Key expectations in industrial development

By: Mohammad Athar (Saif), Partner and Leader, Industrial Development, PwC India

This budget could usher in economic development in the country’s hilly states, that hold immense potential across sectors, by providing a specific thrust on resource-based industries, food processing and tourism. It could enable economic development in such states by supporting them with a mix of investments to develop quality connectivity and industrial infrastructure. Industrial policies would need to focus on managing challenges linked to operational costs for investors. For example, the Government could support them by providing for an industry-responsive workforce, and logistics infrastructure and services availability.

• The tourism sector presents us with a humongous growth potential and monetising our tourism assets will be critical. India’s hilly states, right from Jammu and Kashmir to Sikkim, need capacity building to develop quality infrastructure and service availability. Developing iconic tourism destinations and globally reputed theme parks will internalise a lot of pent-up demand which is getting serviced from other destinations. Bringing in private sector operators and developers will be important to achieve differentiated service delivery, for this, a new policy to promote PPP in developing Tourism clusters and zones will be impactful.
• The Production Linked Incentive (PLI) Scheme has provided the required thrust to manufacturing in India, and it is time the quality of industrial infrastructure becomes world-class to attract global investors. India has many special economic zones (SEZs) and industrial parks with good-quality infrastructure, but some of them need to be upgraded to world-class facilities by providing both urban and industrial amenities to workers. The private sector can play an important role in developing these sector- and industry-specific economic and industrial zones. Right now, the majority of our industrial infrastructure is driven by the private sector. Developing country-specific zones in key sectors like electronics and auto will encourage global investors from the US and Japan. This model has worked in the past with the success of Japanese enclaves in Rajasthan and Gujarat.
• The PLI Scheme has given a major boost to manufacturing revival and helped in developing a clear framework to operationalise the scheme, including the disbursal mechanism. Bringing new sectors under the scheme will help in maintaining the traction in manufacturing.
• Post the sunset of the SEZ policy, India needs a WTO-compliant exports zones policy. Exports need a major boost as India has remained a large domestic market for investors but has been used limitedly to serve the global market. Our manufacturing will need to be more productive than before to cater to global demands and we will need to focus on the factor (for ex land, labour, power)  cost and transactional cost drivers. A new SEZ policy to enable exports and give operational flexibility to investors will help in pursuing the global markets. For example, tenants in SEZs could serve both the domestic and export markets under a framework agreement.
• Available land parcels in SEZs and industrial parks need to be utilised for new initiatives of the Government like development of multimodal logistics parks, pharmaceutical, textiles and electronics manufacturing clusters to improve asset utilisation and improve densification of manufacturing.