‘Make in India’ initiative gives boost to heavy engineering industry in India as FDIs are opened for Railways and Defence sectors
While leading a German delegation to explore collaboration opportunities in India, Mark Hauptmann, political scientist and the German Parliament member, had described Germany and India as a “perfect match”. There was a greater rationale behind the statement rather than just being a media quote. India and Germany have a long successful trade and bilateral collaboration history. The trade relations between India and Germany stands strong with Germany being the largest trading partner in Europe. Now after the initiation of PM Narendra Modi’s ‘Make in India’ campaign the time is ideal to further strengthen the relationship from trade and bilateral standpoint.
The ‘Make in India’ initiative is being termed by industry watchers as a thoughtful mix of economic prudence and administrative reforms that reflects the government’s strong strategy to bolster economic growth of the country. One of the many such policy reforms was seen in the Union Budget 2015 when the amount of FDI was increased to 49% for conservative segment like Defence and 100% for Railways. The government also has backed the ‘Make in India’ initiative with multi-pronged strategies that focus on infrastructure development that includes ports, highways and logistics facilities. This initiative is aimed to provide a conducive environment for investors to leverage India as a manufacturing hub and in turn create job opportunities also.
Opening up of conservative sectors like defence as well as railways, and major investments planned in infrastructure, transport and industrial manufacturing; has collectively offered tremendous opportunities for heavy engineering and automation sectors in India. The government aims to increase the contribution from manufacturing sector to country’s Gross Domestic Product (GDP) to 25%; and to achieve that the defence sector has to take the lead. India has been a global leader in defence imports with two-third of its defence procurements being imported. With ‘Make in India’ initiative the focus is to increase the domestic manufacturing for country’s defence up to 70% in next five years. The FDI cap has been increased to 49% and upon approval of Cabinet Committee of Security it can go up to 100%.
Just like in 1990s when the government opened up the economy there were host of carmakers who made a beeline to tap the Indian car market. For this they tied with Indian firms, and doing so built the knowledge and skills to develop passenger vehicles on their own, that they even export now. The same can happen with the defence sector. With India’s ambitious plans to strengthen its defence forces with latest technologies and solutions that are made in India; there is a great scope for private Indian companies like Mahindra, L&T etc. to partner with global defence technology companies to cater to the India’s defence needs.
Similarly Coal India Limited (CIL) intends to double up their coal production capabilities from present 500 billion tonne to 1 billion tonne by 20201. This is a big opportunity for heavy equipment makers – both Indian and Global. CIL has aligned their roadmap for equipment and technology procurement with ‘Make in India’ mantra, wherein CIL wants indigenous production of equipment and ground sensing solutions. Heavy engineering Indian companies like BEML, L&T etc. have opportunity to partner with global players like Caterpillar, Leibherr etc. to produce mining equipment with latest technologies.
Likewise Indian Railways where the FDI cap has been increased to 100% offers opportunities to develop not only the rail stock for transportation like high-speed railways, but also the mass-rapid transportation for the metropolitan cities. There is increased focus on PPP mode for project delivery, with estimated US$ 1000 billion worth of projects to be allocated through this mode.
The Indian engineering sector is of major strategic importance to the economy as it integrates with all other industry segments. The avenues for business opportunities are aplenty; we implore you to explore the opportunity to ‘Make in India’ and expand your business globally from India.