those, the national manufacturing investment zones are about this basic infrastructure only. It's only a part of what we need to grow the volume of manufacturing that we must have to employ 100 million people and the variety of products that we need to be able to supply our own needs and these to export and thus balance our trade. So on this base, the second component is the component of capabilities. And these capabilities are in technology. These capabilities are in human skills. These capabilities are in institutions that can organize and produce productively, competitively. So capabilities is really the essence of industrialization and manufacturing. All nations that have grown through industry have grown by creating more sophisticated and more productive capabilities. Technology, human skills, institutional skills are parts of those. So the second big agenda of the manufacturing policy with people, I think a skipping over it makes you glaze your eyes a bit, is about these things and they're named. What are the requirements in our country to be addressed, to get an acceleration of the learning and capability building process in India, in manufacturing and industry. The third capability that we need comes down to addressing both. To your point about implementation, even in the infrastructure, what is coming in the way of building infrastructure today is the infrastructure. And as you say, land problems, environmental problems, we are not able to reconcile presently with the processes that we have, the needs of a variety of people quickly. So things get stuck. Similarly, you may say in capabilities, we've got an issue about skills and the ability of employers to right size their workforces. So we talk about labor laws and so on. And there's no consensus on what is the right solution there and will all parties agree to the implementation of those solutions. So again, the ability to get stakeholders involved so that solutions are found quickly, which stakeholders will support, then reforms can be done. Thus infrastructure will improve and thus also we'll build our capabilities through the necessary reforms in the various processes required for learning, which are mostly about people. So what we have done is address in the manufacturing policy and I've used the we already because this policy was devised collaboratively by the national manufacturing competitiveness council, which has worked at listening to industry and stakeholders for the last five or six years. Then the ministry, which is the executive arm. And at the same time, before even the ministry began to announce the policy, we took in the planning commission the responsibility of converting the policy to the plan. So we are already way ahead. You'll see in a couple of months time or less even the whole plan of implementation for this policy, which is not merely NMIZs. I mean, they'll have their own time lags because of land acquisition, but the several other areas. And I do believe that the process of implementation is a process of really including various stakeholders at the state level because many of these actions are the states and amongst ministries and industry everywhere. The lesson which we'll come to later if we talk about other countries, and I believe the minister mentioned about Germany and Japan and China now, is that the producers and the government work collaboratively because the producers know where the stone is under foot and the government can help them to avoid it to get over it. From concept to reality, Mr. Kalyani and Mr. Muthuraman, this is coming to you too, Mr. Kalyani, from concept to reality, are you optimistic? I say, you know, yeah, I am optimistic. Why? Let me answer the question and I'll explain why I'm optimistic. First of all, as Arun just described, it's a policy that's been put into place after several consultative processes where a lot of people within the industry, within the government were involved. There are challenges, there is no doubt, and I'll speak about some of them. However, I think the most important takeaway from my perspective of the new manufacturing policy designed to increase India's manufacturing to 25% of GDP by 2022 is largely its content and intent, which Mr. Mayra talked about. He talked about a few things, you know, putting in, I mean, easy ways of working with the government to bring infrastructure. What I think what is really meant is in today's environment you have to take, I don't know, 100 or 150 different permissions from different agencies of the government and this is all going to get converted into a single window agency. I'm coming to the nuts and bolts practicalities of doing business. The problem is that all of this is going to be done largely at the state level and therefore it's extremely important to get the states to fundamentally agree to the intent and content of this policy. The danger of this policy is that it falls in the hands of the state administration and they go by the book and they say that, okay, only what falls here I will do, what is outside this I will not touch. Which means that the large industrial activity that is there today outside the purview of this new NIMCs will get orphaned. So that's one danger. The second more than danger a proactive process that the states need to undertake is once you understand the content and the intent, the content is to increase manufacturing. Intent is to do it by increasing, you know, job creation and all this and reducing hassles for manufacturing. I think the states need to start doing this with their existing infrastructure with their existing administrative policies, with their existing industrial policies. They need to amend their industrial policies to reflect the national manufacturing policy that is coming out. And this is most important and I think, you know, again this is a process where a lot of stakeholders are involved there are a lot of aberrations within the stakeholders there is a trust deficit within the stakeholders whether it's labor as Arun talked about, whether it's society at the other end whether it's land holders, I mean we need to now start working towards reducing this trust deficit that we have. And we'll talk about potential ways to reduce the trust deficit but Mr. Muthuraman you know as the chief of a large manufacturer, this policy in real concrete terms, Mr. Kalyani has shared his insights with us in concrete terms, how do you see it making a difference? No, I am optimistic about this policy first of all and I think it's a very good beginning but we must remember that it is only the beginning. There's much more work to be done, much more work to be done and I'm happy when I heard Arun saying that there is a plan to start that work out the work is going on. You see the type of work that needs to be done is first of all the states need to be convinced that manufacturing is fundamentally important there are many states and I hear voices from some states at least people don't think, people somehow think that employment will come about through services and many other you know factors of production. There is no large country in the world, there is no country with a large population in the world without exception that has become economically prosperous without going through a solid phase of manufacturing growth for long periods of time and higher the population of that country, the longer is this period of manufacturing dominance. These are all historic facts and known well this has been true of United States, been true of many countries in western Europe, it's true of South Korea, it's true of now of China. So first of all the states actually needs to be convinced, so there has to be a consultation in the states. There needs to be a consultation with other stakeholders like for example the land owners, you know we need to appreciate even today the industry occupies only 3 or 4% of the land in India and when manufacturing contributes to 25% of the GDP I expect that 3-4% to go to maybe 7 or 8 or maximum 10%. So the land requirement for industries are not huge. Thirdly clusters, industries thrive in clusters and the concept of cluster as to what kind of advantages a cluster can bring to reducing transaction cost, reducing logistic cost, making things you know easier, smoother flow, all that there is a convincing that is required and labor needs convincing, you know there are some provisions in the new manufacturing policy about the exit policy and so on and so forth I think we need consultation with the labor. There is a need for a wide ranging consultation among various stakeholders in a proper manner slowly but that needs to be done. If that doesn't get done well, you know this is just a policy. You need to implement it but I think it's a very good beginning, it's got some very good measures in terms of you know ease of regulation, giving the delegated powers to the SPV you know to work and if you have a good partner you know in the SPV who have say some bit of international exposure as to how these clusters operate, I think this can work well and I see that there is a sort of large scale participation that is required by the government, by the industry, by other stakeholders, industry association and making sure that people are convinced about the positiveness of this policy. If you don't do that then you will stumble. So far we get the sense that critical to the success of the policy is active involvement at the same level by state governments and a delicate consultation process with all stakeholders because for instance something like land is going to be a process that's going to have to be handled delicately. Mr. Nag, you know is there an example that you can share with us, similar starting point to where manufacturing in India is today and the journey made by any of our neighbors that provides specific insights and how to make this work. Several actually and I'll come to that in a moment but first let me just make a couple of sort of broader points at the regional level. In China every 1% growth in GDP has reduced poverty by 0.8%. In India unfortunately every 1% growth in GDP has reduced poverty by only 0.3%. So there's a huge multiplier effect which is to China's advantage and that is because our growth driver has mainly been services rather than manufacturing. But even within manufacturing in India the larger component of manufacturing growth has come from the more capital intensive sector, not the labour intensive. So we need not only more manufacturing growth, we need more labour intensive growth and within that a third element which is I think important to recognize and I must say that Arun and your colleagues have done a great job of that analysis that most of the labour intensive industry in manufacturing in India is with small enterprises and just to give you a number and it's quite striking, in India 84% of India's manufacturing employment is about in firms less than 50 workers, 84% to be precise in Malaysia, Korea, China, they're in the range of 25 to 40%. In India in the apparel industry which is usually the most labour intensive 80% of employees in the apparel sector work in enterprises less than 5 people. In China that's less than 5%. And the reason I'm giving these figures because I think it leads to exactly the point you are saying that you have to not only have more labour intensive part of manufacturing but you have to have the enterprises grow up, they have to become bigger so that you can have economies of scale, you can have technology, you can have access to credit and I must say that the policy that the government of India has just adopted I think is tremendous in terms of its analysis. I think you've really gone through this analysis very well and therefore the policy is very comprehensive. It really hits all the sort of push points. Now as you said right at the beginning is the implementation which will matter but I must say I'm very encouraged that the policy is comprehensive, it's not just sort of in a one-stop, one sort of in a short effort on this NIMC or this industrial park. And talking about the experience in this perspective, each of these countries I've mentioned Malaysia, Korea, China have really come from very similar points over the last three decades and have gone way to where they have, A, because they've been comprehensive, which I think this policy is, and B, governance and I know there's a separate session somewhere but I think if we don't have good governance and I'm not talking only about corruption, corruption is definitely an important element but good governance state and centre, Mr Kalyani mentioned about the land acquisition. Land acquisition falls apart not only because of laws or lack of it but because that's where money is made and that is where bad governance comes in. So to me, combine what my colleagues have said with good governance, man I think we have a good chance of a success. Good governance, now that's a tough one. Mr Nurdeh, you know the global experience which applies to what India is about to embark upon anything you can share with us? Well let me first say I'm not only saying that because all these gentlemen are saying the same thing but we at Accenture are also very optimistic and we were that before today because we've done some research with the National Manufacturing Competitive Council and the title of the report that we brought out was the next opportunity, India's next opportunity because we think that is manufacturing and if you look at it it's a fairly simple equation. It's a great start one of the fastest growing markets in the world with great talent and if you add those three up it's just a huge opportunity. So we're optimistic. The way I would look at it or we would look at this I would say open the windows and I think that's what you have done very well but also I would suggest that to the Indian manufacturing companies look at the world and what's happening. Look at other sectors here in India itself the IT services sector and Accenture is very much a part of that from 2% of GDP to 6% of GDP over a period of 10 years. I mean there's some great lessons to be learned. Look at China look at Germany what are the lessons there and I took a step back and I said what are sort of the things that you distill from that and the first one I would say is focus on innovation innovate around the customer and there's I think two areas where India could lead the way and where you're already leading the ways on the frugal innovation stay on that track. The other thing where India could lead the way is around the concept of shared value. Value for society and value for business. I think that is a concept where India is uniquely positioned to lead the way around the globe. Then the second thing I would say make manufacturing a great place to work and this will resonate with Mr. I mean I'm coming from a resources background first of all it is about the commitment to health and safety because that's number one. Secondly I would say the manufacturing environment can be in a very exciting environment in terms of a high tech work environment. It can be a high tech environment so focus on implementing those technology and attracting the workers. Third collaborate between industry and government to create these talent pools. Focus on skilling, focus on training and do that in a continuous way. So I would say with those three things India can really build up that manufacturing brand like the IT services sector has done it. Two pillars to make this successful one is to argue outlined governance. The other is infrastructure and that's a big one too. Infrastructure solutions. I'm sure you enjoy the city of Mumbai I'm not so sure you enjoy the drive around here though. Thank you for having me despite the fact that I cannot speak for manufacturing I do represent the people that get it there we as a top five global freight forwarding company we bring the stuff to the manufacturers and we take their goods to the consumers and we love to do that in an efficient manner. I have brought with me quite a list of things that a company like ours needs to happen in a place like India for us to be successful or more successful than we have been the last 25 years that we've been operating in this country. This is very nuts and bolts it comes from the practitioner's mouth. I've got seven points six of them start with the word increase one of them starts with the word reduce. Let me go through it very quickly increase capacity at airports and ports in order to ease congestion increase storage facility at the airport increase investments in existing road network increase investment in the existing rail network increase investment in power infrastructure increase investment in workforce education scale building. The last one reduce bureaucracy. Where does it come from well it stems from the fact and I'll give it to you in a brutally condensed version it stems from the fact that India's logistics infrastructure is currently overstretched and cargo movements are stalled by high bureaucracy I'll give you one example for each starting with the transportation mode in India 57% of the goods get transported on roads trucking which is the most inefficient, most expensive and most emission prone mode of transporting things the US only 37% even to India China only 22% the rest is rail and water and the one example on the necessary reduction of bureaucracy trucking goods from Gurgon south of Delhi to the port of Mumbai includes 36 checkpoints and can take up to 10 days vehicles are stopped at borders the tax status of the transported goods are checked there is all kinds of checks as to motor vehicle rules and so forth so these multiple and sequential checks often accompanied by requests for payments result in vehicles being detained and hence in slower delivery high fuel consumption and reutilization of transport capacity so much for my wish list and I come back to some of the points later on but that is something that you would have been coping with for every year of business that you've been in and that Mr. Myra that summary really represents the ground issues and there's no getting around that with a policy our policy has three components and the key component doesn't sound like policy it is process of resolving difficulties what he gave was right these are the difficulties what is coming in the way so far in getting over these difficulties we said we need governance better governance not more government this is about more government but we need governance and to get better governance which means some regulations some norms the stakeholders need to be involved to say well if you're going to stop doing this how are you going to regulate things this by the way is exactly what held up the component that you mentioned of the national manufacturing policy that's the zones around labour and the environmental issues because the intention was to sort of hand it over to some private party and say you do it but obviously the stakeholders would say we want to know who is going to do it and how and would we be fairly treated so that conversation had to be had and what we've got there I would just say this is an experiment in improving governance so the national manufacturing zones will allow us and the stakeholders are permitted us to try new ways of regulating and governing which are more efficient don't require so much government there while the rest of the country can learn from it okay so it's an experiment similarly to your point about states thank goodness we have so many states with different ambitions because that gives the opportunity for experiments to be tried and for states to compete with each other and that also means 36 checkpoints when a truck is making its way so the 36 checkpoints that he was referring to so many states different rules that apply different checkpoints these are the you know the nitty gritty that also bugs down manufacturing one last thing on that exactly just to consistently yes the states must make improvements within themselves but their points at which they interact with other states and then you talk about India as a whole so that is where we come in a federal structure that the center has to induce collaboration for the sake of everybody to do that we should not be from the center running things in the states it's just too big and too complicated the one size does not fit all but there will be issues like this and that is why GST is a matter about the states together those things yes is where the center has to bring the states on board and to have again consultation and collaboration on those matters too okay fair enough there are two points that actually led to prolonged discussions on the policy one was on the environmental concerns and one was on the labor concerns Mr. Kalyani have you mapped the process have you mapped the conversations that took place around it and do you have any thoughts on the fears that were expressed well let me take the issue of labor there has been a lot of discussion about labor reforms labor policies labor law changes etc etc I think we've been discussing this for the past 10 or 15 years and 10 years ago it was felt and even I honestly felt that you really needed a more progressive labor law to run manufacturing effectively now in 2011 fortunately or unfortunately the situation is very different today the fight in the manufacturing sector is not for new laws it's just for retention of talent average attrition rates in industry today are in double digits so therefore the fight is really how do you nurture talent how do you keep talent not with the discussion about having more progressive labor laws the problem is how can we get more of what we have and what institutional processes such as skill development missions and other things that we can set up at the national level to create critical mass by which more and more qualified talent can be created so in a sense the target has changed the objectives have changed when it comes to labor Mr. Muthuraman is that something you endorse completely as well because there is the aspect of new technology and new skill sets and what displacement that could cause you know in all these discussions on this labor reforms there is an implicit assumption that people are making that here is a difficult subject and therefore it needs to be handled I don't think that's the approach that we need to take in the manufacturing industry you're always going to have a much larger proportion of let's say so called blue collared employees compared to the white collared employees and the blue collared employees need to be able to bargain for themselves I would advocate for some for a strong union in every manufacturing entity I don't agree with this no union concept and I would argue that in many cases there is not enough consultations there is not enough sharing there is not enough trust building over a period of time which is what has caused the problem this issue of hire and fire and all that that we are here about I don't agree with that at all there is no question that an industry needs to have the right number of people when the manufacturing industry changes some basic changes in technology over a period of time you may find the need for less number of people but then you should be able to handle those excess people by either retraining them and making sure that you get them employed somewhere there is a responsibility of the industrial organization and the management to ensure that the labor is protected now if you have a consultative process management and making them participate in the working of the company I believe that problems will be less you know I come from an organization which has had a hundred year of industrial peace I have never had any problems of this nature and we have also reduced people there was a time when Tata Steel has 80,000 people and we reduced it to 35,000 people there was no problem nobody objected to it but to my mind there is a way to handle these human beings and somehow for example we are not talking about executive reforms because we think executives there are no problems but we talk of labor reforms as if it's some problematic animal that needs to be sort of fixed but you know if it is viewed as a problem it is because for instance on the policy the delay in approving the policy came from tricky conversations on labor and you know is it too much being made of the issue or you know I think labor reforms are very critical and we do have a very archaic absolutely out of dated labor laws I am not saying labor reforms are not required that's not my point but they are necessary and not just sufficient and the reason is you've got to consolidate the enterprises our enterprises are economically not efficient because they are too small and to be able to do that and this killing that Mr Kalyani mentioned can only happen if they are of a minimum size so there has to be flexibility of exit and entry which this policy has addressed is really ignoring a fundamental problem if we say sitting here labor reforms and labor laws are not a problem we can handle it I think that's a major problem the point I wanted to make is if you want to fast forward then I would say look at Italy today and that's where you don't want to be because I think that is exactly you know what's happened with labor laws you know companies not being allowed to grow up forced to stay small partly due to the labor laws you know pension commitments that are out of whack is something else then the other thing is an increasing challenge in Europe is once you're in a job and you are part of the system then you're great but more and more there's a group of people not yet in a job so they are basically forced to go from contract to contract and so you get disparity in the labor market and I don't want to comment on the specific Indian situation but if you want to fast forward look at Europe and look at some of the things that you may not want to happen in India and he has a lot of exposure to Europe he knows exactly what I'm talking about a very quick word you know we must ask ourselves a question as to why there are certain industrial organizations which have no problems with labor and why there are industrial organizations which have frequent problems that will answer the question it's not an issue of labor reforms labor I'm not saying labor reforms are not important they are important but there is something else which is much more important much more important and that is to handle labor well that is the point that I'm saying exactly let me build on that but by introducing this that the most important asset to grow a competitive and growing therefore manufacturing sector the only asset and since I introduced the concept of learning the only asset that you employ in a manufacturing organization that can appreciate its value because it can learn is the human being your buildings or machine your land depreciate and they're just an enabler for you to get things done so we have to consider human beings we have to consider something on the profit and loss account which you adjust up and down flexibility because next month I'd see less and so but to see that as your source of ongoing competitive advantage and build in it therefore the concepts of retention and so on now to answer this point yes I agree with Mr. Nath that the labor laws are a component no doubt we got antiquated laws and the administration is terrible but it's one component yes yes but the other things may be equally essential and that's the point we are concentrating on if you don't do this we can't grow manufacturing what he's saying and I agree frankly you can do all of that but if you don't do the other things forget it there's no manufacturing and so here yesterday I heard from Baba he was talking about one state since you're talking about states there's a certain part of Maharashtra in which there are much better industrial relations than other parts of Maharashtra the labor laws are the same and the part in which they're better industrial relations the productivity has gone up some six times compared to other parts the same state same Indians same laws what is that due to is what Mr. Motoraman is saying it's a pattern of relationships now in building those relationships there are some institutions both on the labor representation side and consultation processes there are definitely processes and institutions of building skills which his organization has and Tata's have in which government does have an enabling role also so I'm talking about reconstructing the concept of the enterprise the constituents of the enterprise the processes in the enterprise that's what it is and to his point there are small organizations that have become big in our country and some haven't as we've looked at though ones were complaining that I can't grow big and they will say because they are an irksome thing the labor laws they will sort of concentrate if you did this I will grow believe me they will not the others who have grown in spite of the labor laws what they did these people should learn to do but yes of course we must make our labor laws modern and we must improve their administration which is the component the administration within the NMIZ regarding institutions the NMIZs are not going to build institutions Mr. Nurdeck. No I think this is exactly one of those points where the manufacturing industry can learn from the services industry because in our business it's only about people so are you really creating an inclusive work environment where people can learn and grow where they get the right training where they can make a career where it's fun to work are they engaged and are you keeping an eye on that I think that is a critical factor Mr. Kalyani it's at the ball rolling on the labor issue and you've been remarkably silent since. No you know I agree with Arun. Organizations have to change and redesign their workforce first of all if you look at Indian manufacturing Indian manufacturing had a classic business model of low capital investment highly labor intensive manual working very little technology this was just 15-20 years ago today the business model is exactly upside down it's high technology very highly skilled manpower and therefore high capital cost and therefore you need to make it productive and the only way you can make it productive is if you have people as an asset that appreciates not people that you look at as a liability so I think first you need to start differentiating in this fashion in relation to labor laws I agree with Mr. Nath the laws are antiquated the problem with our antiquated laws is we have allowed rent seeking to take place because of the aberrations in the law and if you had a way to get rid of this rent seeking process in the system the laws will become far more productive and far more effective in the system. Mr. Dr. Nark Mr. Nark just to move on to another point I think Dr. Mayra and Mr. Hogg made a very important point about the states this 36 checkpoints and I don't think the answer to that is not to have the states I fully agree with you that that is part of our structure and does work well what I think we need and I'm sure Dr. Mayra will agree with me on this that we really need a total overhaul of our tax laws and our revenue arrangements and revenue sharing the reason you have those 36 checkpoints is each state is collecting some revenues and these taxes and so I don't think we need to touch our federated structure which has a very very important role what we need to do is really look at our entire tax system and revenue sharing arrangements between state and the center to take care of the issue that you have mentioned Mr. Hogg which is very critical. And the endeavor on that front has been on for a long time GST but at this stage what we're going to do is invite questions from the audience if you could introduce yourself briefly opposite to a specific member of the panel indicate who you're posing the question to we have mics going around. Advani from EDS and Airbus first thank you very much for stating that manufacturing is not passé anymore we feel a bit of that in Europe as well these days now just one question which I would like to ask relates to China what we see in China is that as Mr. Kalyani has mentioned there was a convergence of a new environment which was set up secondly there were some industry verticals which were put in place and thirdly there was a proactive involvement of foreign manufacturing companies so my question to Mr. Mehra would be what is the role of the foreign manufacturing companies in the new manufacturing policy of India. Thank you actually I believe we are already and we hope to be much more open to and inviting and not manipulating foreign companies than perhaps our very successful competitor China has been this is one of our challenges actually that inside the example of China and how China has grown its manufacturing China has done what all previous people whether Japan, Korea and two centuries ago United States did they protected their fledgling industries against foreign competition and they put rules by joint ventures and squeezing and so on to get technology into their ventures and talking all these countries they have had to now develop a policy in the year 2005 and onwards when the WTO is there and the belief that markets must be left completely open which was not there before China while growing in the regime of open markets has as you know been forcing certain rules which have enabled it to grow capabilities sometimes at the cost of foreign manufacturers and sometimes to their benefit they cannot and do not wish to do that so we have to be much more sophisticated in our learning in having the foreign people come here but please manufacture here is our request give the jobs here train our people here if you can now we cannot be insisting that we will buy only if you manufacture here which used to be possible under the phase manufacturing programs which other countries have used in the past we did also early time but we cannot anymore it has to be two sides we want to make the environment such that you will wish to produce and the two reasons why you should one is the capabilities that you can create here for selling here and for selling elsewhere and the other is the market here but of course you got to provide the environment of the physical infrastructure and less hassles from government the other we hope is comes from your side if you also care and say well I know it's difficult I'm your partner we together will grow here we will share with you what your needs are your experiences openly as partners along with the Indian ventures also that are growing here that's the process we are creating Mr. Muthuraman the role of foreign investment in manufacturing and hence in the objective achievement that's set out in the new policy I think India has been quite open in terms of inviting foreign investment in India and variety of areas of manufacturing and we have a number of foreign companies you see the foreign companies are Indian companies we face the same problem the problems are same so the what we need to do is to solve some of the fundamental problems and in manufacturing also nowadays you've got very high technology manufacturing or you have modern processes and as a president of the industry association of India I would very much welcome the foreign participation in the Indian manufacturing and it's a good thing to have right there at the back Thank you my name is Brian Holden from the Indian Vision Institute I'm just wondering how who should pay for the development of high level personnel going into an advanced technology industry and I use the example of vision because many of the companies in India are looking at how to get into the vision business be it Titan or Alliance or somebody to produce the optometrist the optical technicians the manufacturing technicians whereas industry doesn't seem to take responsibility for the cost of producing or the encouragement of producing not like if they're building a concrete plant where they take capital invest that capital in how to make concrete industry doesn't seem to be taking a role in how to invest in developing the personnel 100,000 optometrist 150,000 technicians necessary to run a world world class business by getting involved in the training of the people I think you've touched upon a subject that I don't think we have spent enough time talking about in this panel which is about investment in skills we've seen evidence of it in the services sector where companies have made large investments in skill up gradation is there enough evidence of it happening and a willingness to invest in skills up gradation we can always talk about the government and the role it has to play but for now the question is pointed at all of you well, let me try to answer this I think it's a very important question there is no doubt that the industry needs to take part responsibility in putting in processes to make this happen because it simply is not going to happen otherwise and today if you look at manufacturing and if you look at the people who have been successful in manufacturing this is exactly what they do they have created processes within their own companies within their own organizations which create this highly sophisticated logical manpower or resource or whatever you want to call it now it's being done in disjointed efforts individually the national skill mission or the national initiative that is there I think it's going to bring all this together in some form or the other and we need to get this cemented so that there is exchange of knowledge exchange of information exchange of process but clearly at least in an Indian context this is going to be an industry responsibility for a fairly long period of time you've acknowledged the responsibility is there an adequate investment do you see going into it this is a very important and fundamental question you know till say 2 or 3 decades ago the government was the main creator of wealth and therefore it did a lot of things over time the creation of wealth has been more and more in their private industries hands and therefore the certain responsibilities also I believe need to shift to industry and skill building is one fundamentally important thing responsibility of the industry to ensure it not only trains its people but it also trains people beyond its need for giving it to smaller companies because we must realize in a country like us the small companies won't be able to train people on their own especially when they start so there is a responsibility that the large private sector corporations need to take on skill building and technical development and so on and the way I would go about doing that it won't come about you know there are some industrial corporation which they will do automatically and they believe that there is a right thing to do and they will do it but many others may not do it the way to get this done I believe is to incentivize good behavior and in many walks of life we need to instead of saying that please follow these rules you say that if you do this like I'll give you a small example from the Chinese steel industry just one example in the Chinese steel industry if your emission levels in the steel plant is above a certain level you will get penalized on your interest rates on the bank and that if you see the scale that scaling scale you will see that the incentives are higher when you do better than the norm so the large corporations need to be incentivized for training other people for giving it to manufacturing industry otherwise manufacturing industry is not going to grow in India so industry has a responsibility for it I'd like to take you down once again to the practicalities of logistics infrastructure if I may and since China was mentioned I'm not going to compare with Europe or US that wouldn't be fair my company has been active in China for 35 years and yet we did the conventional sort of import, export, freight forwarding along the coast now we need to move inland we need to go to the west Chongqing and Chengdu are two cities that are exploding Chongqing largest city of the world 34 million people next door only 250 kilometers away Chengdu another close to 20 million these places are exploding and it is exactly logistical infrastructure both of these places are building hops in a hurry both of these places are deadly competitive and are begging us on their knees to come to their places they have offered to lengthen runways for us within three months so that we can bring in our 747-400s on a daily basis they are offering dedicated warehouses to use the world-class facilities that's the kind of stuff that is possible and happens does it happen in India? I guess that's a no really proactive behavior that's on display in China we have a few more questions right here in the front row Ravi Chaudhary, CNXT Consulting I am a little concerned about the debate actually I am talking about improving manufacturing growth and increased employment through the eyes of a west-based model, high technology high capital, high-scaled labour, yes it will increase growth, it will increase livelihood but I think India must evolve its own model I would like to provocatively propose that we can be due to increase manufacturing, employment and growth through relevant technology, low capital low skills but the enormous entrepreneurship that exists in the Indian rural areas why can't we create added value manufacturing in agricultural sector and all little little products which can be made in India? I am quite comfortable with 84% even 90% employing less than 50 people if it will create an India model of manufacturing productivity and growth once again I think I need to put in information about the whole plan I am glad you are exposing all parts of the plan the plan's objective is 100 million to be employed in the next 15 years, certainly the growth of the forging and the steel industry is not going to employ even a million or 2 million of those so yes the plan has got many industries in mind to be stimulated which are more labour intensive food processing as you mentioned, textiles and garments, leather and so on so there are 15 sectors that we know we need to pay attention to, some of these are at the higher end and they create employment too and they are to help the grow the others also by the skills that they develop all over but we've got all those other sectors we are very conscious that this is not just a commitment in terms of a statement of a number we are calculating that all the plans that are coming up from the associations in those sectors will total up to this 100 million, if not you've got to challenge ourselves in those sectors to stretch your plans and your ambitions, what do you need then from government to stretch your plans and ambitions we have to get the 100 million because that's a social need so that's it and you will find if you look at the document again that you will find these other sectors named very well and what they intend to do and some of them you've done very little like food processing which are very close to so now the Indian model has to be and I would say this very importantly and this is the point of small enterprises that today's technologies of communication and coordination do enable many small enterprises to together create a larger effective enterprise all these small enterprises don't need to be owned by a single owner which requires then forms of governance in which there is a sharing of value that someone mentioned we have recognized that this technology of governing and designing enterprises which are owned by people and then many people owning their enterprises several combining together into an ecosystem creates a competitiveness this is by the way democratic capitalism also because the ownership is very widespread rather than a one owner and a lot of employees so we've got examples from our own country which sometimes we would look at a sconce and say this is as you were implying not modern this is like Gandhian in old fashion but it suits today's technologies it is enabled by today's technologies and our requirements and there are some sectors in which these grow very well and so those happen to be the employment intensive sectors also which is why we found that in the textile sector in China yes is one big factory when we've consulted with the government and textile industry in this country they have said for business reasons it's not labor reasons they like to have several enterprises they find that representation in those also the specialization and then the modularity because you can slow one and do the training while the other one is going is much higher in those forms of enterprises so yes we do need to think about it. Mr. Nag, let me just supplement what you said and I fully agree with you the 84% that I mentioned is less than 5 workers but the idea was not to create factories of 500 as a matter of fact in China most of them are in 50 so I think my point was that you need to move up the scale doesn't mean you have a thousand people organization the important thing is do what is appropriate and that's why labor intensive appropriate technology so I have always felt that we should get away from this label you know I've always believed go with whatever works appropriate technology is obviously one of them and I think the NMP has reflected this very appropriately as you have said we have one question we have three questions we'll do this systematically with the lady like to go first. Hello my name is Veena Mishra I'm the economist with Mahindra and Mahindra and raised and the response you know small is good I have some trouble with the issue of labor intensive and capital intensive because I think ultimately what gets to employment is when a firm is able to grow rapidly you may be using capital intensive technology today but if you're growing very rapidly then you may be employing many many more people five years down the road than someone that is small and is at that point labor intensive the second worry I have is that when you have a lot of small enterprises and you're talking about skilling and training people then the role of the government then becomes larger and that you need to handle that as well my worry is that when we liberalized trade internationally competition between large enterprises and imports from large enterprises ask the reason I think why our parallel textile industry and our leather and our small manufacturing units are not able to cope is and I'll give you a story for that there was a bicycle manufacturer from Italy or France that had come and were going to saw small parts from India standardization across a large number of small little little enterprises is a tough job the person after three years of trying to do it just got fed up and went back so having a lot of small small enterprises does require if you want to go that way it requires a lot more coordination a lot more government intervention and if our governance is not at that level I would say at the same time please ensure that there may be capital intensive but if that is what is required to grow rapidly maybe ten years down the road that's where it'll get to the employment so it's just a caution I mean in terms of going that way you know if I can reiterate what Mr. Nagat said do whatever works you know and I think that the reality is it's not either or neither will it be either or in the future and if the guiding principle is do whatever works it meets your maximum of growth and hence addition Mr. Mathuraman. You know on this labour intensive capital intensive my view is that you know every process at a given state of technology requires a certain number of people which should have just that number of people at another level of technology at another improvement level you require maybe less people or a different number of people so one doesn't you don't have more people you don't you know when you improve technologies or when you automate things there are a couple of objectives with which you will automate you will automate it from a point of view of process reliability or product consistency and so on that to my mind should be done in the interest of customers or in the interest of efficient manufacturing but if somebody is automating just for reducing the number of people India I think needs to give it that's subject to a different kind of a thought. And to be fair I'm sure that's not typically the reason for doing business in a particular way. You've been waiting very patiently. Yeah Bernhard Steinrucke, Indo-German Chamber of Commerce Mr. Mayra, the SCZ policy to a certain extent failed. Your new policy why will it not fail? On the other hand question to Mr. Mathuraman we have great history in India of industrial townships like Jamshedpur or look at Jamnagar or others the largest refinery in the world, one of the largest manufacturing units in the world could you imagine that we have many many within this policy many many more Jamshedpurs in India? Yes actually I would answer both the question because they happen to be one answer that the SCZ policy was just providing land or saying well you can take this land and build something on it. That SCZ wasn't connected to two things transportation and the logistics that he's pointing out but for manufacturing is essential. Secondly to urban habitation necessarily. So if you're going to employ people where will the people live and also in the SCZ you weren't really committed to what you pointed out about the training the two rooms which manufacturing would need. So the concept of the NMIZ is much more comprehensive. It requires in the NMIZ about two-thirds of the land to be urban habitation like Jamshedpur or it's a Jamshedpur model. In fact Jamshedpur has been used as has been as has been examples from China and elsewhere in devising the architecture of these new NMIZs and of course the long transportation corridors in the first set along the Delhi Bombay rail corridor. So this is why I feel the NMIZs will succeed where the SCZs did not succeed in growing manufacturing Can I be provocative for the sake of being provocative because we called them townships a hundred years ago and today we're calling them mega industrial zones the only thing that's come in between is a pile of bureaucracy so we're going back to what has been proven and there's a different description of it. The only thing that has held it back for all this while is a large growing cumbersome bureaucracy I know that's a little philosophical Mr. Myra and you're going to wonder how do I answer that but you know does that simplistic description strike true to you? Of course it is true we have handed over to the state more things and we've allowed the state to grow. We haven't really cleaned up the processes of management within the state yet and we are focusing on that now when we talk about in the NMIZ that you will have a requirement to manage things to do with the environment for sure but it will be done in a more efficient fashion and not necessarily only by government officials sitting over there so Jamshutpur of course you may say the company was running the town same idea but in today's DNA as he would also admit as you come into being a more democratic and they've suffered this also there's a belief all over the world that the people should elect those who govern them they cannot be the company the capital and the company I mean this is all over the world so we have to come to these concepts you know when Jamshutpur is getting discussed I can't keep quiet yes you know if you look at what the government told Tata and Steel Company many many many years ago as to what are your responsibilities for having for us having given you this land for developing a steel plant it does read like today's this policy so if you had a good practice there's no harm in going back doesn't matter what happened in between yes a question there if we could get a mic across three quick questions one is for Mr Nag you had mentioned that the percentage of GDP growth and is linkage to employment and you feel that manufacturing employs more people per unit of GDP growth than do services our data in the state of Gujarat actually support exactly the reverse service industry is manpower oriented whereas manufacturing has got equipment and manpower and consequently whatever service industry is able to generate as a unit of GDP it's far more labour intensive and far more human resource intensive especially if you are looking at the field of objective of employment number two question is states compete Mr Mayra we have seen Himachal Pradesh take a thousand companies into Himachal Pradesh and you know for a fact that the infrastructure in those places was so weak it was incentive wise through taxes as if this were not enough for states to compete Sikkim has also followed with a 30 year tax incentive another 460 companies have gone to Sikkim and in the process we have lost two major states for tourism who is going to determine national priorities versus state priorities when we lose one industry to another industry often at the cost of the people's employment in these places and the third is whenever we have a history of creating small enclaves of very good infrastructure and facilities existing industries tend to migrate to these areas but in employment in the existing areas and new employment in the new areas creating therefore the kind of additional employment that we are looking for that doesn't necessarily follow each time thank you I recognize that Gujarat has done very well in terms of manufacturing but not in terms of employment creation Haryana is the one which takes the price on that one manufacturing sector is about 9% in the 1980s if I remember and is up to about 17% now I think you might have a structure in which your services which produces or need for other things are done and may create employment but by and large not only in India but everywhere else is the manufacturing which creates more employment not services services produces GDP so I think if you want to create employment it has to come from manufacturing but it's obviously not either or but I think on that issue you really need to see Haryana versus Gujarat to see the point thank you I think you raised a very big question about governance architectures in which you say you have a lot of knowledge about governance architectures in which you said states will do things to make themselves more attractive than other states and you use the example of Himachal so let's make a couple of points there one with the point you raised that even though the infrastructure was poor the tax incentives were attractive business people made their own judgment they were going to work in poor infrastructure but they liked the tax incentive that's their requirement that's okay now so long as the state is absorbing the tax incentive that's package it's offering one state invests in infrastructure and doesn't reduce taxes saying why should I better infrastructure the reason you will come and I will recover through taxes the cost of building the infrastructure that's the state's models what they will build countries have the same thing after all I mean countries adopt different models and they are trying to attract investments to go so I see no problem with that however if the center is subsidizing one state at the cost of another you know then they say why are you we all supposed to be equal under your eyes why are you helping one and not the other now we have had in our country in the past the backward areas and using people to go to the backward areas because we do believe we don't want upset in the country violence and so on and so forth so it is a balance of governance that we collectively agree that the northeast we should invest in all of us Gujarat accepts Marashtra accepts because we want to be one country in that to have you know more employment and satisfaction there so it's again a governance thing that some things we will agree to do for some all of us together but as for the rest I think we should be free to devise our models which enable us to be more attractive for the sort of industry that will come to us I mean some industries will be attracted like in a module actually many of them was not so much a module manufacturing many were to do with services because they said you know that's a good nice environment or manufacturing like pharmaceuticals it's not very heavy in terms of infrastructure but you need good quality people so you'll find your models and attract a certain type of industry and I do believe that that is the only way we are going to be growing things everywhere people will have to find their own models and their own solutions from where they are we're all out of time except for closing comments from each one of you we've taken various different aspects dealt with it in this panel the audience has taken us into new territory as well now for a quick summary before we wrap up Mr. Muthuraman would you like to go first? I'll make just two points one is I am very optimistic about this policy there is a lot of work to be done but I think the government has also realized that manufacturing is important and it'll give you employment that's the first one and therefore I have every hope that further work will be done the second point I want to make is there is another very big pressure that will push the government to do what it ought to be doing which is this addition of 10 to 12 million people every year into the job market if you didn't have enough manufacturing you're going to have a huge problem and when the problem shows up its face government also will start realizing that in addition to manufacturing being desirable it must now be done Mr. Hook all of these are very important issues and I have a lot of respect for them but if we can't move a box from A to B nothing will happen so I'm a contradiction within as far as the role of government is concerned I'd like government to be involved very much so in order to tick off my wish list but then just as badly and just as quickly I want government to step out of the way of business Mr. Kalyani I would like to think that this is a very good policy more than anything else I don't think you have an option or India as a nation if in the next 10-12 years we really don't make this happen then I think in the league of nations you would have missed a bus so it's in everybody's interest to simply make this happen now clearly if you look at it from a historical perspective you know we have said many of these things before in the last 20-30 years we have had many policies we have had many interventions most of them have not produced the kind of results that were expected now why would it be any different I think it's the same question that we had in 1991 when as a country we almost became bankrupt and something pushed the system to change and I believe that something will push the system here to change and I think states will have to play an increasingly important role in understanding the content and intent of this policy and make things happen in their states actually you've been very generous with your time to me we're talking about policy and implementation so I might just go to general Petraeus who said the policy is not made, policy accumulates the result of many decisions taken as a country moves forward collectively we are going to have to take many decisions and take them collectively and we get the result it doesn't matter if you have a policy or not I would say I mean the policy is very important but I think it's it takes its own responsibility how am I going to innovate, how am I going to position, how am I going to create an engaged workforce and you know take responsibility in your own hand I'm going to invest in my workforce as well Mr. Naag I think India like many other countries in Asia certainly China has had tremendously positive, robust growth story but increasingly inequality is increasing and I think therefore I'm very concerned about what one calls informistically the two phases of India which diverge rather than converge and I think the emphasis that we have now put on manufacturing which is not only important for accelerating growth but really to ensure that India's growth is supported of course the implementation is what will make the difference but as Muthuraman says when you're adding that sort of numbers of people joining the labour force if you don't have some way to create employment our growth story will come to naught so I think that summarizes what the last hour and a half has been spent on thank you very much for being an active participative audience as well appreciate your insights thank you