'Make In India' - Are We Ready?

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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.