Indian Prime Minister Narendra Modi plans a raft of business-friendly measures if he wins a third term this week, including pushing through regulations making it easier to hire and fire workers, according to two government officials familiar with the matter.
As part of an election pledge to transform India into a global manufacturing hub, Modi wants to offer subsidies for domestic production modelled on recent packages for semiconductor firms and electric vehicle makers, said the officials, who spoke on condition of anonymity because they were not authorised to talk to media.
The premier also plans to reduce import taxes on key inputs for locally-made goods, which have pushed up India’s manufacturing costs, the officials said.
Modi’s office and the labour and finance ministries did not respond to Reuters’ questions.
Exit polls project that the right-wing coalition led by Modi’s Hindu nationalist Bharatiya Janata Party (BJP) will win a big majority when election results are announced on June 4.
Modi’s reelection campaign was partly built on the promise of continued economic development. He’s pitching India as an alternative for global firms diversifying their supply chains from China.
India is the world’s fastest-growing major economy. But that includes both a booming tech sector and a struggling older economy that doesn’t provide enough jobs for everyone else, said Josh Felman, the former head of the International Monetary Fund’s office in India.
“What can be done now to provide employment – good jobs for these people – is manufacturing,” Felman said.
India successfully lured suppliers for major U.S. corporations like Apple Inc and Alphabet Inc’s Google. But less than 3% of global manufacturing takes place in the world’s most populous country, compared to 24% for China, World Bank data shows.
The government plans to increase India’s share of global manufacturing to 5% by 2030 and 10% by 2047, according to an internal document seen by Reuters. It did not provide specifics.
Reuters spoke to 15 people – including bureaucrats, representatives of major investors, economists and trade unionists – who identified three significant obstacles holding India back from manufacturing hub status: restrictive labour laws, challenges acquiring land, and a rigidly inefficient tariff regime.
INDIA’S PEARL RIVER DELTA?
When Modi was chief minister of his home state of Gujarat between 2001 and 2014, he dreamt up an investment zone in the Dholera region. Legislation creating the Dholera Special Investment Region (DSIR) was passed in 2009 and local authorities began acquiring land for it in 2013.
The plan, Modi said during a 2011 visit to a Chinese port, was to develop DSIR along the “Shanghai model”.
Starting in the 1980s, China set up special economic zones along its southeastern coast that are widely credited for it becoming the world’s factory floor.
Land reform was a precursor for China’s manufacturing rise. Starting in the 1970s, Beijing separated ownership from usage rights, making it easier for investors to acquire industrial land, said Henry Gao, a Chinese trade expert at Singapore Management University (SMU).
Beijing’s industrial zoning policies also made it easier for industries to set up in areas with ready access to materials and facilities, he said.
As prime minister, Modi has continued to stress the importance of industrial zones for India. In March, he described facilities under construction in DSIR as central to the creation of an Indian semi-conductor manufacturing hub.
Tata Group announced plans in January to build India’s first semi-conductor fabrication plant there.
During a visit in March, Reuters also saw construction activity for an upcoming cargo airport and promotional billboards set up by real-estate developers.
There were paved roads and a waterfront but little sign of bustling business.
DSIR hopes to attract more manufacturing companies by providing leases of up to 99 years on government-owned land, said Rahul Gupta, head of the Gujarat Industrial Development Corporation.
Local officials have said that it took more than a decade to acquire land and award infrastructure contracts, but Gupta predicted there would be much more activity in about two to three years.
Outside such zones, industrial groups still have to undergo a “very difficult process” to acquire the large plots of land they need because title deeds are often unclear and holdings are fractured, said Richard Rossow of the Washington-based Center for Strategic and International Studies think-tank.
In May, Foxconn – whose local investment was trumpeted as a major success by Modi – was met with protests by farmers in Karnataka state unhappy with the compensation they received from local authorities for giving up their land to the manufacturer, Indian media reported.
The Taiwanese company didn’t return a request for comment.
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