Success stories of “Make In India” campaign – Part 1

Prime Minister Narendra Modi launched the “Make in India” campaign on September 25, 2014. With one million people to enter the job market each month, creating opportunities to such a vast talent pool is a humongous task. Jobs need to be created in both organized and unorganized sectors. The efforts in improving the unorganized sector outlook is a story for another day. Notwithstanding apprehensions by the opposition parties, the early signs look exciting for the future of India.

Let us look at some of the early success stories of the “Make in India” campaign. Of course, we need to be cognizant of the fact that many projects are in the early stages and it would take time to see the results. However, it would be interesting to know the sectors/industries/companies that have brought into this idea.

 

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Electronics

Foxconn, the manufacturer of Apple’s iPhones has announced plans for creating 10-12 facilities in India, which will include factories and data centers. Foxconn expects to sign the first contract by the end of 2015. That Foxconn chose India following various issues it faced in its Chinese facilities, bolsters the “Make in India” campaign. The advantages the arrival of a big company to the country can be manifold.

Foxconn’s arrival can trigger the arrival of companies along its supply chain and also help to multiply the indirect jobs created due to this. There have already been reports of Oppo mobiles starting its manufacturing plant by August this year. ZTE Corporation, another Chinese telecom major, has completed its recce to set up its manufacturing facility in India. With e-business on the rise, there are plenty of other players waiting on the wings to explore the large market. Another Chinese mobile handset maker Phicomm has also committed to invest $100mn in the next 3 years to market its products and at the same time, they are exploring to setting up a manufacturing facility here.

 

Automobiles

Mercedes Benz has brought into the “Make in India” program in two different areas. Firstly, in the luxury car segments, it has decided to manufacture more of its components in India – thus increasing the localization of its new model C220 CDI to 60%. Secondly, Mercedes Benz has also decided to manufacture its luxury buses in India, to be exported to Africa and South East Asian markets. The trials have already begun and full-fledged exports will start from early 2016.

Competition for low cost manufacturing cannot be underestimated. Following Mercedes’s lead, its German competitor BMW has also decided to increase its localization to 50%. BMW has already signed deals with approximately 20 companies who supply its components. Volvo is also now in the exploratory stage of exporting its range of buses to other markets. Renault, the french automobile major, has also improved localization of its KWID model to 98% – the KWID is expected to be launched later this year. The US behemoth, Ford, has also committed to invest Rs 4000 to Rs 5000cr for R&D, in its Chennai facility.

 

Defense

Hyundai Heavy Industries (HHI) of South Korea will work with Hindustan Shipyard Limited, Vizag to build warships in India. Currently, the time duration from the point of order to delivery takes around 6 years. With this collaboration, this gap is expected to fall to 2.5 years. Though in very early stages of discussion, HHI has indicated that the objective is to outsource the manufacturing of small and medium size ships to India. The initial understanding was completed during PM Modi’s recent visit to South Korea.

Another South Korean major, Samsung, has also agreed to build LNG tankers with Kochi Shipyard. Another decision made recently was that Goa shipyard will construct 12 minesweepers for the Indian navy at a cost of 1 billion USD. Gurgaon based Sun Group, is in discussion with Russia, to manufacture 200 Kamov Ka 226 light helicopters in Punjab. The German and US defense ministers were in India recently to push sale of their products and there have been news reports that India will engage with them, only if there is a “Make in India” component in the deal. Reliance Infrastructure is in discussion with officials in Russia to explore opportunity to build nuclear submarines and stealth warships in India, along with other partners.

 

Railways

Recently, Indian Railways has invited bids by international suppliers for the procurement and manufacture of 15 train sets. Two train sets will be imported, where as the reminder will need to be manufactured in India – which will result in 40 coaches to be imported and 275 coaches will be manufactured in India. The whole project is estimated to be worth around Rs. 2,500cr. These train sets will be used on faster inter-city travel routes.

PM Modi during his recent visit to Berlin, visited the Berlin Central Train Station (Berlin Hauptbahnhof) to inspect the infrastructure and other facilities. Also Railway Minister, Suresh Prabhu, in his recent interviews has suggested that he will look to capitalize on various assets of railways like land, optical fibers, etc. If these ideas go per plan, there are many more job opportunities possible.

 

Aviation

There are two parts in this segment. Firstly, in military aviation, the recent deal with France on Rafale jets is well publicized. Whatever the politics of the deal is, the Indian government has been able to extract substantial investment in India in the future. Defense minister Manohar Parrikar has gone on record to say that 50% of the total deal value, approx. $4bn will be invested in India within the defense and aerospace sector. Secondly, in civil aviation, Airbus has also announced that it has joined the “Make in India” bandwagon. To this extent, Airbus has already announced restructuring of its organization in India and the new CEO has announced that Airbus exports will reach $2bn from India.  Pratt and Whitney, a US based firm, has also evinced interest in setting up its facilities in India. Like in the automobile sector, aviation also has the potential to create many upstream and downstream jobs along the supply chain.


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