Make Maharashtra Great Again! Economically.

06 Jun 20, Mumbai

Make Maharashtra GREAT Again. Economically. 

Like all the states of India, Maharashtra too, has been reeling under the global Coronavirus Pandemic (Covid-19). Since March 2020, the state machinery has come under pressure, and so the business sector too. The extent of economic losses isn’t measured yet, but that is expected to phenomenal.

It is crucial that the state bounces back soon - in terms of human health, as well as economic health. Decisive Leadership, Cohesive Policy making, fast execution and timely completion of projects will be key to the success of state’s economic resurrection. While some states are still grappling to make a workable plan for unlocking the state, other states, like Uttar Pradesh (UP) seemed to have a game plan ready for the economic resurrection.

Minimize exits and maximize new entries 

Industrialists and business houses, funding houses, must be working on their plan to cover up the losses (even when with no clear expiry date of Covid-19 in sight). 

Fulfilling financial commitment to employees and vendors, and restarting plants & offices must be their priority number one, however, in order to survive the scare and sustain the business, they must also be working on mid-long-term plans. This could include diversification (in terms of products or locations), starting newer businesses, enter newer markets, sectors, bring a foreign manufacturer in India etc.

The moot question is, Does Maharashtra feature in their scheme of things? Will it be their default choice? 

It need not be necessary that businesses that are currently in Maharashtra, would extend their diversification in the state only. They could also look at other states. And vice-versa. 

So, Maharashtra, as a state machinery should minimize exits of existing setups and maximize new entries.

It is likely that Maharashtra may face stiff competition from UP, Haryana, Karnataka, MP and Telangana. Given the political stability, and decisive leadership in these states, it is expected the decision making would be decisive and much faster there.

In addition, there could be positive momentum rollover from pre-Covid19 era, - like UP, where the state mechanism must have already been ignited with the massive interest shown by foreign biggies for setting up new manufacturing units in the state, especially in defense, after a hugely successful DefExpo 19, that was held in Lucknow last year, in which it is expected to garner investment upto Rs.50,000 Cr. 

( https://www.financialexpress.com/defence/defexpo-2020-up-govt-inks-23-defence-manufacturing-related-mous-worth-rs-50000-crore/1860611/)

The Maharashtra Story 

Maharashtra is the third largest state in India, occupying approximately 9.4% of the country's total geographical area. The state is well connected to all the major markets with 4 international and 7 domestic airports, over 303,000 km of road network and 6,165 km of rail network. The state’s coastline of 720 km and presence of 55 ports facilitate about 22% of the total cargo transport in India. Jawaharlal Nehru Port Trust (JNPT), the largest container port in the country, is connected to 34 Container Freight Stations (CFS) and 46 Inland Container Depots (ICD). The state has a total installed power capacity of over 43,000 MW. 

Maharashtra has a good presence of industrial clusters, especially automobile, IT & ITeS, chemicals, textiles and food processing clusters and offers lucrative investment opportunities in these sectors. Maharashtra’s Gross State Domestic Product (GSDP) was $387 bn (2017-18).

Mumbai, the state's capital is known as the financial capital of India and houses the headquarters of major corporate and financial institutions. 

Maharashtra is the automobile manufacturing hub of the country.

The Fadnavis Effect

During Devendra Fadnavis’s tenure (2014-19), the state saw steady rise in its GDP and net per capita income. It has contributed about 15% to the country's GDP in 2017-18.

MUMBAI, which has been for long the top destination that attracts Foreign Direct Investment (FDI) inflows in India, retained its position with the highest share in total FDI equity inflows to the country in 2018-19 too. Other key facts of the last five years

• In Per Capita Income Maharashtra is leading state amongst major states

• Per Capita Income during 2017-18 was Rs.1,80,596 as against Rs. 1,65,491 in 2016-17

• Per Capita Income of the State for 2016-17 as compared to 2015-16 increased by 12.1 per cent whereas for Karnataka is increased by 10.2 per cent for similar period

• Two digit 10.0 per cent economic growth during 2016-17 as against 2015-16

• Gross State Domestic Product increased by Rs. 2,39,473 crore during 2017-18 over 2016-17

• Gross State Domestic Product at current prices is Rs. 24,96,505 during 2017-18 as compared to Rs.16,49,695 during 2013-14

Foreign Direct Investment (FDI) 

During this time, Maharashtra attracted Highest FDI inflow during 2000-19. The state attracted about more than 33.3% of FDI inflow of the country during 2000-18. However, the New Delhi region, which covers the national capital and parts of Uttar Pradesh and Haryana, is fast closing in.

Big Enablers by Central Government

A stable government at the centre, business friendly environment and ease of doing business are the key positive aspects that will attract most foreign companies to shift to India. In addition to this, government of India has launched mega programmes to ensure the country is well on course to take the economy as close as possible, to the mark of USD 5 Trillion by 2025.India could be among the top recipients of new business setups, particularly those companies which want to shift bases – in the background of Covid-19.

Make in India 2.0

Make in India is a major national programme of the Government of India designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best in class manufacturing infrastructure in the country.  The programme was refreshed in 2019.

• Make in India (launched in 2017) + Assemble in India for World

• Make In India 2.0 was launched in 2019 and aimed at making India a $5-trillion economy by 2024-25

• In addition to 25 sectors, enhance Focus on futuristic segments – robotics, genomics, chemical feedstock and electrical storages (for E vehicles). 

Atmanirbhar Bharat Abhiyan 

In May 2020, The Government of India has announced significant initiatives to strengthen the economic credentials of the country and make it one of the strongest economies in the world.

• India is fast becoming home to startup companies focused on high growth areas such as mobility, e-commerce and other vertical specific solutions - creating new markets and driving innovation.

• Current government is striving to move steadily to minimise structural and political bottlenecks and bring back investment and economic performance back to the path.

• Foreign Direct Investment in India averaged 1211.71 USD Million from 1995 until 2016, reaching an all time high of 5670 USD Million in February of 2008 and a record low of -60 USD Million in February of 2014.

Mega Planning

Govt of India has drawn up a list of ten mega clusters across nine states as the most attractive destinations for companies to set shop based on sectoral requirements and tax incentives to promote the country as an alternative business continuity plan destination amid the ongoing Covid-19 pandemic. 

1.     Mumbai (Maharashtra) 

2.     Pune (Maharashtra) 

3.     Aurangabad (Maharashtra) 

4.     Vadodara (Bharuch-Ankleshwar Cluster / Gujarat) 

5.     Bengaluru (Karnataka) 

6.     Chennai (Tamil Nadu) 

7.     Tirupati-Nellore (Andhra Pradesh) 

8.     Noida (Uttar Pradesh)

9.     Hyderabad (Telangana)

Three big regions of Maharashtra feature in the above list. This time, the state government must make most of the central planning and bring newer industry sectors, so that the state can become a powerhouse in those sectors in long term.

Make in Maharashtra 

In line with the Centre’s Make in India programme, Maharashtra too had unveiled initiatives to attract foreign investment through “Make in Maharashtra” and “Magnetic Maharashtra” in 2016 and 2018 respectively. The framework exists still and could be optimized by the state machinery.

Crystal ball gazing - What lies in store for Maharashtra? 

On May 14 2020, in order to take out country’s economy from the shackles of Covid-19 pandemic, central government uncovered the contours of the economic package. The package, amounting to Rs.20 lakh Crore (USD 265 Bn) has a provision for generous lending to states.

As per Mr. Fadnavis, the state has a fiscal space of Rs. 2 lakh crores by way of loan from the centre under various programmes. If availed with meticulous planning and fiscal prudence, this finance can help the state machinery to create sustainable infrastructure and also attract FDI in a more practical manner. That will boost up the state economy in mid-term.

What needs to be done now?

The state government must be able to enthuse confidence among foreign investors, that the Maharashtra offers

• Political Stability

• Decisive and Fast decision making

• Rational Thinking (preserving environmental is paramount – but, in larger good, where possible that may be second priority)

• Business Friendly Attitude and Policies (less red tapism , unionism)

• Supply of Skilled Manpower

• Support for Ancillary and Auxiliary Industries
• Quick programme for creating more homegrown skilled workers in the state. 

Which Sectors set to have better future? 

While automobile and electronic manufacturing sectors have been mainstay of the industrial landscape in Maharashtra, Covid-19 pandemic could add a few more sectors that would hold greater promise in years to come.

• In the given scenario, First and foremost, will be all elements of modern healthcare infrastructure - e.g. medical equipment (from ventilators to beds, whatever comes in the healthcare ecosystem) manufacturing. This is essentially a small and medium sector activity, with a few big flagbearers.

• During lockdowns, we also learned that Work from Home (WFH) is a workable option for conducting activities – most in services sector and some-to-many in manufacturing. This will give rise demand for digital devices – like laptops, smartphones, routers etc in services, and internet enabled infrastructure in manufacturing (IoT will come in a big way)

• The model of deliveries too would change for sure. Earlier many customers would walk to one vendor (MCtOV). But due to lockdown, we saw how vendors leveraged technology to reach many customers at one go (One vendor coming to many customer - OVtMC). The relationship model changed. And this change is likely to persist for some time. Thanks to digitalization - platforms for selling, aggregating etc ensured that customers got most of what they wanted - at least in the metro cities. So, there exists huge scope for these platforms to extend their success to tier 2/3/4 towns. This will create demand for smart warehouses

• Demand for wearable will also rise

• Delivery of entertainment has changed – instead of cinema halls – entertainment is now served more on handheld devices or digital TVs- thanks to platforms like Netflix, Amazon Prime and many more
• In agricultural, usage of sensors is will increas. This is an IoT in itself - Agri IoT
• Smart cities to develop that will need IoT Infra for vigilance or efficient traffic management or city service monitoring 
• Reliance on alternative or renewable and suatstinable power like Solar energy is likely to increase. Solar Power units and allied equipments likely to be in demand

• All this will need infrastructure – tech, telecom, devices.

So, which sectors are likely to gain the MOST after Covid-19? 

Other than the usual ones like FMCG, automobile, consumer goods, textile (including medical textile like PPE/masks) and education, some of the sectors that could see more activity could be -

• Pharmaceutical, R&D

• Companies making physical elements of the modern healthcare infrastructure

• Computer Hardware – laptops, desktops, servers, data centres

• Telecom – networks and devices

• Handheld Devices

• Smart Devices (internet enabled) and equipments including agri implements 

• Defense equipment manufacturing is an evergreen sector, given a perpetual threat of conventional warfare and terrorism attacks

• E storage like battery. 

All this equipment, machinery would need smarter devices. Meaning more chips and computing devices. So, my cherry pick, is Chip Making. I am of the opinion that it could emerge as a big beneficiary of the pandemic.

Spot the Opportunity

Somehow, India hasn’t been given its place in global semiconductor industry.

Although, India has a very fast-growing electronics system design manufacturing (ESDM) industry. India also has a strong design base with more than 120 units. According to the Department of Electronics and Information Technology (DeitY), nearly 2,000 chips are being designed every year in India and more than 20,000 engineers are working on various aspects of chip design and verification. 

Now that the government has a strong focus in developing the ESDM ecosystem in India, it is a good opportunity for the entrepreneurs to look at this space more enthusiastically. States should also make more attempts to bring investment in these value-based sectors (semiconductor, fabless manufacturing, smart cards, microelectronics).  Main players in chip making are Intel  (USA), Qualcomm (USA) and ST STMicroelectronics, (France). 

The three areas in the ESDM sector which can be brought to India in two years’ time are-PCBAs (Printed Circuit Board Assembly), display and the energy source (or battery packs).

Desired Push is already there

Central Government appears keen on rebooting this space. On april 1, 2020 Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme, were notified by the Ministry of Electronics and IT (MietY). There is an outlay of Rs 50,000 crore.

Under the scheme, the government aims to attract top 5 global mobile manufacturing companies who control 80 per cent of the global market in the segment and also promote five local companies in expanding their business as national champions.

This include major sectors of electronics such as Consumer electronics, ICT, CPE (customer premises equipment like routers) products, Computers, Medical Electronics etc. 

How Maharashtra can gain?

Attract chipmakers. Become the new semiconductor hub in India 

Traditionally, Bangalore has been the hub of semiconductor industry in India. Companies like Intel, Texas Instruments have been present for decades, but lately NOIDA too had been able to get some companies in this space.

Maharashtra too has a capacity to come to the scene - with  huge number of engineering colleges – that can promise companies of sustained technical manpower. In addition, Maharashtra has been on the forefront for foreign manufacturers, especially MSMES from Japan, Europe, South Korea and USA.

In addition to service sectors, this time, the push should be on bringing more value based manufacturing. 

Manufacturing should be aimed at reducing dependency on imports. Once we have key manufactures of such products or machinery,  it's ecosystem for ancillary products would get developed in next 3-5 years. That will be a local infrastructure. Both forward and backward linkages will have to be built if one wants to develop the complete ecosystem. 

Thus a time bound programme is required to reduce import dependency and increase State's self sustainability in medium term. 

So it is time, that the state machinery aggressively work on plan to reboot the state economy. Time to think beyond traditional assembly setups, like - electronics and automobile manufacturing. The new industrial setup can give better multiplier effects in terms of jobs and economical outputs, and make Maharashtra shine in thr international arena.

This will need creative and aggressive marketing & promotion of the state’s capability & potential in the international markets (Japan, South Korea, Europe, Japan, USA) through sustained efforts (road shows (like VCs do) in India and abroad), hard sell, and strong recommendations from flag-bearers from these countries. Needless to add - planning and execution should be aggressive yet workable, accountable and result oriented (should not be exploited as an opportunity to splurge on foreign shores on account of public money!) 

Time for a “Smart Reboot!”

A few years ago, a telecom service provider ran a successful ad campaign with a tagline - "पकडो लाइफ का हर सिग्नल Pakdo Life ka Har Signal (Catch Every Signal of Life)" . Likewise, the state governments should catch all possible signals, analyse them and work a fast track strategy to attract  foreign MSMEs that are desperate to exit from the scenario of uncertainty.

Maharashtra, as the land of saints and warriors has always been great. It is great even now. But, Due to the Covid-19 Pandemic there are dark clouds that are threatening to take the state a few years back in terms of economic growth. Need of the hour is for an experienced and industry savvy navigator to navigate through these dark clouds, and Reboot the State's economy to Make Maharashtra Great Again.

शुभम भवतु. 

Dhananjay Deshmukh, Mumbai

dhan1011@gmail.com

(the author is an independent marketing research and business consulting professional, focused on India Entry Strategies). 

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