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Friday 26 May 2017
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Industrial corridors to shine in Make in India

N V Vijayakumar, February 22, 2016, DHNS 0:04 IST
Led by technology and investment, India is bringing in a new paradigm shift in its industrialisation journey backed by new industrial corridors. Even though trade routes and harbours played a pivotal role in the beginning, when industrialisation was norm of the day, the Second World War really promoted industrial development supported by ‘discriminating protection’ which flourished cotton textiles, sugar and iron and steel industries.

As India also grew with the global industrial revolution, which already finished three phases, getting onto fourth wave, the country is gearing up to be a part of it by focussing on infrastructure-supported industrialisation, which is reflected in the emergence of industrial corridors, where various nodes and industrial hubs, and smart cities are planned. The UPA government’s ‘National Strategy for Manufacturing’ prepared in 2006 and the current NDA government’s Make in India campaign support corridors. India started its journey on industrial corridors with the establishment of the Delhi-Mumbai Industrial Corridor (DMIC) in 2005. It enhanced the industrialisation process between two cities, and various nodes were also established for further development of towns. Besides private city Lavasa near Pune and 24 new cities, the 1,500 km-long DMIC goes along with the Western Dedicated Freight Corridor.

So what exactly is an industrial corridor? Besides allocating a package of infrastructure spending to a specific geographical area, industrial corridors help in flourishing industrial development by creating manufacturing clusters and ancillary industries. Besides smart cities, these corridors will be well-connected by road, rail, air or sea.

Interacting with Deccan Herald, Grant Thornton India Partner Vikram Bapat said industrial corridors will help in the next wave of industrialisation, as they will ring-fence fertile agricultural land for industrial use, and thus benefit both sectors. “By enabling the growth of ancillary units, these industrial corridors will reduce freight and transportation costs. Once GST is rolled out, it will rationalise the supply chain and bring in optimal tax structure,” he said. Bapat also pointed out that the industrial corridors will help attract talent in large numbers and achieve 100 million job target easily.

Manufacturing-led industrialisation

Manufacturing is the keg pin of industrialisation as the society is moving towards massive consumerism supported by growing disposable income. India imported $300 billion of capital and consumer goods last year, and if 80 per cent of it is produced from India, it will create massive job opportunities and investment. The corridors will become catalysts in this journey.

Union Minister of State for Commerce and Industry Nirmala Sitharaman said India’s manufacturing sector’s contribution to GDP is only 17 per cent and the government plans to take it 25 per cent in the current year. Cisco India & SAARC Sales MD Purushottam Kaushik said, “The industrial corridors planned by the government will not only link smart cities, but will also be the main driver of the pledge to Make In India by ensuring seamless connectivity for industrial growth.”

Chandan Mitra, who is the Chairman of the Parliamentary Standing Committee on Commerce, and entrusted with the task of preparing a report for expediting projects, told Deccan Herald that the industrial corridor will lure investment and accentuate industrialisation of India. “The industrial corridors are coming up along with the freight corridors, which will also connect ports, and will help in the transportation of capital goods,” he said. Besides land acquisition and infrastructure development, the panel will look into all issues concerning the corridors financial aspects.

Policy framework

India’s first industrial corridor DMIC got Rs 17,500 crore grant from the Centre and $4.5 billion from the Japanese government for the first phase, which started in 2011. The Japan Bank for International Cooperation (JBIC) holds a 26 per cent stake in DMICDC. But the institutional framework for the formation of node/city-level SPVs for corridors are yet to come up.

According to Bapat, there is a need for a separate strategy to incentivise corridor projects to bring in more investment . “One idea could be to institutionalise the corridors and create single-window agencies that can cut through inter-state issues and help businesses to set up seamlessly,” he said. On the role of central and state governments, he said the model for administering corridors should be like that of National Highways.Rumours are rife that the government plans to approve a proposal to establish a National Industrial Corridor Authority (NICA) for implementing corridor projects in the current Budget.

Corridors planned


Besides DMIC, the government plans the development of Amritsar-Kolkata Industrial Corridor (AKIC), Bengaluru- Mumbai Economic Corridor (BMEC), Chennai-Bengaluru Industrial Corridor (CBIC), Visakhapatnam-Chennai Industrial Corridor (VCIC) and Chennai-Kolkata Industrial Corridor. DMIC is one of the world’s largest infrastructure projects and is expected to fetch $90 billion investment. Six states, namely, Uttar Pradesh, Haryana, Madhya Pradesh, Gujarat, Rajasthan and Maharashtra, have formed SPVs for the development of DMIC’s nodes.

DMIC Chief Executive Alkesh K Sharma said that they are in the final stages of completing the pre-PPP process, which includes forming SPVs and creating the basic infrastructure like transportation, water treatment, sewage treatment, among others. “This work will be completed in the next 4-5 months and by August, we feel we will be able to invite anchor investors to set up their businesses there,” he said. In the North East, the government mulls a similar mega infrastructure project — requiring a basic investment of Rs 11,000 crore (not including land and power) — which will link the states of the region with each other and to multiple border points.

Multilateral agencies like Japan International Cooperation Agency (JICA), JBIC (which are supporting DMIC and CBIC) and the Asian Development Bank (which has completed a conceptual development plan for VCIC) have evinced interest in investing these projects. On the CBIC, the nodal agency JICA has completed the master plan, and three nodes have been identified. ADB has completed a conceptual development plan report on VCIC and two nodes have been identified for master planning. The AKIC feasibility study is under progress.

Opportunities

Cisco’s Kaushik said the Make In India and industrial corridor projects hold tremendous value for the company. “The latest report from Sustainability Outlook pegs the smart city market in India at $45-$50 billion over the next five years. We are working with the government on information and communication technology for the smart cities proposed under the DMIC. These include Dholera Special Investment Region in Gujarat, Shendra-Bidkin Mega Industrial Park in Maharashtra, Manesar Bawal Investment Region in Haryana and Khushkhera Bhiwadi Neemrana Investment Region in Rajasthan,” he said.

Indo-German Chamber of Commerce Director General Bernhard Steinruecke said that German companies are not looking at large investment in the corridor but only parts of that. “We have been looking at Mumbai-Bengaluru corridor and looking at its feasibility study. I came to know that there is a competition between the UK and Germany in this project,” he said.

Scope for Industrialisation

India imported $300 billion of capital and consumer goods last year, and if 80 per cent of it is produced from India, it will create massive job opportunities and investment. The corridors will become catalyst in this journey.But to make the corridors successful, we have to be part of the Industrial Revolution 4.0, which will be shaped by a fresh wave of innovation in areas such as smart robotics, materials that are lighter and tougher, and a manufacturing process built around 3D printing and analytics.

Here we have to come up with new technologies, new products, new brands and enter new markets so that Make in India will become a grand success. Even though we have entrepreneurs who have performed well, we need strategic alliances with countries like the US, Britain, Germany, Japan, Korea and Taiwan to emulate and correct ourselves to go ahead.

DIPP secretary Amitabh Kant said, “Industrial corridors will help in many layers of manufacturing, from Industry 4.0 to labour intensive manufacturing, which will bring largescale investment, employment opportunity, productivity gains,” said Kant.

Massive investment in industrial corridor will pave the way for large human displacement and destruction of fertile agricultural land. According to economist Joseph Schumpeter’s Creative Destruction Theory, an entrepreneur’s introduction of radical innovation into the system will bring in creative destruction of economic value and it will really force sustained long-term economic growth. Let us believe Schumpeter and industrial corridors will help India’s efforts to lead the world in the fourth wave of industrial revolution.

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