SUCCESSES AND FAILURES OF MAKE IN INDIA

WHY IN NEWS:

• It has been five years since the launch of Make in India, but targets still look like distant dreams as the programme faces many hurdles.

BACKGROUND:

• The initiative aims to encourage manufacturing in India and galvanize the economy with dedicated investments in manufacturing and services
• The three major objectives were:
  • (a) To increase the manufacturing sector’s growth rate to 12-14% per annum in order to increase the sector’s share in the economy
  • (b) To create 100 million additional manufacturing jobs in the economy by 2022
  • (c) To ensure that the manufacturing sector’s contribution to GDP is increased to 25% by 2022 (revised to 2025) from the current 16%.
• The policy approach was to create conducive environment for investments, develop modern and efficient infrastructure, and open up new sectors for foreign capital.
• The focus of Make in India programme is on creating jobs and skill enhancement in 25 sectors such as automobiles, chemicals, IT & BPM, pharmaceuticals, construction, defence manufacturing etc.

FAILURES OF MAKE IN INDIA:

• Slow growth of investment in the economy:
  • Gross fixed capital formation of the private sector declined to 28.6% of GDP in 2017-18 from 31.3% in 2013-14 (Economic Survey 2018-19)
  • As per Centre for Monitoring Indian Economy (CMIE) data announcement of new investment projects declined by 38.4 per cent during 2017-18
  • Moreover as per RBI report FDI in manufacturing sector remained sluggish at $11.97 billion during 2016-17
• Slow output growth:
  • The index of industrial production pertaining to manufacturing has registered double-digit growth rates only on two occasions during the period April 2012 to November 2019.
  • In fact, data show that for a majority of the months, it was 3% or below and even negative for some months
• Employment growth:
  • As per periodic labour force survey (PLFS) the unemployment rate in 2017-18 was 6.1 per cent
  • As per Centre for Monitoring Indian Economy (CMIE) data 11 million people lost their jobs in 2018

REASON FOR FAILURES:

• Too much reliance on foreign capital:
  • Most of the schemes under Make in India relied too much on foreign capital for investments and global markets for produce.
  • This created an inbuilt uncertainty, as domestic production had to be planned according to the demand and supply conditions elsewhere
• ‘Make in India’ has been plagued by a large number of under-prepared initiatives:
  • The implementation deficit has resulted in large number of stalled projects in India
• Overestimation of the implementation capacity of the government:
  • Make in India set out too ambitious growth rates for the manufacturing sector to achieve.
  • An annual growth rate of 12-14% is well beyond the capacity of the industrial sector
  • Historically India has not achieved it and to expect to build capabilities for such a quantum jump is perhaps an enormous overestimation of the implementation capacity of the government
• Loss of policy focus:
  • The initiative brought in too many sectors into its fold. This led to a loss of policy focus.
  • Further, it was seen as a policy devoid of any understanding of the comparative advantages of the domestic economy.
• The initiative is ill-timed:
  • Given the uncertainties of the global economy and ever-rising trade protectionism, the initiative was spectacularly ill-timed.

SUCCESSES ACHIEVED:

• Ease of doing business:
  • Steps taken to improve ease of doing business include simplification and rationalisation of existing rules.
  • As a result of the measures taken to improve the country’s investment climate, India jumped to 63rd in World Bank’s ease of doing business rankings 2019.
• Boost to research:
  • First indigenously developed and manufactured Rotavirus vaccine, ‘Rotavac’, launched. 30 bio-incubators and Biotech Parks supported.
• Boost in investment:
  • Make in India initiative led to radiant growth in the IT and manufacturing sectors.
  • This has encouraged various global/foreign investors to make investments in India and boost their business by building the products in the country.
  • In 2015, India emerged as the top destination for foreign direct investment, surpassing the U.S. and China.
• Boost to MSMEs:
  • The ‘zero defect zero effect’ phrase which came with Make in India campaign has shown positive impact on the Micro, Small and Medium Enterprises (MSMEs) of India.
  • As a result, many companies are manufacturing goods with ‘zero defects’ and ensuring that the goods have ‘zero effect’ on the environment.
• Accountability:
  • The implementation of Goods and Services Tax (GST) and demonetisation has made the industry as a whole much more transparent and accountable.
  • Now the processes have been simplified such as obtaining licenses and clearances that have brought in more transparency into the system.
  • The digitisation initiative that is part of Make in India has helped make processes much more transparent and easier to implement.

WAY FORWARD:

• Labour reforms:
  • Faster implementation of all the four labour codes - Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions
• Simplifying tax system:
  • The complex taxation system, a huge amount of paperwork and corruption is a main cause of worries among the investors.
  • Reducing number of taxes required to pay annually, reducing the number procedures to be followed and simplifying and rationalizing GST rates is the need of the hour
• Land reforms:
  • Stringent land acquisition laws make it difficult for India to attract investors in the manufacturing sector.
  • India’s benchmark land acquisition law can be amended to make it easier to buy land for defence and development projects in the fast-growing economy, while also ensuring the rights of farmers.
• Skill training:
  • Despite various government efforts like Skill India initiative, Yuva Kaushal Kendra etc., India still lags behind other nations in imparting skill training.
  • Integration of skill education with the formal education, reforms in Skill Sector Councils, innovative funding model of skill training institutes, establishment of Skill Development University etc. need to be done

CONCLUSION:

• This initiative is undoubtedly an inspiring initiative, which has reduced the risk factors of investing in India for many foreign companies.
• The availability of skilled labour, a business friendly environment, good infrastructure and low manufacturing cost are some conditions required for the success of the Make in India campaign.

PRACTICE QUESTION:

Q. Critically analyse the progress made in India’s manufacturing sector through ‘Make in India’ initiative?