"On Tuesday, visuals of the Prime Minister Modi meet with industry captains showed grim faces all around the table. The Prime Minister exhorted the business honchos to catalyse risk taking ability and step up investments even as industry leaders pressed for an interest rate cut and more policy action to improve ease of doing business. Fifteen months after storming to power, the economy is far from healing. Credit growth in July'15 for banking system remained weak at 8.4% YoY (sub 10% for eighth consecutive month) driven by subdued growth in Industry (+4.8% YoY, -1.3% YTD) and services (+6.4% YoY, -0.6% YTD). However, retail loans (+16.8% YoY, +4.5% YTD) and agri loans (+12.2% YoY, 5% YTD) continued with strong momentum even in this month. Retail growth is quite broad-based with good growth witnessed in home loans and vehicle loans. Growth in infrastructure (+8.3% YoY) continued to trend downwards. Weak investment cycle and high cost of capital remain bugbears faced by Industry in their quest to move to the next level of competence.
Against this backdrop, faces had to be grim and so they were. At the very kernel of change is the cost of capital and mountains of existing debt. But are non-negotiable for risk taking. From the visuals on telly one saw the chief economic adviser Arvind Subramanian speaking aggressively and everyone else sitting tense and listening. Despite the change in administrations, there is not much change in governance and policy imperatives. Other than corruption which has vanished, inertia and lassitude continue to grip the administration. A strange obsession with legislation has more or less paralysed the executive and with the Government and Mint Street not on the same page, there is no respite in the interest rate regime. China's gloom and doom scenario which has rocked bigger economies than ours has meant that the advantage of an ever lowering commodity phalanx led by crude has not really rubbed off on India.
As mentioned even in earlier columns, sadly the government hasn't shown alacrity in executive decision making. My contention is that the PM and his Cabinet colleagues know exactly what the problems of industry are. They have been well documented. AS an administration it is incumbent on a government to provide solutions and create an environment which makes risk taking the norm. I would offer the Nokia Sriperumbudur Plant to the highest bidder and ask the entity to roll out Make in India products from there. In the first week of March, the PM while replying to the Motion of Thanks to the President's address in parliament spoke in the Rajya Sabha on the Nokia plant which is lying shut for sometime now. The Union Govt, the PM said was, ""making efforts to see that the Nokia unit in Chennai, which shut down last year, restarts soon. It was not because of us but because of policies of the previous government? We are trying to revive that facility...If we have to create jobs, we will have to promote the idea of Make in India. We will have to focus on infrastructure development."" Pertinently, production at the three manufacturing facilities of Foxconn near the Nokia plant was suspended in February 2015 following the exit of Nokia's Chennai manufacturing unit from the deal it signed with Microsoft last year.
At a time when Micromax has emerged as the 10th largest mobile phone manufacturer in the world (Made in China and assembled in India incidentally), Nokia's Chennai plant arguably one of the biggest in the world, was shut down due to a tax tussle with the State and the Centre on retrospective taxation and asset freeze. As many as 8000 employees remain jobless due to the plant's closure. It is a question of intent, when Satyam capsized and India's reputation as a credible provider of infotech solutions lay in tatters, it was the much vilified Congress led UPA which roped in Tech Mahindra to salvage what was perceived to be a blue chip company. The acquisition through a bidding process worked for Tech Mahindra and India.
India needs bold and innovative reforms. Government has to be the initiator and the creator of a level playing field for business - both domestic and international - to do business in India. Take tranches of 10 loss making public sector entities for 10 consecutive years which have assets like land parcels etc and disinvest them through the strategic sale route. You will find that many people will come forward because they see competencies, value, synergy etc in these companies. The time to sit and jaw jaw on issues is over. The Nokia Plant is the very embodiment of all that can go wrong in India just as Enron's power plant became a symbol of how India can bring itself to ruin. These are learnings that India needs to transpose. If Nokia's plant is on the PM's radar, why doesn't his government show that it means business and brings a resolution to it very soon. IT will become a beacon to attract investment. Investors will know that India once again means business. Instead we have regressive, retrospective, retrograde taxation policies like MAT which sprung up like a rattle snake used every now and again to spook investors.
The problems faced by industry remain constant - more or less for the last 11 years now. Take them by the scruff of the neck and rattle the cage and tell the world India actually means business and wants to do more than offering lip service to that credo.
MADE IN INDIA
*Nokia which started manufacturing in Chennai in January 2006 shut down its Sriperumbudur plant from November 1, 2014 as Microsoft terminated mobile purchase agreement from the the factory and it was left with no business.
*In September 2013, Nokia announced it would sell its devices and services (D&S) business, including assets in India, to Microsoft for $7.2 billion by March 2014.
*The deal was completed in late April but the Chennai facility could not be transferred to Microsoft because of legal issues related to a tax demand by the Indian government.
*But in March, the Tamil Nadu government served a Rs. 2,400 crores notice on Nokia, stating that the mobile manufacturer had sole its export products in the domestic market in yet another case of tax terrorism.
*In a separate tax case, Supreme Court ordered Nokia India on March 14 to give a Rs. 3,500 crore guarantee before it transferred the plant to Microsoft. "
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