After India liberalized in 1991, services sector grew contributing significantly to GDP, economic growth, international trade and investment. It was estimated that manufacturing sector’s contribution to GDP stood for 16% where services sector contributed 56.5% to the India’s GDP.
According to the Reserve Bank of India (RBI), India’s ITeS/BPO exports rose 37% in 2012-13. While manufacturing exports continue to perform well, most of it remains in the skill-intensive sector (automotive, engineering, etc.). This does nothing for the large number of low-skilled workers who are either unemployed or labouring away in hazardous, inhumane conditions beyond the purview of established formal state regulations.
Even after the incorporation of National Manufacturing Policy in 2011, India’s share of global manufacturing only dipped. According to estimates released by the Central Statistics Office, India’s overall GDP growth in 2013 was at 4.9%, marginally above 4.5 %in 2012/2013. But manufacturing output was seen declining 0.2% in 2013 compared with 1.1% growth in 2012, dragging down the overall economy. It was likely to be the worst year for manufacturing since 1999/2000.
For India to revive its manufacturing sector and boost its employment opportunities, it needed massive investment including major contributions from foreign investors. Economic growth cannot in fact be rapid if it is not manufacturing-led. The sustainability of services-led growth, therefore, required services exports to finance imports of manufactures to meet the shortfall in domestic production. This was quite impossible, and the inevitable balance of payment difficulties ultimately halted the growth process itself. Any attempt to revive services-led growth will fail for the same reason; severe balance of payments difficulties will re-emerge. It is manufacturing-led growth that can begin to restore the balance between domestic absorption and domestic production so that the external balance remains manageable. Thus, manufacturing-led growth was essential. Any attempt to revive services-led growth would cause severe balance of payments difficulties to re-emerge.
The most urgent need was to upgrade India’s physical infrastructure to encourage domestic and foreign direct investment in the manufacturing sector. This could absorb the rural labour surplus that is migrating to the cities by providing employment in labor-intensive, less technology-intensive manufacturing, regulated by humane labour laws catering to the contemporary needs of the economy.
For India to achieve its stated goals of reviving its manufacturing sector and providing jobs to the tens of millions of its unemployed youth, it was necessary to design policies targeted at low cost mass manufacturing. Thus ‘Make in India’ campaign was launched on September 14, 2014 with the key objective to promote rapid growth of manufacturing sector. This meant not just rapid growth of manufacturing, but also a lead role for manufacturing in India’s growth process. It did not call for discouragement or lowering of services or agricultural growth, it calls for services growth to be pulled by manufacturing growth and not vice versa.Led by the Department of Industrial Policy and Promotion, the initiative aims to raise the contribution of the manufacturing sector to 25% of the Gross Domestic Product (GDP) by the year 2025 from its current share of 16%. Make in India has introduced multiple new initiatives, promoting foreign direct investment, implementing intellectual property rights and developing the manufacturing sector.
Narendra Modi while introducing the programme in his maiden Independence Day speech, said, “I want to tell the people of the whole world. Come, make in India. Come and manufacture in India. Go and sell in any country of the world, but manufacture here. We have skill, talent, discipline and the desire to do something. We want to give the world an opportunity that come make in India.”
The initiative targeted 25 sectors of the economy which range from automobile to Information Technology (IT) to Business Process Management (BPM). The government has introduced several reforms to create possibilities for getting Foreign Direct Investment (FDI) and foster business partnerships. These reforms also aligned with the parameters of World Bank’s ‘Ease of Doing Business’ and aim to improve India’s ranking on it. The government also intended to develop industrial corridors and build smart cities with state-of-the-art technology and high-speed communication. Innovation and research activities were supported by a fast-paced registration system and improved infrastructure for Intellectual Property Rights (IPR) registrations.