ABOUT THE AUTHOR
This article has been written by Aisha Ali a Law Student at Jamia Millia Islamia.
With the sole aim of transforming India into a global manufacturing hub, the Government launched the Swadeshi movement in India called ‘Make in India’. Five years after its launch it is appropriate time to take the stock of the progress made by Make in India. The present paper aims to highlight the scheme with the various objectives which has been included in the layout of the policy. The author has then presented the assessment of the scheme in the last five years after its launch. At last, the author has mentioned the shortcomings and the reason for the same.
India is considered to be one of the largest and fastest-growing economies of the world. Since the liberalization reforms were introduced by the government in the early ’90s, the Gross Domestic Product (GDP) of the country has risen rapidly. Economists believe that India has missed out on the manufacturing part from being an agriculture-based economy to becoming a service-oriented economy. A vibrant manufacturing base leads to more research and development, innovation, productivity, exports, and middle-class jobs in a country and helps to the standard of living more than any other sector. Following all these, the Government of India initiated a scheme called ‘Make in India’ to encourage companies to manufacture in India and to create more economic activities in the country. The scheme was launched by Prime Minister Narendra Modi in September 2014 to make India a manufacturing and designing hub. The country at that time facing a severe economic crisis in the form of stagflation and the economy that time needed a push. To stabilize the economy and to provide better incentives ‘Make in India’ was launched as an answer to all these problems. The Government here aimed to cease the export of all the raw materials and import of all the fined manufactured products. The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, is the nodal agency for the formulation and implementation of the program.
OBJECTIVES OF MAKE IN INDIA
It targets 25 sectors of the economy which range from automobile to Information Technology (IT) & Business Process Management (BPM). The initiative basically promises the investors which include both domestic and overseas investors, a conducive environment to turn India a manufacturing hub and to create job opportunities.
Three main achievable targets:
1. Target of an increase in the share of manufacturing sector growth to 12-14% per annum over the medium term.
2. An increase in the share of manufacturing in the country’s Gross Domestic Product from 16% to 25% by 2022.
3. To create 100 million additional manufacturing jobs in the economy by 2022.
Besides these, three main targets additional targets were made which were the creation of appropriate skill sets among rural migrants and the urban poor for inclusive growth, increase in domestic value addition and technological depth in manufacturing, enhancing the global competitiveness of the Indian manufacturing sector, and ensuring the sustainability of growth, particularly with regard to the environment.
The primary task of the project was to attract investments from all across the globe. In order to fulfill all these objectives government has initially taken very effective steps, one of those is granting permission for 100% Foreign Direct Investment (F.D.I.) in key sectors of the economy by the government of India.
Immediately after one year of its launch in 2014, India became the top destination globally for foreign direct investment (FDI), surpassing the United States and China, with $60.1 billion FDI investments. In the subsequent years, India improved its ranking across major fields including the world ranking of Ease of Doing Business from 100 in 2014 to 63 in 2019 among 190 countries. But it lags in various spheres even after five years of its launch.
ASSESSMENT OF PROGRESS
The policy has three variables to create a change in the manufacturing sector, namely, investment, and output, and employment growth. Let’s see each variable:
Investment- The last five years witnessed the slow growth of investment in the economy. Slow down was more prominent in capital investments in the manufacturing sector. According to Economic Survey 2018-19, Gross fixed capital formation (a measure of aggregate investment) of the private sector, declined to 28.6% of GDP in 2017-18 from 31.3% in 2013-14. Even though India is among the world’s top FDI destinations, garnering inflows of $49 billion in 2019, However, FDI inflows are more directed towards the capital markets. Manufacturing FDI was only around $8 billion in 2019.
Output: Monthly index of industrial production pertaining to manufacturing has registered double-digit growth rates only on two occasions during the period April 2012 to November 2019. The data has in fact shown that for a majority of the months, it was 3% or below and even negative for some months.
Employment: According to a government report, the unemployment rate in India is highest in 45 years. Moreover, Industrial employment has not grown to keep pace with the rate of new entries into the labor market.
On the other hand, the GDP rate currently has been declining and showing its lowest percentage in the last few years. The recent pandemic of coronavirus has added to it.
REASONS FOR THE SHORTCOMINGS
1. Inbuilt uncertainty- Make in India has too much reliance on foreign capital for investments and global markets to produce. This has created an inbuilt uncertainty. The domestic production of the country had to be planned according to the demand and supply chain.
2. Distraction from Policy- It has brought in many sectors into its fold; this led to a loss of policy focus. Every sector requires a special focus and policy and ‘Make in India’ has a general policy for all which did not work. Also, the majority of sectors that make in India focus on the lack of comparative advantages of the domestic economy.
3. Policymakers were more concerned about only two deficits namely, Fiscal Deficit and Current Account Deficit, and neglected the third deficit, i.e. Implementation Deficit in the economy which has led to a scenario where there is a quantum jump in the ‘ease of doing business’ ranking, but investments are still to arrive.
4. Many economists say that the policy was introduced at the wrong time when we living in the era of protectionism rather than on globalization and we need to revive it by a firm changes in the policy which focuses on the root causes.
5. Low Productivity- The workers in India is India are less productive if we compare it with other nations. According to Mckinsey Report, the workforce in India is 4-5% less productive than their counterparts in China.
6. Small Industrial Units- The policy focuses to increase the manufacturing and industrial growth by the percentage which is still not feasible for SIUs because of its size.
7. Labor Laws- Labor laws of the country are considered to be very complicated and are one of the major reasons to hinder global companies to invest in India.
8. Infrastructure- Even though electricity cost is the same in both China and India but power outrage is very high in India which stops investors to invest in India over China.
9. Communication and Transportation- The average speed in India is 60kms per hour as compared to china which has 100kms. Indian Railways are saturated and Indian Ports are outperforming.
10. Red-Tapism- The lengthy paperwork, corruption makes India less attractive for investors.
11. Insufficient rules and regulations - Labor laws and land acquisition laws are insufficient and complicated.
Make in India is a huge initiative and requires a long gestation period so it would still be a premature step to criticize the program. It is a well-appreciated step by the government and if implemented efficiently will prove to be a boon for the country and will surely boost up the economy. However, the reasons for the shortcomings which have been mentioned above must be taken into consideration. Special rather than general focus should be given to each sector included under the scheme to increase the growth in each sector.