India dead set on reviving its manufacturing sector

Hopefully 'Make in India' campaign does the trick.

Indian Prime Minister Narendra Modi unveiled the "Make in India" campaign recently, aimed at reviving the manufacturing sector through higher domestic and foreign participation.

According to a research note from DBS, plans are to raise the sector's share in overall GDP to 25% from ~15% in FY14. Growth in this sector had slowed to -0.7% in FY14, down from 4.3% in FY11-12.

The key aspects of the new framework include: Establishing a single point of contact of investors under the "Invest India" initiative. An investor facilitation cell will also be launched to assist prospective foreign parties through the entire investment cycle. Also, it includes the identification fo 25 sectors including electronings, IT, pharmaceuticals, automobiles, tourism etc. as key thrust areas.

Further, an overhaul of the regulatory framework is in the works, with emphasis on skill development, infrastructure, and easing FDI policies.

Lastly, time-bound clearances were assured. A dedicated eight member team to answer investors' queries and provide suggestions/feedback on further changes to the government was initiated.

Here's more from DBS:

The government's move to introduce this campaign along with its key stakeholders, including major business groups and foreign companies operating in India, is a step in the right direction.

These broad initiatives blend with the government's overall plans to build investor confidence through better governance and a conducive business climate.

Beyond simplifying the process of doing business, the success of this initiative will hinge on the pace with which infrastructure investments (transport and resource-based industries) are undertaken, focus on skill development and re-look at the land acquisition law, amongst others.

Availability of good quality infrastructure and a simplified regulatory framework will lower the hurdle to develop the economy's manufacturing base.

While material changes to the manufacturing cycle is likely to be only visible beyond FY15, we expect the initial boost through porject clearances and rebuilding stockes to lift growth towards 6% this year and the next.

Lagged boost to consumption spending should also help boost growth in later part of this year and into FY16.