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China's Industrial base is worth $8 trillion out of its $18 trillion PPP economy......the largest industrial country, with the biggest exports in the world and the largest economy in the world....as of 2014.
Its main engine of growth has been streamlining INDUSTRIAL investment from foreign sources, via economic zones near the coast; private investment within China through cheap and easy credit and finally and most significant, government investment in key industries.
It is a mixed economy where 50% of the industrial base is run by the government and 50% by the private sector......BUT make no mistake it is primarily government led investment INITIATIVES which has seen spectacular results for China, and the main source of its success.
Exports in China represent only 12% of PPP GDP, and is not the main cause of China's success, but GOVERNMENT LED investment drive into INDUSTRY and INFRASTRUCTURE.
We see this repeated again in another Communist country the Soviet Union circa 1928--1941, where during these years the Soviet real GDP growth totaled on average 20% a year. As with China, Japan since 1945 and the Soviet Union............ development in industry was wholly planned. In the case of Japan by dedicated bureaucrats in the back room.
The beauty of INDUSTRY is that no matter how much you spend on it it is not inflationary, but rather it provides cheap jobs to the masses of 25 million plus a year of Indians moving from the village to the city.
China's PPP GDP should reach $75 trillion by 2050, and India's at $40 trillion.
For India to reach that target of $40 trillion in a mere 35 years from the current $5.5 trillion, massive sustainable investment must be made by the government of India in industry.
In addition significant changes must also be made in commercial law, industrial law and employment law to allow for greater flexibility and ease with which to conduct business in the country. Old colonial era and post-colonial era laws must be got rid of, and replaced with up to date legal instruments.
India was after all the number two industrial hub of the world in 1750 representing 25% of the world manufacturing base. It was only during colonial times that India's economy shrank in absolute terms between 1814--1921, when much of Indian industry was destroyed to pave the way for the country to become a captured market from a certain country, and the export of raw materials and plantation economy of opium, indigo and jute.
Corrupt aimless do nothing Congress was lackluster about INDUSTRY since 1947, but perhaps the BJP can change the situation in India finally.
One thing is clear.Neither the service sector or the agricultural sectors will push India from the current $5.5 trillion PPP GDP to the projected $40 trillion PPP GDP in 2050. The ONLY sector with the necessary engine power to do that is the INDUSTRIAL SECTOR......growing to about 50% of the GDP.
That means creating a mechanism where the Indian budget represents about 40% of GDP, from the current 17%???.....a more effective tax regime, a more effective revenue generating mechanism for the government, greater savings and greater government investment in industry.
Gearing the Indian economy to perpetually invest in industry.
It goes without saying that the game in the area of government and governance will have to be upped, and corruption defeated.
| Country | Investment 2008 est. (gross fixed) (% of GDP) |
Investment 2012 est. (gross fixed) (% of GDP) |
|---|---|---|
 Singapore |
45.00 | 24.1 |
 Vietnam |
44.50 | 28.2 |
 Qatar |
41.40 | 30.6 |
 Cape Verde |
41.30 | 34.2 |
 Guyana |
40.50 | 21.6 |
 China |
40.20 | 46.1 |
 Lesotho |
39.20 | 37.3 |
 India |
39.00 | 29.9 |
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Union Budget likely to provide big thrust to ‘Make In India’
The BJP government's 'Make in India' initiative could get top billing in the 2015-16 Union Budget with tax breaks and other measures for several sectors.
Make in India is the centerpiece of the Narendra Modi administration's bid to revive manufacturing activities and create millions of jobs. With the Chinese economy slowing, India senses an opportunity in the industrial sector..
A blueprint for the 25 identified sectors was presented to PM Modi late last month by the secretaries cutting across departments. The proposals, running into several pages, have been circulated to ministries and the budget is expected to give a final stance on several of the fiscal proposals. The tax proposals are part of the one-year roadmap identified by ministries.
While some of the moves will boost domestic production and reduce imports, they will also make purchases lighter on your pocket. For instance, there is a recommendation to halve the excise duty on footwear to 6%. Similarly, the commerce department has suggested a reduction in the customs duty on gold and silver from 10% to 2%, a proposal which will have to be weighed in the context of the overall import bill and its impact on the exchange rate.
The food processing ministry has suggested that brand building should be treated the same way as R&D and 200% of expenditure be allowed as deduction. It also wants sops on primary processing of perishables to cut down wastages, which will help check price swings.
For defence, where the government is seeking to reduce the dependence on imports, the ministry wants a tax holiday for local manufacturing and further sops for R&D.
The department of information technology has also suggested income tax benefits to attract electronics and telecom equipment manufacturers into the country and reform the inverted duty structure where the customs tariff on finished goods is lower than those on components. In the run up to the elections, Modi had suggested that local electronics manufacturing will not just create jobs but also help narrow the current account deficit.
READ ALSO: Invest in railways to make it engine of growth: Prabhu
Again to cut down on foreign exchange outgo, the civil aviation ministry has suggested incentivizing maintenance, repair and operations (MROs) be exempted from service tax, while also proposing that airline operators be allowed to issue tax-free infrastructure bonds to help raise funds.
Similarly, the shipping ministry wants a specialized financing window for ship-building and repair, besides easier tax rules for the sector. Railways too want "time-bound" tax sops through excise holiday, although it has not spelt out the details.
For micro, small and medium enterprises (MSME), which are seen as the mainstay of the Make in India initiative, the ministry has proposed that there should be direct tax exemptions during the first three year of operations, a move that may be tough to implement.
In case of the petrochemicals sector there is a proposal to boost local manufacturing by having higher import duty on finished products and low rates on feedstock. For metals and cement it has been suggested that the customs duty on steel products be increased, while allowing duty-free import of raw materials and ore - moves that will discourage imports.
READ ALSO: To Make in India, give a break to our tech & talent
There are also demands for budgetary allocation for sectors such as biotechnology, where an allocation of Rs 1,000 crore has been sought for bio-manufacturing and another Rs 750 crore for scaling up Indian biotech start-ups and SMEs. For mining an annual budgetary support of Rs 500 crore has been sought to encourage exploration. The tourism ministry has demanded an annual budget of Rs 3,000 crore, compared to a little under Rs 2,000 currently.
The petroleum ministry has demanded targeted fiscal measures through interest subvention and long-term funding for manufacturing clusters from the Oil Industry Development Cess.
