Opinion
How India can create its own Elon Musks
Summary
There is plenty Indian states can do to smoothen investments by local risk-takers who have their sights on a global market
On 12 January, Tesla Inc’s chief executive officer Elon Musk, responding to a Twitter query on Tesla’s entry to the Indian market, tweeted: “Still working through a lot of challenges with government". Musk is one of the most visionary global entrepreneurs of the 21st century, which makes him one of the most highly sought-after businessmen. After his tweet referring to “challenges with government", a flurry of responses from various state-level ministers began to appear, promising him red-carpet treatment, single-window time-bound clearances, fast set-up enablers and state incentives to set up a Tesla assembly factory in their particular state.
It is heartwarming to see such quick responses to a global entrepreneur on Twitter, a medium that allows instant communication. At the same time, every business owner and job-creator in the country would also appreciate the same empathy and response from these ministers. Government red tape, taxation, land acquisition rule and state labour laws remain challenges for Indian entrepreneurs. An equally welcoming policy environment in these states for existing businesses could allow for the creation of multiple Teslas by local entrepreneurs who can develop products to produce in India and sell across the world. Simple solutions can propel Indian enterprises into global markets.
For any manufacturer, the top five elemental costs are on raw material, wages, interest payments, logistics and depreciation. Any business that operates in India is at a disadvantage on account of high interest, logistics and compliance costs. These can typically pose up to a double-digit penalty as a proportion of costs, which more than offsets the relatively lower labour cost in India. So, what should governments do? Here is an action plan to attract investment in manufacturing.
Ensure affordable finance: Banks must restart risk-based lending to the manufacturing sector. Future industries can only be created by intelligent risk-taking. Thus, lending to advanced technology ventures should be promoted. In a successful capitalistic system, measured risk is encouraged and spread across a pool of assets. So, expedite the processes or changes necessary to facilitate movable asset-based lending. Tripling credit growth and improving credit availability could create huge employment opportunities as well as reduce inflation and improve export competitiveness. Also, venture capital and private equity investment in manufacturing startups must be incentivized.
Create infrastructure for plug-and-play: State governments must offer plug-and-play facilities such as readily-available land, transport infrastructure, electricity, water-and-sewage connectivity, and other basic clearances for a plant to swiftly commence operations. About 10% of the area under development can be allotted for common services and earmarked for banks, logistics nodes, research and development labs, packaging and testing units, display zones and transport hubs. Such ready facilities will unburden entrepreneurs and fast-track the setting up of private factories.
Reform government payment schemes: India suffers from a very poor culture of payment and we have the worst record in the Asia-Pacific region on delayed payments. State-government payments are mostly late, which results in a cascade of delays in downstream payments. We should improve our performance on these ratings so that a promise to pay on a particular date is treated as an article of faith. This reform will not only strengthen enterprises, but also reduce bad-loan stress within India’s financial system.
Revise or axe outdated laws: It is time to free entrepreneurs from the clutches of labour laws and land acquisition delays. Even in an industrially progressive state like Maharashtra, its Mathadi Act has become a nuisance for entrepreneurs. Central and state governments should come together to simplify labour laws with an emphasis on the protection of employment rather than employees.
Build capacity: Skilled labour is not just an asset to Indian industry, but to the entire economy. State governments must push skill development among the youth. Privatize education and focus on developing capabilities so that skilled and efficient human resources are available. Startups that create intellectual property must be encouraged.
Finally, building trust is key to entrepreneurship and job creation. India has been a trustful society with entrepreneurial instincts for centuries. As an Industrial Commission (1916-1918) report authored by British officer T.H. Holland had observed, “At a time when the West of Europe, the birth place of modern industrial system, was inhabited by uncivilised tribes, India was famous for the wealth of her rulers and for high artistic skill of her craftsmen. And even at a much later period, when the merchant adventurers from the West made their first appearance in India, the industrial development of this country was at any rate not inferior to that of the more advanced European nations."
I am sure India’s position in entrepreneurship and trade can be revived by dialogue, deliberation and mutual trust. Elon Musk is certainly welcome to manufacture and innovate in India, but the same state governments should also offer the same to local entrepreneurs ready to create global enterprises that generate value for all stakeholders.
Together, we can create miracles. Our tryst with destiny is here and now. The Sanskrit word ‘nirmukta’ means liberated. It is time to make Indian manufacturing nirmukta to create our own ‘Musks’ in India. No other ‘maska’ or blandishment would be needed.
Sudhir Mehta is chairman & managing director, Pinnacle Industries, and chairman, Mahratta Chamber of Commerce, Industries and Agriculture (MCCIA)
