The 5th vdma summit had interesting talks and discussions focusing on manufacturing and creating skill-sets
The 5th VDMA Mechanical Engineering Summit was held on 23rd September 2016 at the Hyatt Regency, Pune. Attended by more than 200 participants constituting mainly German companies in India (who are also VDMA members), the sessions mainly concentrated on the Indian business clime and ease of doing business in India.
India is the third-largest sales market in Asia for the German Engineering industry. In 2015, the export of German machinery to India attained a value of around 2.94 billion Euros which was an increase of 15% as compared to 2014.
India’s FDI inflows rose to $44 billion in 2015 from $35 billion in 2014, and the growth has been across the board; however, India is expected to see net FDI inflows of $35 billion this financial year, which would short fall of last year’s figures.
With the GST Bill being passed in both the houses of Parliament, ratified by majority of the states and the approval of Union Cabinet granted for setting up the Goods and Service Tax (GST) council, the chances of the Draft Model Bill for implementation of GST from April 1, 2017, now looks achievable. When implemented, the GST would be the biggest reform in Indian tax history. This will certainly be a big step forward in the endeavours of ease of doing business in India.
The GDP grew at 7.1% in the first quarter of financial year 2016-17 amid sluggish investment and farm output which reduces the prospects of hitting the 8% mark for the full financial year but the government is hopeful that a bountiful monsoon and increment envisaged in the 7th Pay Commission along with various structural reforms could still take the GDP growth closer to that figure.
At the 5th VDMA Mechanical Engineering Summit, VDMA India, Managing Director, Rajesh Nath stated that presently more than 550 VDMA member companies are engaged in their own business in the Indian market, which involves the top five industrial segments of members sector — machine tools, construction machinery, mechanical power transmission, valves & robotic and automation. He further revealed the present economic scenario which concluded with the quote of actor Jimmy Dean,”I can’t change the direction of the wind but I can adjust my sails to always reach my destination.”
The Minister for Heavy Industries & Public Enterprises, Department of Heavy Industry, Shri Girish Shankar, said that presently the Indian manufacturing sector accounts 16% of the GDP and by 2022 it will increase to 25% thus creating more jobs. Some of the new economic opportunities in the sector will come from new policy schemes such as high-speed rail corridors, the Industrial corridor, and new defence procurement policies. There is also the campaign to increase manufacturing in India through Make in India. Technological advancements in the manufacturing sector is key to economic development and capacity building of the country. “Our manufacturing sector has the potential to touch $1 trillion dollars by 2025. There will be 90 million domestic jobs created. Two German companies recently have invested Rs 100 crore to source parts from Force Motors, a manufacturer of utility and commercial vehicles.
Prime Minister Narendra Modi has also launched the Make in India programme to transform India as a global manufacturing design and innovation hub and insists that local recognition be given to Indian companies. In short, there are incremental changes taking place in India and there should be a transformation by 2025.” He added that his department will also be actively involved in reforming policies leading to create better ecosystem. It is still reviewing the gaps between engineering R&D and manufacturing through various policies and initiatives.
In sync, the Deputy Consul General of the Federal Republic of Germany, Mumbai, Ms. Gabriele Boner said India is a favoured investment destination for German companies. The well known smart cities project which involves cleaning of rivers and introduction of renewable energy are two areas which holds immense potential for collaboration between Germany and India.
Wrapping up the inaugural session, President of VDMA, Dr. Reinhold Festge emphasised on the importance of easing three areas: GST, land ownership and Free Trade Agreement to draw more investments from German companies to India. He further said these are uncertain times and a year ago none of us would have believed that the British would have voted in favour of Brexit. He further stated that all the good results in 2015 have made us optimistic and that business would finally take a positive turn. However, considering the circumstances of today’s times, and the outlook predicted for 2016, shows that we need to be prepared for sudden ups and downs in the mechanical engineering market in India.
The event also saw the release of the 6th Anniversary issue of the VDMA India Quarterly Newsletter – German Machinery Industry. The newsletter covers the development in the various industrial sectors in Germany. The Knowledge Partner, Euro Asia Consulting Private Limited (EAC), released a publication ‘Manufacturing Competitiveness of Indian States’ along with other dignitaries and it was circulated amongst the delegates at the Summit. Ashish Kumar, partner of EAC, spoke about the publication and stated that the programme ‘Make in India Mittelstand” which is exclusively for the German Mittelstand companies has completed one year. The accomplishments as part of this programme are that currently we support 60 German Mittelstand companies, keeping one year into perspective. We have declared investment volume close to half a billion euros over the last one year.
The first presentation at the Summit was on “How the next level of growth can be unleashed in India”, made by Siddharth Kaul, director, Ernst & Young. He began with a brief overview of the global scenario, saying that these are uncertain times and there are many surprises along the way. “No one expected Brexit to happen. We have heard about the promise of the BRICS countries not holding up to what was promised. In such a scenario, India stands out as a bright spot, but given the integrated nature of the Indian economy with the globe, it obviously cannot stand in isolation. A lot of the growth prospects would have to be considered in light of what is happening globally. We also know that there is uncertainty because of the high level of government debt and the pressures it creates in various countries in terms of fiscal policies. Most of the governments have exhausted the instruments they would have deployed in reviving growth and while we can certainly say that we are not in the days of 2008-2009, it’s fair to say that it’s the longest period of sluggish growth before we can say that we are out of the woods.”
Rajat Mehta, director, corporate sales, head FX flows desk, global markets, The Hongkong and Shanghai Banking Corporation Limited (HSBC) spoke on “Balancing perils and possibilities, an economic overview”. He started by talking about creation of jobs and said that when one hears this government talk about “Make in India”, it is basically got two things: The size of the domestic economy propels consumption and creates a multiplier effect. People need to spend money, and they will only spend when they see a positive sentiment, and have a job. That is why this government’s focus has been on creating jobs. “Unfortunately for India, a vast majority of our population are still employed in agriculture, which is very low on productivity. The high productivity sectors that are currenly evolving and have evolved are e-commerce, logistics, and organised industrial manufacturing. Though they still have a low percentage as compared to some established sectors, and a process that started with the previous government, despite the liberalisation,” he added.
These are the areas where challenges lie in terms of getting Make in India right. We need to invest in sectors that matters most and create the highest level of importance. It is for this reason India sees much emphasis on manufacturing, technology and automation, because that’s where productivity is maximum to enhance job creation.
The post lunch session began with Sunil Mathur, managing director, Siemens Limited, speaking on Internet of Things, wherein he explained the importance and relevance of Industry 4.0 in the Indian manufacturing industry. He talked in brief about pace of information dissemination, and how the pace of disruptions has increased over the years. “We know from experience of the telephones and mobiles that the introduction of new technologies has been faster over the years and today we are talking about almost 95% of the people in the world using mobile phones, which was not the case too long ago. Some of us know here in India how there used to be long queues for telephone lines and STD connections. But the world has changed since then and not only in India. There are mega trend that are hitting us, be it in terms of demographics where people have a large number of older people in some parts of the world and some countries that have a young population in other parts of the world. Urbanisation has taken over and cities are growing and bursting at the seams and that is a experience in India. But that is also true for many other cities around the world.”
The second leg of the technical session began with “Leadership in Engineering Industry” by GK Pillai, managing director and CEO, Walchandnagar Industries. He spoke about post-Independence and how the engineering industry was the first to grow as a organised sector. “Today, people don’t want to set up an engineering industry, and nor venture into it. There is a kind of apprehension and one of the reasons is that the returns in the engineering industry does not commensurate with the effort and capital investment put in. There is a huge dichotomy. We need 25% GDP in the manufacturing sector. Today most of the GDP comes from the service sector but the engineering sector needs to see a lot of change.”
The session continued with “Skilling in Manufacturing” presented by Dr Andreas Lauermann, president, Volkswagen India. He elucidated about the work and potential in India and how Volkswagen is keen to cultivate this potential. “India is a young country and has a huge cultural background. The country is yet to achieve a kind of maturity that is prevalent in the West. To transform this country into an industrial one or a more developed one, it’s necessary to invest in manufacturing and industrialisation. India also needs to use the technologies available that are already available globally and produce goods that customers need here in India and the world .The basis for that is is education and skilling,” he added. He also elaborated about the initiatives take by Volkswagen India, the Central government and the government of Maharashtra.
The final session of the summit was devoted to “Half tenure completion of Govt: Promise vs. Reality”. This panel discussion was moderated by Rajesh Nath. The panellists were Shri Girish Shankar, Dr. Reinhold Festge, president, VDMA; Sivasubramanian, managing director, Thyssenkrupp Industries India; Gurudas Mustafi, director & CEO, MBE Coal & Mineral Technology India; and Manojit Acharya, managing director, Jungheinrich Lift Truck India.
It was an interesting discussion covering the views of the government as well as the issues faced by the industry. The discussion started with the topic of Make in India and a wide range of issues regarding this government’s programmes were covered. Though there are challenges, the industry recognised the efforts of the government. There was also a serious discussion on whether India could reach 25% of its GDP from manufacturing alone. The second point covered during the discussion was skill management. Each panellist spoke about the problems they face for skilled labour and how this could be addressed was a moot point of discussion. There is also the dual system of vocational training in Germany. The discussion was summed up by Rajesh Nath when he said: Make in India has the potential to emerge as a multiplier to provide the emerging workforce with livelihood opportunities, a policy framework on its own cannot be successful unless a broader ecosystem is in place. The discussion then concluded with a Q&A session.
The Summit provided a good interaction and networking opportunity for both the members and speakers at the event. The German companies are quite upbeat about business opportunities in India and are aligned with the Make in India campaign. Most of the companies operating in India have been quite successful and have established a strong presence over the years. The government’s endeavours towards Ease of Doing Business is bound to attract new German investment in the years to come.