January , 2018
Why ‘Make in India?
16:45 pm

Anustup Roy Barman

The ‘Make in India’ initiative indicates a shift in the way government agencies interact with various industries. It will focus on acting as a partner in the economic development alongside the corporate sector.

Prime Minister Modi stated the motive to launch the ‘Make in India’ initiative very clearly. It is important for the purchasing power of the common man to increase, as this would further boost demand, and hence spur development and also benefit investors. The faster people are pulled out of poverty, the more will be the opportunities for global businesses.

Modi had correctly assessed mood of gloom among India’s business community in the last few years due to lack of clarity pertaining to policy issues. He said, “Trust is essential for investors to feel secure. Let us begin with trust. If there is an issue, the government can intervene. Trust too can be a transformative force. Development and growth-oriented employment is the government’s responsibility.”  To the expression “Look East”, Modi added “Link West”, emphasising the necessity of a global vision.

Has it yielded dividends?

No large country can achieve economic growth without manufacturing the goods that are consumed or demanded by its people. Most services—especially the basic, low technology and low value-added services, will anyway be produced within the country. A country will move up the ladder of prosperity if it can manufacture the goods and produce the services required by its people and also export a considerable part of those goods and services. Prime Minister Narendra Modi was therefore absolutely right when he stated that his government’s goal was to give the highest priority to ‘Make in India’ and called upon global players to set up manufacturing hubs in India.

To make a product and capture a significant market share is not an easy task. There may be multiple players in the same sector.   To make the product viable, the intending manufacturer must make it better or cheaper or reach it to the consumer sooner or be able to offer something which makes his product more attractive. It is here we face the hurdle of ‘factor costs’. Since the announcement of ‘Make in India’, there is no evidence to prove that manufacturing has gathered momentum. On the contrary, it seems to have lost steam and, in 2016-17, the sector had weakened considerably. Between Q1 and Q4 of 2016-17, the growth rate of manufacturing GVA had halved. The weakness of the manufacturing sector is reflected in the steady drop in the growth rate of overall GVA. The conclusion is that apart from the announcement of ‘Make in India’, there has been little policy or administrative support. All other data point to the same direction. In the five quarters between Q4 of 2015-16 and Q4 of 2016-17, Gross Fixed Capital Formation (GFCF) as a proportion of GDP had declined—30.8, 31.0, 29.4, 29.4 and 28.5. A drop of 2.3% in 12 months is a disaster. Considering that GFCF was 34-35% only a few years ago and the government has done nothing to step up private as well as pubic investment. According to Mr Alok Tibrewala, President, India Plastic Federation, “the plastic industry has not been affected much with Make in India. Plastic was always a good sector in the Indian case but it is a good initiative and shows the business friendly mind set of the government.”

Make in India, was innovative and aspirational. Unfortunately, it appears that there was little homework done before and practically no policy support till date. ‘Make in India’ might just turn into a hollow slogan if actions on the ground don’t support it.

Add new comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.