Is ‘Make in India’ a marketing
gimmick or reality?
In the Independence Day
speech on 15 August 2014 PM Shri Narendra Modi said, “let’s resolve to steer
the country to one destination. We have it in us to move in that direction. Come,
make in India, ?Come, manufacture in India. Sell in any country of the world
but manufacture here.” With job creation, skill enhancement and attracting foreign
investment as its aim, this campaign has taken 25 growth sectors under its purview
namely: automobiles, chemicals, IT, pharmaceuticals,
textiles, ports, aviation, leather, tourism and hospitality, wellness,
railways, auto components, design manufacturing, renewable energy, mining,
bio-technology, pharmaceuticals and electronics among others.
This paper is an outcome of descriptive research based on
secondary data sources. For collecting information, articles from leading
newspapers, research papers, Make in India official website and some other
authentic sources were referred to and were subsequently analysed to address
the objectives of present study.
Here cross sectional analysis
was done to investigate the progress of Make in India initiative. In a cross sectional analysis, all the
measurements for a sample are obtained at a single point of time, although
recruitment may take place across a longer period of time. In the study above,
data between the time period September 2014 to December 2017 was collected for analysis.
Some of the reasons for using cross-sectional analysis over
longitudinal analysis were-
the data collection strategy was broader in scope (involved more than one
sector or a small group) and the direction of the study was mixed, where both
exposure and outcome were measured together and that’s why we used cross
sectional analysis instead of longitudinal analysis where direction should be
prospective or retrospective.
sectional studies only one group is used, data is collected only once and
multiple outcomes can be studied but in longitudinal analysis, outcomes and
exposures are collected at multiple follow-up times and it generally yields
multiple or repeated measurements on each subject. Therefore, cross-sectional
study is cheap and inexpensive and thus used in this case.
Cross-sectional studies can be done more
quickly than longitudinal studies. That’s why cross-sectional analysis was
conducted in order to first establish whether there were links or associations
between certain variables or not (here aimed at exploring the link between
progress of the campaign and characteristics of policies). Subsequently
longitudinal study could have been set up to study cause and effect.
Why ‘Make in India’ was launched?
The various pressing issues that
prompted the launch of this initiative are:
India needs more jobs for its young people. Nearly 120mn will enter the
labour force over the decade to 2024, as India enjoys, or perhaps endures, an
unprecedented demographic bulge. The share of the
manufacturing sector in total employment in India remained almost unchanged
around 11% from 1987-88 until 2004-05 and increased modestly thereafter as per
the National Sample Survey.
Modest increments in agricultural output are associated with negligible
increases in employment. The informal or unorganized services sector is
an employer of the last resort, but levels of income are low and quality of
jobs is poor. Thus growth of manufacturing sector is important.
In fact, industrialisation is imperative .For this India must breakthrough the
phenomenon of Premature deindustrialisation which is damaging many emerging
economies. Countries like Britain and the US became manufacturing
powers before they grew rich and China has followed much the same path. Dani
Rodrik, a Harvard economist, thinks manufacturing in Asia and Africa stalled
before it got going, with India perhaps the most obvious example. Many
developing countries have seen the relative economic weight of manufacturing
decline. In India, manufacturing has been declining as a
share of output over recent years. New technology is often blamed for
deindustrialisation in the west but Mr Rodrik says that, in the emerging world,
trade and globalisation play a part too. He argues that countries like India
have been hit by a “double whammy”: they opened up only to be hit by a wave of
cheap manufacturing imports. This leaves many workers stuck between jobs in the
informal economy with a far smaller number in advanced services, such as IT.
“Deindustrialisation has long been a concern in rich nations,” Mr Rodrik wrote
last year, “but it should be a much bigger problem for developing countries.”
The emphasis on manufacturing in India at this juncture represents a cognizance
of the problem. The New Manufacturing policy’s vision is to create 100 million
additional jobs by 2022 in manufacturing sector. Job creation will fight poverty and
help divert people from agriculture, which has a low capacity to sustain their
livelihood. Modi (2016)
Share of manufacturing sector in India’s
GDP over the past 20 years has remained dismal, crushing the hopes of an
economy based on manufacturing led growth .It increased slowly
from 15.9% in 1987-88 to 17.3% in 1995-96, diminished thereafter to a low of
12.9% in 2013-14 as per the CSO National Accounts Statistics, which is far
below China and other Asian economies. Worse, it has been declining of late,
with exports also falling because of the global slowdown. India needs to restart
its economy and thus could hardly have picked a trickier time to start an
export-led manufacturing drive. The New Manufacturing policy aims at
increasing manufacturing sector’s share in GDP to 25% by 2022.
The government’s push for manufacturing comes at a time when many big
companies are seeking an alternative to China as costs and risks there rise. India needs to improve its business
climate in order to take advantage of this shift and benefit from the likely
shedding of millions of jobs
by China. It was also an apt response to a crucial situation which formulated when
the much-hyped emerging markets bubble had burst, and India’s growth rate fell
to its lowest level in a decade (2013). The promise of the BRICS nations faded
and India was tagged as one of the so-called ‘Fragile Five’. Global investors debated
whether the world’s largest democracy was a risk or an opportunity. India was
on the edge of severe economic collapse.
Another possible reason for Make in India could be to prevent shift of
economic activity outside the country. Some Indian service industries and
manufacturing base was migrating abroad which was evident from slip in India’s
BOT in business and financial services from a surplus five years ago than and a
trend of outbound FDI of 65 cents for every dollar of Inbound FDI in Indian
manufacturing in five years till march 2012 which was an outcome of weak
infrastructure, red tape and corruption.
Also, makeover of India into a manufacturing hub will help
develop, strengthen and modernize the Indian
infrastructure. Such advancement will revive the health of other sectors such
as service, agriculture, hospitality, medical, tourism, etc. Also it would link India into global supply chains, boosting exports, helping to
reduce the current-account deficit along with minimizing
some of the trade frictions we have with other countries.
taken to facilitate ‘Make in India’ initiative
in India’ initiative aims to provide a friendly environment to the business
community so that they can devote their effort, resources, and energy in
Several measures have been taken for ease
of doing business by both central and state government and several measures are
taken by central government:
Unified online portal (Shram Suvidha) for Registration
of Labour Identification Number (LIN), submission of returns, grievance
redressal, combined returns under 8 labour laws.
Online portals for Employees State Insurance
Corporation (ESIC) and Employees Provident Fund Organization (EPFO) for
real-time registration, a single-window online portal, documents reduced from 7
to 3 for exports and imports, option to obtain company name and DIN at the time
Simplified forms for Industrial Licence, Industrial
Entrepreneurs Memorandum. Many defence sector dual-use products no longer
require licences. Validity of security clearance from Ministry of Home Affairs
extended to 3 years, extended validity for implementing industrial licences
development programme: “Make in India” boosts manufacturing trade and economy.
Over 10,000 training centers opened within 2 years. It Creates job market for
over 10 million people.
foreign direct investment:
“the policy in defence sector has been liberalized and FDI cap has been raised from
26% to 49%. 100% FDI is allowed in defence sector for modern and state of the
art technology on case to case basis.100% FDI under automatic route has been
permitted in construction, operation and maintenance in rail infrastructure
Target specific approach: A workshop titled “Make
in India – Sectorial perspective & initiatives” was conducted on 29th
December, 2014 under which an action plan for 1 year and 3 years has been
prepared to boost investments in 25 sectors.
Investor facilitation cell: An 8 member investor
facilitation cell (IFC) dedicated for the Make in India campaign was formed in
September 2014 with an objective to assist investors in seeking regulatory
approvals, hand-holding services through the pre-investment phase, execution
and after-care support.
India agency, whose mission is investment promotion and facilitation, is the
‘back-end’ of the ‘Make in India’ initiative. It has been set up as a joint
venture between the Federation of Indian Chambers of Commerce and Industry (FICCI,
51% stake), the Department of Industrial Policy and Promotion within the
Ministry of Commerce and Industry (DIPP, 35% stake), and the 28 state
governments (0.5% stake each).
The number of taxes will be reduced and making
payments will be simplified through Goods and Services Tax (GST).
Labour laws reforms: the ministry has taken steps
for drafting four Labour Codes on Wages; Industrial Relations; Social Security
and Welfare; and Safety and Working Conditions respectively, by simplifying,
amalgamating and rationalizing the relevant provisions of the central labour
laws. These reforms will help in catalyzing the creation of employment
opportunities in the country without diluting basic aspects of safety, security
and health of workers.
The Make in India week in Mumbai, which
concluded on 18th February 2016, offered
a platform to investors, governments, countries, CEOs, consultants, diplomats
and companies to come together and discuss business. It
resulted in investment commitments worth Rs.15.2 trillion across various Indian states, of
this, about 30% of the investments fall under the foreign direct investment
(FDI) category, told by Amitabh Kant, secretary, department of industrial
policy and promotion (DIPP).
minister Devendra Fadnavis said that Maharashtra has signed 2,594
memoranda of understanding (MoUs) worth over Rs.8 trillion. These MoUs would
create more than 3 million jobs in Maharashtra. “The spectrum of these
investment proposals is so large that it covers sectors from real estate
to tourism to skill development to agro food processing to animal
husbandry. The regions where the investors are putting their money will
open up more sectors and spur more investment,” Fadnavis said.
Eliminate requirement of minimum paid-up capital
and common seal, Integrate processes for obtaining PAN, TAN, ESIC and EPFO
registration with incorporation of company and Single-window clearance for
import and export.
Finance Minister Arun Jaitley announced
several proposals in the Union Budget 2016-17 to help start-ups
innovate, generate employment and be key partners in the Make in India
programme, he proposed to back them through 100 per cent deduction of
profits for three out of five years for start-ups set up during April 2016
to March 2019. He said Minimum Alternate Tax will apply in such cases. He
also proposed modification in Customs and Excise duty structure to
incentivise domestic value addition and push the MII campaign. This was
done to bring down costs and improve competitiveness of the domestic
Measures taken by state
measures have been taken by state governments like online consent system for
Pollution Control Board (Gujarat), Unified process with single ID for VAT and
Professional Tax registration, Number of procedures and time for getting an
electricity connection reduced (Maharashtra), Real-time allotment of TIN –
Taxpayer Identification Number, Online application portal for residential and
industrial building permits(Delhi).
Challenges in the road of making India a manufacturing hub
India may be glad that
it is surpassing China as the world’s fastest growing major economy and the
fact that rising wages across the Himalayas bring prospects for Make in India
to pitch in local factories. However, the scenario is more complex than that.
Foreign companies complain about India’s poor infrastructure, shaky roads, congested ports,
unreliable power supply. If authorities facilitate the requirements of
the national programmes of 100 “Smart Cities” and “Industrial Corridors”, infrastructure
will improve. As Information Technology is also a part of Infrastructure, internet
connectivity with LAN, WAN with high speed data transfer is also the need of
the hour. Also, the rural infrastructure is required to be given impetus to
ensure sustainable rural economic development. Golden quadrilateral, DMIC
(Delhi Metro Industrial Corridor) for roadways, linked river for waterways,
express highways, vibrant sea-ports etc. are required since manufacturing would
require free flow of raw materials and finished goods.
India has been very stringent when it comes to procedural mechanisms and regulatory
clearances. For the issue of unnecessary laws and regulations and making
stringent bureaucratic processes easier, shorter, transparent and responsive as
well as accountable proceedings, it has emphasized the concept of “single
acquisition is also a challengeable issue as the existing laws have made the
acquisition of land more complex and costly. These laws create hurdles in
investment into preferred sectors like manufacturing, construction,
infrastructure and mining. The difficult balancing act between providing
sufficient rights and safeguards to landowners and easing land acquisition
procedures has been introduced through the announcement of the Presidential
challengeable issue is the restrictive labour laws of India.
Both the federal and state governments will have to implement labour reforms
which will ease these laws. Reforms which will help labour rights, human
resource management, and worker and management relationship with proper safety
norms and efficient transport facilities are the need of the hour. But reforms require a majority
in both houses of Parliament; the governing coalition (NDA) has a majority in
the Lok Sabha (lower house) while it is in the minority in the Rajya Sabha
(upper house). The government has adopted temporary executive ordinances on
land acquisition, FDI in the insurance sector and
coal-mining licences, but it will need to come to agreement with the opposition
to make them permanent.
Goods and Services Tax (GST) is another key indirect tax reform that would go a
long way in promoting the “Make in India” vision. This reform will incentivise
Indian manufacturing by simplifying the current complex indirect tax structure.
A report by
consulting firm E&Y said in 2012 that India lags far behind other nations
in imparting skills training to its workers. Not too much has changed since
then. While engineering colleges proliferate, the same cannot be said of
industry-specific technical skills for shop floors. A major effort has got
underway under the National Skill Development Corporation (NSDC), but this
needs time to develop. The government’s Economic Survey said last year that the
skilled workforce in India is counted at a mere 2%, while the NSDC estimated a
need for 120 million skilled people in the non-farm sector– which would make it
10% of the population at current levels. Lack of vocational education
facilities and lack of training facilities are a key part of India’s industrial
landscape. Skill development is also imperative in order to ensure creation of
world class products under the scheme. The government is sensitive
to this issue and has thus created a new Skill Development Department under a
full-fledged cabinet minister.
While India is home to R&D
facilities for many global companies, Indian companies have been slow to adopt
it. India’s industry has grown over the past six decades either through
public sector companies or through domestic industries enjoying access to a
market protected by customs duties. Thus government must ensure that huge investments in R&D and imports of high tech equipments is made
in order to ensure long term competitiveness of Indian industry.
One can start manufacturing in India,
but will they create jobs that last? India’s public sector companies put up by
Prime Minister Jawahar lal Nehru in the 1950s were sheltered in protectionist
policies. In the new scheme of things, can India look for human employment on a
large scale when robots may take over manufacture worldwide and still stay
competitive? Vivek Wadhwa, Stanford University fellow who is at the forefront
of alerting the world on the robotic threat, told the BBC recently that it was
now “indisputable” that a new kind of industrial revolution was in the offing –
one that won’t require many humans. “In a decade or two you’ll find that robots
and artificial intelligence can do almost every job that human beings do. We
are headed into a jobless future,” he says. Scary? Just think of Google’s
self-driving cars – and the fact that your smartphone is now good enough to be
an ECG machine on the basis of an app. (Small consolation: some jobs may be had
in making robots. Tata Motors is perfecting one, expected in under two months.
It was showcased, somewhat ironically, at the Make In India event).
Also, Made in china campaign of China
was launched on the same day as India, seeking to retain its manufacturing
competence. The two campaigns will be persistently compared and thus India should constantly keep up its strength so as to outpace China’s
domination in the manufacturing sector.
Besides the ones mentioned above, there
are ample of other challenges towards making India a global manufacturing hub.
However, focussing on these issues and taking adequate measures can turn the
“Make in India” vision into a dream come true.
faced by ‘Make in India’ initiative
NDA government’s Make in
India campaign till early October 2015 had attracted INR 2000 Crore worth
investment proposals. Despite this, the campaign has found its critics.
The topmost of these
criticisms is levelled against the serving government. A number of technology
based companies have not been moved by the campaign launch and have professed
to continue getting their components manufactured by China.
Ravi Aron, a U.S.-based expert in manufacturing, said India was ill-suited for
a Chinese-style export boom, because it lacked the infrastructure and the
skills for its exports to compete internationally. “It should not be called
‘Make in India’ but ‘Make In Spite of India’,” said Aron, of Johns Hopkins
University, advising the Indian government to scale back its ambitions and
focus on its growing domestic market.
The biggest criticism came from Reserve Bank of India (RBI) former governor
Raghuram Rajan who alternatively suggested “make for India”, holding that a
strategy focused on the external market is unlikely to work for India as it did
for Asian economies in the current global economic scenario. He suggested the
country should produce for the internal market as external demand is likely to
remain muted for several years. Rajan recommended that the government should
focus on creating an environment where all sorts of enterprises can flourish,
and then leave entrepreneurs to choose what they want to do. “Instead of
subsidising inputs to specific industries because they are deemed important or
labour-intensive, a strategy that has not really paid off for us over the
years, let us figure out the public goods each sector needs, and strive to
provide them,” he said in a speech in December 2014.
DMK leader M K Stalin
said, the country is moving away from a mixed to a capitalist economy with
corporate honchos appearing set to get a “bonanza of sorts” and the
poor a “pittance”. “It appears that the path towards capitalist
economy is being refurbished, switching from a mixed economy under the Modi
Rating agency Standard
& Poor’s (S&P) has revised the outlook on India to “Stable” from
“Negative”, while keeping the “BBB–” rating unchanged. One of the significant
reasons for the upward revision according to S&P was that “the new
government has both the willingness and capacity to implement reforms necessary
to restore some of India’s lost growth potential”. Also, ratings agency Moody’s has said that net foreign direct investment (FDI)
inflows have hit an all-time high in early 2016, highlighting the success of
‘Make in India’ initiative. It said that the FDI inflows have more than
financed the current account deficit (CAD) for the first time since 2004. Also,
India now ranks 130 in the ease of doing business, moving up 12 places from the
year 2015 according to World Bank report. All these signify a positive impact
of the scheme.
For the campaign to
attain success, studies suggest avoiding artificial props, curbing inflation
and fiscal deficits, ensuring a realistic exchange rate, and letting the market
decide which sectors should flourish. The strategic and dynamic aspects demands
for several priority areas such as, Defence,
Electronics hardware, Healthcare, Construction and Agro industries. The
responsibility must be shared among the centre and state through decentralized
and coordinated efforts.
Where the whole world is
transitioning in the light of innovation, the key to survival lies in being
flexible and adaptive to changes, or as they say, survival of the fittest. It needs to be recognized that the
above is a journey and success cannot be achieved overnight.
Thus is ‘Make in India’ a
marketing gimmick or not, we will try to find the answer to this question in
the next couple of years.