While campaigning for the 2014 Lok Sabha elections, the BJP and Narendra Modi made improving India’s economy 1 of their main platforms. 1 of the initiatives they came up with to achieve this was the ‘Make in India’ program. Ever since, promoting ‘Make in India’ has been at the top of PM Modi’s agenda at almost every foreign visit or international forum.
Here’s are 5 points to understand the Make in India initiative.
1. Make In India Aims To Make India a Global Manufacturing Hub
In his Independence Day speech in 2014, PM Modi invited global businesses to, “Come, make in India! Sell in any country of the world but manufacture here.” The ‘Make in India’ campaign was launched a little over a month later on 25th September 2015.
It involves attracting international as well as domestic companies to manufacture their products in India. Presently, India’s manufacturing sector contributes only about 15% to its GDP. With Make in India, the government hopes to increase this to at least 25%, closer to other developing global manufacturers like Malaysia, China, Thailand and Indonesia. In the process, the government expects to generate jobs, attract more foreign direct investment, build infrastructure and create a digital network, which will transform India into a hub for international business, thus improving its economy.
2. The Timing of This Initiative Couldn’t Have Been Better
China, our biggest competitor, has been the world’s preferred manufacturing location in the last ten years. However, things are changing. China is losing its advantage as a low cost manufacturer due to rising wages, high electricity costs and the appreciation of its currency.
So, big companies are now looking for other options and India could possibly be the ideal alternative. Among the top 25 exporting countries, India has the second lowest manufacturing costs after Indonesia. Even though India suffers from critical drawbacks like poor infrastructure and bureaucratic inefficiency, India’s long-term prospects remain unscathed thanks to its large labour force, a strong base of entrepreneurs and growing domestic demand. In many ways, the stage is set for India to transform itself into a manufacturing hub.
3. The Policy Still Doesn’t Make It Easier To ‘Do Business’ In India (a.k.a. Problems)
India’s biggest obstacles in achieving the Make in India dream are ease of doing business and substandard quality of products. This year, a World Bank report ranked India at 130 out of 189 countries for its ‘ease of doing business’. This is not an ideal situation for an entrepreneur who wants to start his own business in India because he would have to cut through plenty of red tape before he starts doing business. Coupled with this, dysfunctional infrastructure and widespread corruption are not exactly welcome mats for global businesses.
4. The Government Is Supporting This Initiate With New Policies (a.k.a Possible Solutions)
The government has implemented certain policies to complement the Make in India mission and improve India’s perception around the world. New initiatives have been rolled out which aim to make it extremely easy for companies to do business in India by making bureaucratic procedures speedy and transparent.
For example, companies can now register, seek clearances and even file their tax returns online. It has also introduced the Foreign Direct Investment (FDI) Policy to allow more foreign companies to own businesses in India by increasing liberalisation in 25 sectors. The FDI limit in the defence sector has been raised from 26% to 49% this year and 100% FDI is allowed in medical devices and railways infrastructure. Intellectual property rights have also been upgraded to protect innovators and creators. Additionally, PM Modi coined the “Zero defect, zero effect” slogan to promote Indian products, indicating that they not only come without any defects but also have zero adverse effects on the environment.
5. It Will Take More Than ‘Make In India’ For India To be an Economic Superpower
According to the Congress, the ‘Make in India’ campaign is mere repackaging and rebranding of the initiatives that were taken by it when it was in power. While it’s true that the Union Cabinet had approved the National Manufacturing Policy in 2011, the Modi government has prioritized this sector and is encouraging foreign companies to invest in India more aggressively. The RBI governor, Raghuram Rajan, correctly pointed out that what worked for China may not work for us because India is developing at a different speed and may not be immediately ready to accommodate large-scale manufacturing.
While, it’s great that the government is relaxing various policies, there are still important issues such as labour reforms that have not been addressed. Legislations like the Goods and Services Tax Bill and Land Acquisition Bill, that are important for businesses, have yet to be passed in the Parliament. While sectors such as defense, automobile and electronics have shown remarkable improvements thanks to Make in India, the country’s agricultural sector is struggling and needs attention. In order to achieve the target of 25% contribution of the manufacturing sector to the GDP, the NDA government still needs to rework a lot of strategies and policies and at the same time ensure that other sectors too are being focused upon.
Stay tuned to our upcoming blog posts for success stories under ‘Make In India’, and ‘Digital India’ a subsidiary NDA-launched initiative.