How make in India has fared in achieving the desired objective? Background of “make in India”
Results after 5 years:
- 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.
Why has Make in India failed to deliver?
- 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%.
Infrastructure issues:
- 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:
- 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.
Why India companies remain small?
- 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).
Way forward:
- 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.
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
- Liberalization is much-needed reform to promote Indian economy as export-oriented.
- India needs to immediately arrest the outflow of the capital.
