Five Years of ‘Make in India Initiative’: Success or failure?

Five Years of ‘Make in India Initiative’: Success or failure?

Updated on 17 October, 2019

GS3 Infrastructure Economy
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The News: Five Years of ‘Make in India Initiative’: Success or failure? On September 25, 2014, the Indian government has launched the 'Make in India Initiative' in order to give thrust to the manufacturing sector's growth rate to 12-14 percent per annum, but after five years, the initiative has failed to achieve its objective due to the various parameters. What is Make in India (Beginning of Indigenous Manufacturing): ‘Make in India’ is a major national initiative that focuses on making India a global manufacturing hub.

  • Objective:  The initiative motivated to increase the manufacturing sector’s growth rate to 12-14 percent per annum in order to increase this sector’s share in the economy.
  • The initiative also intended to create 100 million additional jobs to the economy, so that the overall growth of the economy can be achieved.
  • The other objective is to ensure that the manufacturing sector which contributes around 15% of the country’s Gross Domestic Products is increased to 25% in the next few years.
  • 'Make in India' also aims to create a conducive environment for investment, development of modern and efficient infrastructure, opening up new sectors for foreign investment
  • Key Thrust of the Programme: The key thrust of the programme is oriented on Cutting down in delays in manufacturing projects clearance.
  • And also develop adequate infrastructure and make it easier for companies to do business in India. 
  • Key Sectors under the Programme: The key sectors identified under the program are enlisted in the below sections:
  • Automobiles, auto components, biotechnology, chemicals, defense manufacturing, electronic systems, food processing, leather, mining, oil & gas, ports, railways, ports, and textiles.

Status of the Make in India Initiative:

Name of the Sector Programmed Launched Progress so far
Automobile
  • Faster Adoption and Manufacturing of Hybrid and Electric vehicles (FAME)
  • National Electric Mobility Mission Plan 2020 (NEMMP) has been launched to promote electric cars.
  • National Automotive Testing and R&D Infrastructure Project (NATRIP) centers are set up
  • 100?I under automatic route subject to all applicable regulations and law is available
The top players have inaugurated manufacturing units namely:
  • ISUZU motors in Sri City Andhra Pradesh
  • Tata Motors & Fiat jointly have opened up in Ranjangaon, Pune
  • Suzuki Motors in Ahmedabad
  • Mercedes Benz In Chakan
Aviation
  • Ude Desh ka Aam Nagrik (UDAN) was introduced for regional connectivity
  • Incentives in the form of tax concessions are provided
  • National civil aviation policy 2016 was announced for establishing an integrated ecosystem
  • Airports are being developed under the public-private partnership model to encourage private participation
  • GPS Aided Geo Augmented Navigation system (GAGAN) to support direct air routes
  • The passengers carried by scheduled domestic airlines have increased by 29%
  • Common User Domestic Cargo Terminals have been operationalized in 13 cities
Bio-Technology FDI Policy: 100?I for Greenfield Pharma via the automatic route 100?I for Brownfield Pharma.
  • Current Good Manufacturing Practices (CGMP) a plant was inaugurated in 2016 for the manufacture of Phytopharmaceuticals
  • A virtual center was launched in order to develop and advance technologies in the area of biofuels
  • First indigenously developed and manufactured rotavirus vaccine ‘Rotavac’ was launched in 2015
Chemicals and Petro-chemicals
  • The Assam Gas Cracker project is being initiated which is expected to produce about 2.8 lakh MT polymers per annum.
  • The FDI equity inflows in the sector increased by 107%
Constructions
  • 100 smart cities missions with an intention to achieve infrastructure development
  • AMRUT initiated which concentrates on providing basic infrastructure facilities.
  • Swachh Bharat mission established to promote healthy sanitation practices.
  • Heritage City Development and Augmentation Yojana (HRIDAY) focuses on revitalizing the Indian Heritage sites.
  • The Real Estate (Regulation & Development) Act, 2016 has been the shining star of this sector.
  • 7 million houses have been constructed under Pradhan Mantri Awas Yojana (Gramin) houses.
  • The construction sector is the industry which stands 2nd in line in terms of providing employment, after agriculture. 
Defence
  • 100?I
  • Upto 49% automatic route
  • Above 49% government route
  • A ‘Make in India’ portal for Defence Production
  • (www.makeinindiadefence.com)
  • Various products manufactured in India like HAL Tejas Light combat aircraft by sourcing 95% of the resources required locally.
  • Defence equipment amounting to INR 2059.18 Crore have been exported to 28 countries in FY 2015-16.
Electronic System
  • The Modified SIPS scheme has been developed in order to attract investment into this sector.
  • Export incentives 2-3% are made available under the Merchandise Export from India scheme.
  • Around 38 mobile manufacturing units have been set up which have created employment of about 38300
  • Under Digital Saksharta Abhiyan(DISHA)around 99.56 lakh candidates have been enrolled for training
  • In 2017 this industry witnesses a remarkable jump of 27% wherein the total volume reached 1.57 Lakh.
Food Processing
  • RBI has classified loan to food & agro-based processing units and Cold Chain under agriculture activities for Priority Sector Lending (PSL).
  • A special fund called Food Processing Fund has been deposited with the NABARD in order to provide funds to designated food parks.
  • The growth rate of Gross Value Added has increased from 1.91% in 2013-14 to 5.78% in 2014-15 at constant prices.
  • There has been an FDI equity inflow of USD 1.7 Billion from April 2014 to December 2016.
  • 88 cold chain projects have been operationalised out of the 134 projects which had been sanctioned.
  • The government had sanctioned 42 mega food parks of which 8 have been operationalised.
IT & IBM
  • Favourable government policies and initiatives serve as an incentive to invest in this sector
  • The Digital India campaign has pumped in a lot of investment with digital delivery standing as a focus point
  • Total FDI equity inflow in Computer software and hardware sector saw a major growth from 2.3 Billion to 5.9 Billion.
Leather
  • The leather product sector is entirely de-licensed which serves as an icing on the cake.
  • The FDI equity inflow amounted to USD 53.39 Million in this sector.
  • India boasts of being the 2nd largest producer of footwear and also the 2nd largest exporter of leather garments.
Mining
  • The Mines and Minerals Development and Regulation Act 1957 (MMDR) had been amended with greater transparency as its motive.
  • District Mineral Foundation set up for grievance redressal and also to improve the image of mining.
  • In terms of Gross Value Added this sector has grown by 10.5% in 2016-17 and 12.5% in 2017-18.
  • By November 2016 17 mineral blocks across 7 states have been auctioned.
  • Auctioned resulted in additional revenues amounting to INR 47551 Crores and total revenues of INR 59639 Crores.
Oil and Gas
  • Hydrocarbon Exploration & Licensing Policy (HELP) provides for a uniform licensing system
  • Additional depreciation of 15% on the installation of capital equipment acquired is permitted.
  • In Gujarat India has invested in refineries especially for exports.
  • The refining capacity of India has been expanded by 15 Million Metric Tonnes Per Annum due to the commissioning of Paradip Refinery In February 2016.
  • Crude Oil Strategic storage of 5.33 MMT capacity was built at Visakhapatnam, Mangalore and Padur.
Pharmaceuticals
  • The National Pharmaceutical Pricing Policy 2012 mainly focuses on the regulation of the price of drugs.
  • Indian Drugs and Pharmaceuticals Limited has enabled the mass manufacture of products in various fields.
  • Pharma Jan Samadhan, a customer grievance redressal system launched in March 2015.
  • Pharma Sahi Dham provides real-time information on the prices of medicines.
Ports and Shipping
  • New Berthing Policy for Dry Bulk Cargo for all major ports was introduced to facilitate the movement of higher cargo throughput from major ports.
  • Funds amounting to USD 25 Million for major ports and USD 21 million for minor ports have been earmarked.
  • Under the Sagarmala project, a total of 173 projects with an investment of INR 4 Lakh Crore introduced during 2016-17.
Railway
  • Public-Private Partnership model to enhance passenger amenities.
  • Project Swarn targets on improving the passenger experience.
  • Mission Raftaar has at its core the doubling of an average speed of freight trains.
  • A noteworthy achievement in the year 2017-18 is 51 trains have been speeded up by more than a hour.
  • The Gatimaan Express is the fastest train in India which covers a distance of 188 kms in 1 hour and 40 mins.
Renewable Energy
  • A bouquet of fiscal incentives has been provided.
  • To promote clean energy co-operation a joint Indo-US PACE Setter fund has been established with a contribution of USD 4 Million.
  • The world’s largest solar power plant was commissioned in Tamil Nadu with a huge capacity of 648 MW.
  • 34 Solar parks have been sanctioned to 21 states and INR 356.63 Crores has been provided to Solar Energy Corporation of India for the same.
Space
  • GSLV III launched for satellites which are heavier in nature weighing about 4500 to 500 kg.
  • ISRO has entered into co-operative arrangements with 33 countries and 3 multinational bodies.
  • Antrix Corporation Limited has undertaken various initiatives for the marketing of space products and services at a global level.
  • India is the first nation in the world to reach Mars successfully in the 1st attempt. The spacecraft was called Mangalyaan.
Thermal power
  • The revised tariff policy 2016 guarantees a good return on investment and ensures the safety of the investments to the investors.
  • The Ultra Mega Power Projects having a huge capacity of 4000 MW have been set up by the government of India.
  • India boasts of having the fifth largest installed capacity in the world.
  • The electricity generation increased by 5.9%(2016-17 vs 2015-16).
  • April 2014 to October 2016 has witnessed an addition of 50471.41MW to the generation capacity.
  • 98.8% of the villages have been electrified.
Tourism and Hospitality
  • Swadesh Darshan scheme had been launched to serve mass and niche tourism.
  • The National Mission for Pilgrimage Rejuvenation and Spiritual Augmentation Drive had the beautification of pilgrimage sites as its focus.
  • The e-tourist visa facility has been extended to travelers of 150 countries.
  • India crawled up 13 places from 65 to 52 as per the Travel and Tourism Competitiveness Index 2015 of the World Economic Forum.
  • This sector is among the top 10 sectors when it comes to the FDI inflow.

Make in India Initiative: Success or Failure India has witnessed an increase in FDI from $16 billion in 2013-14 to $36 billion in 2015-16. But, since 2016, the FDIs have plateaued that interns not contributing to India’s industrialization. The contribution FDI has been declining in the manufacturing sector as above $7 billion (2017), as against $9.6 billion in 2014-15. Why has ‘Make in India’ failed to deliver its objectives? 

  • No Direct Investment: There is no saying that a large number of FDI is neither foreign nor direct but comes from Mauritius-based shell companies.
  • Recycling of Indian Black money: It is estimated by the Indian tax authorities that most of these investments were “black money” from India, which was routed via Mauritius.
  • Low productivity of Indian factories: As per the Mackinsey report, the Indian workers are less productive as compared to its counterparts like China and Thailand.
  • Insufficient Skills: Due to the lacunae of insufficient skills, Indian workers four to five times less productive than their counterparts in Thailand and China.
  • Small Size of Industrial Units: Another reason is that the size of the industrial units is too small for attaining economies of scale, investing in modern equipment and developing supply chains.
  • Complicated Labour Regulations: Complicated labour regulation has made plants to equip themselves with only 100 employees.
  • Other factors: There other factors for the slow growth of ‘Make in India Initiative’ that are mentioned in the below section:
  • The infrastructure of the manufacturing industry is not good enough to compete with India’s counterpart.
  • Power outages are much higher in India and the electricity cost is about the same in India and China.
  • Inconvenient transportation is another reason for the slow growth of the initiative (transportation takes much more time in India)
  • Bureaucratic procedures and corruption continue to make India less attractive to investors. 
Ease of Doing Business: Perspective for India India has jumped 23 ranks in the World Bank’s Ease of Doing Business Index 2018 to 77 among 190 countries surveyed, making it the only country to rank among the top 10 improvers for the second consecutive year. 
  • India’s rank is below 100 on five parameters like: 
  • Resolving issues-108
  • Paying taxes-121
  • Starting a business-137
  • Enforcing contracts-163
  • Registering property-166
Ease of Doing Business Ranking of States
  • The index is jointly released by the World Bank and DIPP on 372-point Business Reforms Action Plan (BRAP) 2017 for the period between July 2016-July 2018.
  • The rankings of the states are in accordance with the third edition of DIPP’s Business Reforms Action Plan (BRAP 2017). 
  • The index scorecard is divided into four parts:
    • Top Achievers (above 95%)
    • Achievers (90-95%)
    • Fast Movers (80-90%)
    • Aspires (below 80%)
Top Achievers Andhra Pradesh, Telangana, Haryana, Jharkhand, Gujarat, Chhattisgarh, Madhya Pradesh, Karnataka, Rajasthan
Achievers West Bengal, Uttarakhand, Uttar Pradesh, Maharashtra, Odisha, Tamil Nadu
Fast Movers Himachal Pradesh, Assam, Bihar
Aspires Goa, Punjab, Kerala, Jammu & Kashmir, Delhi, Daman & Diu, Tripura, Dadra & Hagar Haveli, Puducherry, Nagaland, Chandigarh, Mizoram, Andaman & Nicobar Island, Manipur, Sikkim, Arunachal Pradesh, Lakshadweep, Meghalaya

Challenges:

  • Growing Service Sector: The service sector has been growing in the country tremendously which has leaped ahead of manufacturing industry.
  • Excessive Red Tape: Excessive red tape has been creating a deterrent for foreign direct investment that further led to the corruption level in the economy.
  • Increasing Overseas Business: Overseas business has risen in recent years in India that creates hurdles for the domestic manufacturer.

An attempt made by India:

  • Reduction of the company tax: Earlier, the Indian government has made a significant move with the reduction of the company tax from about 35 to about 25 per cent.
  • The reform also aligned with the government’s effort to compete with southeast Asian countries, in particular, to attract FDIs.
  • In the wake of US-China trade war, this competition has acquired a new dimension. Now, Trump administration increases tariffs on Chinese exports to the US.
  • According to the Japanese firm, only three of the 56 companies that decided to relocate from China moved to India.
  • Improving Ease of Doing Business: Government has also taken initiative to improve the ease of doing business in the country. 
  • Simplified Rules: Rules and procedures have been simplified and a number of products have been taken off licensing requirements.
  • Encouraging Innovation: In order to give thrust to the better management of patent and trademark registration, Innovation has encouraged by leveraging various programme.
  • Opening-Up various sector: Government has already opened up a number of sectors for FDI. And, in the same scenario, the policy in defence sector has been liberalised.

What needs to be done?

  • India needs to focus on competitive advantages on the global scale in sector where we have a large domestic market.
  • India also needs to shift its priority on industries like Defence, electronics hardware, construction, health care and agro-industries.
  • India must focused on creating favourable policy environment for manufacturing and needs to foster skill development among the masses.
  • A cooperative partnership must be built between government and the private sector, both domestic and foreign cases.
  • As the western world is concern about the technological parameter, India needs to leverage new technologies to resist the counterparts.

Conclusion: In order to make India as a global manufacturing hub, India should make administrative machinery effective as India always became stringent when it comes to regulatory clearances. A healthy business can be observed if India is able to create better procedural management and able to provide easier approval of projects. India’s SME sector has the greatest potential and can play a big role in making the country take the next big leap in manufacturing. India also focused on making this sector viable to fulfill its dream. To provide a greater challenge to Chinese counterparts, India also needs to give impetus to the research and developments. Read More Articles: Results Of Make in India After 5 years Diagnostic Kits Developed By ICAR Under Make In India Initiative


Categories : indianeconomy, policies,
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