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Last year general election of India
was a game changer in the history of Indian politics as it signaled the change
in the attitude of the people to take charge of their responsibility in
changing the government they wanted. It has been almost a year since Prime Minister
Narendra Modi assumed office with ambitious plans of making India globally
competitive. Modi in his maiden term announced a series of policies that could
all together change the scene of India on the global stage and lay back the
story of the country’s high growth. One of the highly acclaimed and applauded policies
is the Make In India. Does this initiative can really mean something for India
or would it just go back in the papers as a mere slogan would depend upon the
course of actions taken by the government.
When Modi launched the Make In India
campaign the country was upbeat about the project particularly the industry and
business group. This is because of the timing of the project. The campaign was
launched at a time when the Indian economy is undergoing economic stress of low
growth. The industry for a long time has been worried over low demand and
reduced consumer spending because of persistent Inflation and poor external
prospects. Apart from all the excitement and hullabaloo surrounding the
ambitious project one has to carefully look at the situation we are in at
present. In India there is a general notion that every government proposes
laudable policies to attract media and public attention but none have the
clarity about its feasibility and implementation. Will Make In India be a
practical reality or a distant dream?
It is always easy to lampoon a
government initiative than to understand its implications on the economy.
However, before implementing such a big project that is said to have a large
scale impact on the economy one has to check the ground reality and the
constraints facing the success of the project. If the government blindly goes
by talking about the project and promoting the idea of Make In India on global
tours it would become just another marketing gimmick.
Much of the growth of India is
accelerated by services and its exports. Manufacturing contributes only 15
percent to India’s GDP whereas services contribute to 57 percent. However, in
the recent years we see that India also have the potential to become a
manufacturing hub and Make In India is exactly trying to tap that potential.
Soon after the announcement of the initiative, many companies such as Airbus,
spice and UK’s BP plc have expressed their interest and commitment in making
the dream project a success. Considering
this, there is great enthusiasm and support for the project among the industry
but it is imperative for the government to look at the challenges and remove
the hurdles in making India truly a global manufacturing hub.
There are quite a lot of hurdles
on the domestic front that need to be immediately rectified. Governance is a
crucial factor in making any economic policy a great success and it is a
serious issue in India. India is plagued by corruption and it is deep rooted in
the Indian politics since time immemorial. Corruption is a kind of tax that
disrupts economic activity and lowers the prospects for investment. How can
India lure foreign companies to carry their production activities here when its own
manufacturing sector is in a pathetic state looking for some revival? The first
step would be to make the domestic manufacturing sector organized and flourish
production activities smoothly without any hindrance. In general many studies
have pointed out that investments move from capital rich to another capital
rich country. So unless and until India strengthens its own manufacturing
sector by going an extra mile in encouraging public and private investments it
is quite difficult to attract investments from abroad and even if it does it is
not sustainable.
India has not been using the
technology advancement optimally to its advantage. Despite high IT and telecom services exports
that is extensively built on high end sophisticated technology India still
hasn’t grown tech savvy. One important factor that improves production and
manufacturing is investment in R&D. For various reasons India is reluctant
to show any sign of investing in R&D. Surprisingly there are Indian corporate
without any R&D wing at all. E governance has taken shape in India, but it
still requires efficiency and accountability. When everything from starting a
business to lodging a complaint is done virtually it saves less time and get the
things done more efficiently.
India ranks relatively low on the
ease of doing business index compared to other emerging nations. According to
the latest World Bank report India is ranked at 142 among 189 nations on the
ease of doing business. However, the initiatives taken by the new government is
promising and is expected to make India business and investment friendly. It is said that it takes 28 days to start a
business in India. The average number of procedures in starting a business in
India is 12 whereas it is 7 in other South Asian economies. Hence there
is much to be done on the clearances and the process of starting a business.
Infrastructure is another major problem in India. Manufacturing and production activities
usually concentrate on areas where there is good infrastructure and logistics
facilities. India’s infrastructure is not all that developed and supportive in ease of business transaction. Many infrastructure projects are waiting
for clearances because of lack of investments. So there is big push needed to
improve the infrastructure of the country. It is good to see that the Modi
government has committed all the way towards achieving this goal. Another
serious problem facing the country is acute power shortage and energy crisis. Electricity
availability is one of the critical factors for manufacturing. We are in a
nascent stage of developing a more robust and sustainable energy system.
The dream project is said to
boast itself in making India a powerhouse of manufacturing leading to job
creation. It is highly uncertain if the first objective could be met
considering all the domestic and external issues but the second objective of
creating jobs is highly certain and possible. Before that government needs to
clear all the roadblocks concerning the success of the project. Finally, on a
concluding note, with all the positives regarding the Make In India initiative
a fundamental question is necessary to be raised and is critical in
understanding the whole idea about the business initiative. Why Make In India?
Why not Make For India as termed by RBI governor Raghuram Rajan? It is true
that India has taken inspiration from other emerging Asian economies on export
led growth but this growth model is now being questioned by many economists and
policymakers. China’s export led growth is now having negative implications on
its economy. India has to understand
that it is all the way different from that of china. Replicating the same type
of export incentive and import substitution growth could lead to negative
effects on the economy in the present global economic scenario where the
developed countries have sluggish demand and is still on the middle stages of
recovery. Raghuram Rajan have also expressed his concern and cautioned about
the ramifications of the program. As of now what India truly needs to concentrate
is on creating a conducive environment for domestic manufacturing sector to
flourish by encouraging investments, implementing the much talked about GST, easing regulations for business to take off, enhancing infrastructure, investing on skill development that could
automatically result in job creation and increase the purchasing power prime minister is
talking about. If all this is done and the roadblocks are removed only then
Make In India can happen as envisaged.