On January 12, Tesla Inc Chief Executive Officer Elon Musk, responding to a Twitter query on Tesla’s entry into the Indian market, tweeted: “There are still too many challenges with the government. is one of the visionary global entrepreneurs of the 21st century, which makes him one of the most sought after businessmen. After his tweet, referring to the “challenges with the government”, there was a flurry of reactions from various state-level ministers In which he was promised red-carpet treatment, single-window time-bound clearance, fast set-up enablers and state incentives to set up a Tesla assembly factory in his state.
A global entrepreneur is delighted to see such quick responses on Twitter, a medium that allows for instant communication. At the same time, every business owner and employer in the country will also appreciate the equal sympathy and response of these ministers. Government red tape, taxation, land acquisition rules and state labor laws continue to be challenges for Indian entrepreneurs. An equally welcoming policy environment in these states for existing businesses could allow the creation of many Teslas by local entrepreneurs who can develop products to produce in India and sell around the world. Simple solutions can propel Indian enterprises into global markets.
For any manufacturer, the top five fundamental costs are on raw materials, wages, interest payments, logistics and depreciation. Any business operating in India is at a disadvantage due to high interest, logistics and compliance costs. These can generally incur double-digit fines as a cost-to-cost ratio, which more than offsets the relatively low labor costs in India. So what should governments do? Here is the action plan to attract investment in the manufacturing sector.
Ensure Affordable Finance: Banks should resume risk based lending to the manufacturing sector. The industries of the future can only be built by intelligent risk-taking. Thus, lending to advanced technology enterprises should be promoted. In a successful capitalist system, measured risk is incentivized and spread over a pool of assets. Therefore, expedite the necessary processes or changes to facilitate movable asset-based lending. The three-fold credit growth and improved credit availability can create huge employment opportunities as well as reduce inflation and improve export competitiveness. Also, venture capital and private equity investment in manufacturing startups should be encouraged.
Build the infrastructure for plug-and-play: State governments should immediately offer plug-and-play facilities such as available land, transport infrastructure, power, water and sewage connectivity, and other basic clearances so that the plant can start operations faster. About 10% of the area under development can be allocated for general services and earmarked for banks, logistics nodes, research and development laboratories, packaging and testing units, demonstration areas and transportation centres. Such ready-made facilities will reduce the burden of entrepreneurs and will speed up the setting up of private factories.
Reforms in Government Payment Schemes: India suffers from a very poor payment culture and we have one of the worst records on delayed payments in the Asia-Pacific region. State-government payments are mostly late, resulting in delays in downstream payments. We must improve our performance on these ratings so that the promise to pay on a particular date is treated as an object of confidence. This reform will not only strengthen enterprises, but will also reduce bad-credit stress within India’s financial system.
Modifying or abolishing old laws: It is time to free the entrepreneurs from the clutches of labor laws and delays in land acquisition. Its Mathadi Act has become a problem for the entrepreneurs even in an industrially progressive state like Maharashtra. The central and state governments should come together to simplify labor laws with an emphasis on protection of employment rather than employees.
Capacity building: Skilled labor is an asset not only to the Indian industry, but to the entire economy. State governments should promote skill development among the youth. Privatize education and focus on developing capabilities so that skilled and efficient human resources are available. Startups creating intellectual property should be encouraged.
In the end, building trust is the key to entrepreneurship and job creation. India has been a trustworthy society with entrepreneurial tendencies for centuries. According to the report of an Industrial Commission (1916–1918) written by British officer T.H. Holland, “At a time when the West of Europe, the birth place of the modern industrial system, was inhabited by uncivilized tribes, India was famous for the wealth of its rulers.” and for the high artistic skill of its craftsmen. And in the much later period, when merchant adventurers from the West first appeared in India, the industrial development of this country was in no way inferior to that of the more advanced European countries.
I am confident that India’s position in entrepreneurship and business can be revived through dialogue, consultation and mutual trust. Elon Musk is certainly welcome to build and innovate in India, but state governments must also groom local entrepreneurs to create global enterprises that generate value for all stakeholders.
Together we can work miracles. With luck our try is here and now. The Sanskrit word ‘Nirmukta’ means free. The time has come to free Indian manufacturing to make their own ‘Kasturi’ in India. No other ‘musk’ or blending will be required.
Sudhir Mehta is the Chairman and Managing Director of Pinnacle Industries and President of the Mahratta Chamber of Commerce, Industries and Agriculture (MCCIA).
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