Reform Essential for Global Competitiveness
ECONOMY & POLICY

Reform Essential for Global Competitiveness

India’s exports are likely to suffer a setback as US tariffs of 25 per cent, plus another 25 per cent in penalties, have kicked in. According to Federation of Indian Export Organisations (FIEO), India’s exports to the US worth $ 47-48 billion are now exposed to pricing disadvantages of 30-3...

India’s exports are likely to suffer a setback as US tariffs of 25 per cent, plus another 25 per cent in penalties, have kicked in. According to Federation of Indian Export Organisations (FIEO), India’s exports to the US worth $ 47-48 billion are now exposed to pricing disadvantages of 30-35 per cent, rendering them uncompetitive compared to competitors from China, Vietnam, Cambodia, the Philippines and other Southeast and South Asian countries. This has another ripple effect: any FDI targeting production in India for US markets will seek other countries with a more favourable tariff environment. Further, the social consequences would also take a huge toll – with job losses, financial ruin, supply chain disruptions, and so on. But this has happened. Now what?It is time for the Government to get back to pursuing its reform agenda, which, during this NDA term, has taken a backseat. Fortunately, the GST reform is on the table. Cement could be a beneficiary. Like cement, more than 80 per cent of earthmoving and other heavy machinery and construction equipment fall under the 28 per cent GST category. These segments, too, could heave a sigh of relief. However, we need the following reforms to withstand the geopolitical pressures – and now is the time for the Government to fire on all cylinders:Labour reform: The need to harmonise regulations across all 36 states and Union Territories under four labour codes has faced opposition. These reforms aim to consolidate the myriad existing labour laws into four unified codes: the Code on Wages, the Code on Social Security, the Code on Industrial Relations, and the Code on Occupational Health & Safety. Trade unions are opposing this as they face extinction. Union leaders claim the codes restrict the right to strike, complicate union registration and introduce cumbersome adjudication processes. They also raise concerns about the derecognition of unions and the centralisation of power to deregister unions.Divestment: The Government has consistently failed to meet disinvestment targets in recent years. Notably, only about 66 per cent of the FY24-25 disinvestment target was achieved. Disinvestment proceeds in FY24-25 are estimated to be among the lowest since FY15, largely owing to a shift away from target-driven stake sales. This represents a shift in strategy: instead of pursuing aggressive stake sales, the Government has pivoted to raising dividends, optimising PSU performance, and selective market dilution.Ease of doing business: Single-window clearances are required. Currently, an allotted mine requires multiple permissions, resulting in the allottee becoming operational only after five years! As per a TeamLease Regtech Report, a chemical manufacturing enterprise with a single unit in Maharashtra faces 635 unique obligations: 299 (47.1 per cent) at the union level, 332 (52.3 per cent) at the state level, and 4 (0.6 per cent) at the municipal level. However, this figure inflates to 1,545 once the frequency of these obligations is factored in. For instance, there are 53 monthly, 93 quarterly and 48 half-yearly compliance requirements. The company must also obtain 72 licenses, permissions and approvals under 52 acts. Even before construction begins, the corporation must complete over 60 one-time registrations and approvals, including 10 certificates/approvals under the Maharashtra Regional and Town Planning Act, 1966. Further, a typical MSME manufacturing unit must comply with up to 998 unique obligations and a total of 1,450 tasks annually, encompassing central, state and local laws.India’s inverted duty structure (IDS): This structure, where import duties or GST on raw materials and intermediate goods exceed those on finished products, undermines exporters’ competitiveness by raising input costs, eroding margins and choking cash flow.India is too important a market for the US to ignore and, therefore, I foresee a thawing of this punitive action in some form over time. However, this wakeup call – that we hardly have any leverage – is indeed an opportunity for us to fortify our policies so they help build unique competencies. Providing protection to our industries has not yielded much as we are unable to compete globally. Global competitiveness and efficiency are key to marching ahead toward our 2047 goals.

Next Story
Infrastructure Urban

VECV to Manufacture Volvo Group’s Advanced AMTs in India

VE Commercial Vehicles (VECV), a joint venture between Volvo Group and Eicher Motors, announced an investment of Rs 5.44 billion to produce and assemble Volvo Group’s 12-speed Automated Manual Transmission (AMT). The greenfield facility will be set up at Vikram Udyogpuri Integrated Industrial Township near Ujjain, Madhya Pradesh, and will cater to India and select Asia-Oceania markets.This investment marks a new milestone in the 18-year VECV-Volvo collaboration, which has already made VECV a global hub for Volvo Group’s 5 & 8 Litre (MDEP) engines since 2013, reinforcing the Make in Ind..

Next Story
Products

Action TESA Drives Shift from Plywood to Engineered Wood Solutions

Action TESA, a leading player in India’s panel industry, is spearheading the market transition from traditional plywood to engineered wood solutions such as Moist Master, HDHMR, and Boilo. These high-performance boards are redefining modular furniture, kitchen, and decorative applications with superior durability, design flexibility, and finish quality.Engineered wood offerings from Action TESA provide consistent quality, dimensional stability, and smooth surfaces, unlike plywood, which can have knots or gaps. The Moist Master, HDHMR, and Boilo BWP FR boards ensure excellent machinability, m..

Next Story
Infrastructure Urban

CREDAI-MCHI Donates Rs 30.65 Mn for Maharashtra Flood Relief

CREDAI-MCHI, the apex body of real estate developers in the Mumbai Metropolitan Region, has extended Rs 30.65 million to the Chief Minister’s Relief Fund to support rescue and rehabilitation efforts in flood-affected areas of central Maharashtra and neighbouring regions.The contribution was presented to Chief Minister Devendra Fadnavis by Sukhraj Nahar, President, and Rushi Mehta, Secretary, CREDAI-MCHI, in the presence of several leading developers from the Mumbai Metropolitan Region.A total of 44 member developers participated in this collective effort, underlining the real estate industry..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?