Executives in Invest India, an investment facilitation agency under the Union Ministry of Commerce and Industry, proposed five sites to the company — three in Tamil Nadu and two in Andhra Pradesh. Finally, after multiple site visits, in September the company zeroed in on a 50-acre site at Cheyyar (or Tiruvetipuram) in Tiruvannamalai, Tamil Nadu.
Neeraj Mittal, MD and CEO of the Tamil Nadu Industrial Guidance and Export Promotion Bureau, told ET Magazine that Autoliv would invest about Rs 100 crore for this venture. Invest India CEO Deepak Bagla adds, “If a global company prefers India over China or Vietnam, it simply reinforces the India story.”
Autoliv’s foray into India for making airbag inflators, both for domestic market and export, is a classic example of Make in India. But the government’s manufacturing policy, as it stands today, has gone beyond inviting multinationals to set up factories in India.
It’s now betting on what’s called Aatmanirbharta (self reliance), a step ahead of Make in India, and linking the newer policy to a massive dose of production incentives. While announcing Rs 1.97 lakh crore cash incentive over five years starting 2021-22 for manufacturers belonging to 13 sectors, Finance Minister Nirmala Sitharaman in her recent budget speech said that the Production Linked Incentive (PLI) scheme was meant for creating global manufacturing champions for an Aatmanirbhar Bharat.
While the tagline — Aatmanirbharta — is new, the Centre has been quietly following the idea inherent in it since the first Modi government came to power in 2014. Sample this: the customs duties of 4,200 out of 11,524 tariff lines have been enhanced during the past seven years. Of these, 111 — including in textiles, furniture, machinery, base metals, electronics, auto-parts and mobile phones — were increased in the 2019-20 Budget. In 2019-20 alone, as many as 63 anti-dumping or safeguard-related cases were initiated of which 26 were settled, according to data available with the Ministry of Commerce and Industry.
The government has also prohibited Chinese milk products and e-cigarettes as well as imposed restrictions on several items — including agarbatti, refined palm oil, television sets, air conditioners, et al — in the last two years, keeping in mind the interests of domestic manufacturers. Further, New Delhi, in 2019, walked out of the Regional Comprehensive Economic Partnership (RCEP) during the final negotiations, claiming that the agreement would extend too many concessions to Chinese exporters which, in turn, would damage the prospects of homegrown manufacturers.
For NITI Aayog Vice-Chairman Rajiv Kumar, Make in India (2014) to Aatmanirbharta (2020) is an upgrade. “The objective has been the same — how to expand India’s manufacturing sector and bring in globally competitive technology,” he says, adding that Aatmanirbharta must not be understood as synonymous with closed-door policy.
“Self-reliance also means we will produce for the world. In PLI scheme, there has been a focus on exportability of sectors as well as their global scale and competitiveness. In a sense, Aatmanirbharta is building upon Make in India concept. It’s a step forward,” Kumar says. PLI was first announced in March 2020, mainly to ramp up domestic manufacturing in mobile, pharmaceutical ingredients and medical devices, with more and more sectors getting added at subsequent stages.
It’s a performance-based subsidy scheme — for example, cash incentives will be doled out to companies for investing in their facilities within India and meeting certain production and sales targets.
While Aatmanirbharta is being hailed by most economists and policy experts as a booster dose to domestic manufacturing, something that will create more jobs and curtail our import bill, the policy has a flip side, too. If India hurriedly and rampantly curbs imports, the country’s ordinary consumers may have to bear the brunt of it.
“Aatmanirbharta can’t come about overnight. For some items, it may take two decades or more. Otherwise, cost of products will rise and consumers of our country will have to pay a heavy price,” cautions Ajay Dua, former Union industry secretary. Price rise will invariably propel interest rates which may lead to shortage of capital, an ominous sign for a healthy economy.
Another concern is Aatmanirbharta may end up helping only a handful of companies, leaving out a vast majority. Also, highvoltage self-reliance in manufacturing sector could mean rising input cost for some export items, thereby making the products globally uncompetitive. Unquestionably, there are a lot of industries in India for whom a dependence on China or Vietnam is unavoidable for their very survival. Chinese companies produce materials in Vietnam which make their way to India, taking advantage of the provisions of the ASEAN free trade pact with India.
Manoj Jajodiya, MD of ONOMA that has AC manufacturing plants in Chennai, Selaqui in Uttarakhand and Neemrana in Rajasthan, says he pays $1,000 for bringing 13-14 tonnes of high-grade copper tubes in a 20 ft container from Shanghai to Mumbai. But for the rest of the journey, from Mumbai to Selaqui, the same consignment costs him more. “If the government gives some incentives, these copper tubes (an integral part of ACs) can be built in India itself. Then, why would we have to buy from China?” he says.
According to him, India needs some 35,000 tonnes of copper tubes to cater to a growing AC market of about 7 million units. And there are no Indian manufacturers worth the name that can meet such a humongous demand of high-grade copper.
No wonder, the nation has to walk a tightrope balancing its desire to become self-reliant and the need for flexibility to roll out the red carpet for select Chinese imports. The walk has only begun.