How make in India has fared in achieving the desired objective? Background of “make in India” 

    • India has a strong service sector.
    • However, a country cannot solely depend on the industrial base.
  • In order to give Philip to the manufacturing sector, Prime Minister Narendra Modi launched the campaign on September 25, 2014 
  • Prime minister aspired to emulate China in attracting foreign investment to industrialize India. 
  • The objective was 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 from 16 to 25 percent of the GDP by 2022
  •  The flagship of this scheme was estimated to create 100 mn additional jobs by then.
Results after 5 years:
  • This policy has produced contrasting results after 5 years.
  • Foreign direct investment (FDI) by volume has increased from $16 billion in 2013-14 to $36 billion in 2015-16.
  • However, the FDIs have plateaued since 2016 
  • Second, they are not contributing to India’s industrialization. 
  • FDIs in the manufacturing sector is on the wane
  • In 2017-18, they were just above $7 billion, as against $9.6 billion in 2014-15. 
  • Services cornered most of the FDIs $23.5 billion, more than three times that of the manufacturing sector
  • India’s share in global export remains the same at 2% and China’s global export remains at 18%.
Why has Make in India failed to deliver?
  • Rerouting of Investment from tax-haven:
  • A large fraction of the Indian FDI is neither foreign nor direct but comes from Mauritius-based shell companies.
  •  Indian tax authorities suspect most investments from Mauritius are “black money” from India.
  • Low Productivity of Indian factories :
  • Workers in India’s manufacturing sector are almost 4-5 times less productive, on average than their counterparts in Thailand and China.
  • This is also because the size of the industrial units is too small in addition to the insufficient skill set of Indian labour.
  • This prohibits them from attaining economies of scale, investing in modern equipment and developing supply chains
  • Ease of doing business:
    Infrastructure issues:
    • Electricity costs are about the same in India and China, power outages are much higher in India.
    • Average speeds in China are about 100 km per hour, while in India, they are about 60 km per hour.
  • India ranks 78 out of 180 countries in Transparency International’s Corruption Perception Index. 
  • India has slipped 10 places in the latest annual Global Competitiveness Index compiled by the Geneva-based World Economic Forum (WEF).
Why India companies remain small? 
    • Labour regulations are more complicated for plants with more than 100 employees
    • Government approval is required under the Industrial Disputes Act of 1947 before laying off any employees 
  • The Contract Labour Act of 1970 requires government and employee approval for simple changes in an employee’s job description or duties.
Way forward:
  • Liberalization is much-needed reform to promote Indian economy as export-oriented.
  • India needs to immediately arrest the outflow of the capital.
However, India’s dream towards strong manufacturing cannot be left and boosted by the recent reduction in corporate taxes from 35% to 25% and Us-China trade wars which have resulted in exodus of factories from China. Also read: Diagnostic Kits Developed By ICAR Under Make In India Initiative Critical Analysis Of The State Of Higher Education In India