In its last 18 months, the UPA government faced up to an economic reality: new investments had come to a halt and projects worth lakhs of crores of rupees caught in red tape were turning unviable, posing a threat to banks that had lent for them. The then Prime Minister, Manmohan Singh, heeded Finance Minister P. Chidambaram’s concern about the impact on public sector banks if these projects were not brought back on track through high-level intervention. When the NDA government assumed office, it found that the mechanism that Dr. Singh had approved to fix the problem — a project monitoring group in the Cabinet Secretariat to steer around roadblocks to big-ticket manufacturing and infrastructure projects — had helped clear projects worth Rs.6.5 lakh crore. In June 2014, the Prime Minister’s Office asked the group to ascertain if the projects it had helped had begun operations. The PMO wanted to know if more chimneys were billowing smoke, if production was going up and jobs were being created on the ground. Three months later, the government launched its Make in India programme to encourage the world to use the country as a global production hub. It promised reforms on norms for foreign direct investment — many of which it subsequently delivered — and a fix for problems that gave the country a poor reputation among foreigners, including unpredictable tax policies and a difficult regulatory environment.
Over the last week, about 1,000 CEOs and 4,000 delegates representing 2,000 overseas firms were in Mumbai at a glitzy event to showcase Make in India, which Prime Minister Narendra Modi presented as the biggest brand to emerge from the country. He said India was adding deregulation to its strengths of democracy, demography and demand, and promised to end retrospective taxation that had spooked investors during the UPA rule. The Industries Ministry has claimed that Rs.15.2-lakh crore worth of investments were committed at the event. These include some by foreign firms such as Oracle (Rs.2,749 crore) and Ascendas (Rs.4,571 crore), but the list is dominated by Indian players making announcements to coincide with the occasion, including a Rs.6,204-crore project by public sector undertaking Rashtriya Chemicals and Fertilizers. Instead of doubting the numbers, it may be more pertinent to focus on two other developments of the week. Authorities served Vodafone a reminder for tax, which warned of asset seizure in case of failure to pay the dues, prompting a sharp reaction from the British firm. It also emerged that Foxconn was yet to follow through on a $5-billion investment it had announced in Maharashtra last August. To capitalise on the success of Make in India, the government must now show sustained improvement on the ease of doing business and create a transparent and stable tax environment to prove it is capable of delivering on its intent. It should use the same yardstick to measure Make in India’s success as it did for the earlier stalled projects: would products start rolling out of factory gates anytime soon?
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