Make in India: Demand of Economic Growth & Issues

The Prime Minister Narendra Modi, prior to the commencement of his maiden US visit, last month launched ‘Make in India’, a major national initiative which focuses on making India a global manufacturing hub.  ‘Make in India’ movement started in September, 2014, aims at creating such an environment to lure foreign producers and investors to come and create jobs in India and enable domestic firms to compete globally. This program is to exploit every possible source to raise the share of manufacturing in GDP from 16% to 25% by 2022 and to create 100 million manufacturing jobs over the same period. The Make in India initiative is based on four pillars: new processes, new infrastructures, new sectors and new mindset. These four pillars are worked upon in terms of facilitating ease of doing business, developing industrial corridors and smart cities, opening up FDI in defense production, insurance, medical services, railway infrastructure and construction in a big way, and making government a facilitator of industrialization and not only a regulator. The campaign Make in India focuses on 25 sectors: construction, defense manufacturing, , IT & BPM, automobiles, aviation, chemicals, electrical machinery, food processing, pharmaceuticals, textiles and garments, media and entertainment, ports, leather, mining, , railways, automobile components, , wellness, tourism and hospitality, renewable energy, biotechnology, , roads and highways, space, thermal power, electronics systems. The websites www.makeinindia.com dedicated to the initiative shows the 25 sectors along with live projects like industrial corridors, FDI policies and details of Investor Facilitation Cell. The campaign is set to achieve total growth by facilitating investment, enhancing skill development and fostering innovation in the country. Much advancement is being headed towards achievement of this innovative mission.

Various foreign companies like Hitachi, Fiat, Airbus, Tetrapak, and Ericsson among others have committed to participate in ‘Make in India’ movement. Russia, China, Germany, Spain, Sweden, Oman, Japan and France have shown keen interest for this initiative and they are offering different sources to realize this dream of India. But on the way to achieve 10% economic growth rate, India has to do much on various issues such as infrastructure, employability score of Indians, ease of doing business index, land acquisition implications, power capacity and industrial security etc.

Global Demand– The global demand seems to increasing day by day. We have started consuming oods and services like never before. According to worldwatch.org there are 1.7 billion members of “the consumer class”— nearly half of them in the developing world. A lifestyle and culture that became common in Europe, North America, Japan, and a few other pockets of the world in the twentieth century is going global in the twenty-first. In addition, there are continents that are developing, particularly Africa, where the growth of demand for goods and services has been phenomenal in the last decade. Also assuming that the fighting in the Middle East would finally come to an end, this region would also get to a path of rebuilding and this will help create further demand for MII (Make in India)

National Demand- According to the Asian Development bank 49% ofthe GDP in 1990–91, now, ontributes 64.5% of the GDP (2008–09).. So, it can notice something interesting here – most of our domestics demand is actually services oriented and not so much products oriented. Thus there is a healthy domestic demand for services but what about the  Also not to forget the 300 Million odd people below poverty line who might be the direct beneficiary of the Make in India Initiative. Henry Ford started Model T and paid his workers more than $5 a week in order to spur demand and create the American middle class. Make In India in a way, would model to do that and help generate more demand.

Development- As roads and highways are vital for an efficient inbound and outbound logistics of a manufacturing firm to ensure proper and cost effective movement of raw materials and finished goods. As per data from website of Ministry of Road transport and Highways (2014) India has a total of 48.65 Lac kilometers of road network comprising of National Highways (92,851 km), State Highways (138,489 km), Major District Roads, Rural roads and urban roads (all together 46.34 Lac Km) which means National Highways comprise 1.7% of India’s total road network but carry 40% of road traffic, which makes it very congested. So it is imperative that Govt. should initiate conversion of single lane or double lane National & State Highways to four or six lane roads to meet growing congestion problem in India. Besides, Govt. should install smart traffic control systems so as to have real time data on vehicular traffic flow and which can be used to control the sequence and duration of traffic signals at major junctions across India.

As per report (2014) by India’s Central Electricity Authority, India had anenergy requirement of 1048672 Million Units (MU) of energy out of which only 995157 MU of energy were available. As per 17th Electric Power Survey of India Report (2010-11), India’s Industrial demand forms 35% of electrical power requirement which is to further increase significantly. As per 12th five year plan, the Govt. had targeted a capacity addition of 88,537 MW out of which only 46,766 MW has been achieved till Aug, 2014. There are issues like delay in environmental clearances and shortage of fuel supply, which hinder the Indian power sector. Govt. should focus on raising domestic coal production by improving quality of mines and ensuring transparent allocation of coal blocks so that cost of power production is reduced and fuel shortage is avoided.

Make in India: An economic range:- RBI Governor Raghuram Rajan observes ‘Make In India’ as ‘Make for India’ strategy because he suggests that Make in India might become excessively focused on manufacturing which will require India to follow the path of exaggerated export-led growth. And if it is not followed by increased demand then it may lead to effects which were there behind the depression in 2008. So India should concentrate on to produce efficiently for the internal market and to strengthen the domestic economy through sustained focus on physical, fiscal, human and financial infrastructure rather than subsidizing exporters with cheap inputs and an undervalued exchange rate. The foreign sector should be taken as sideshow and not the main event. Though manufactured exports (through Make in India) will bring economies of scale but it will pave the way for ‘path dependence’ i.e. excessive dependence on manufactured exports and failure in infusing similar dynamism in service sector as is the case in Japan and Korea. It is important to judge whether it is easier to export what we are already making? Moreover to ‘Make in India’ a success, policy should focus on increasing demand for the supply of manufactured goods. As almost 84% of the total employment in the manufacturing sector in India is in micro and small scale enterprises, India should create an enabling environment for developing strong linkages between smaller and big enterprises.

Ease of doing business– There are different activities involved in starting and doing business such as dealing with construction permits, registering property, getting credit and electricity, paying taxes, enforcing contracts and resolving insolvency etc. As per World Bank report, among 189 economies India ranks 142 for ease of doing business. India needs to improve upon various components of ease of doing business. Minimum or reduced capital requirements and faster and simpler procedures will help getting more firm satisfaction and savings and more registered businesses in India. Construction permits are need to be made more coherent, efficient and transparent while maintaining and protecting public interest through stricter deadlines and optimal allocation of resources. Taxation legislation is to be made broader, transparent and corruption free. Taxation policies should have positive impact on investor confidence, exports and employment growth. Contract enforcement and dispute redresser machinery should be made quick and strict.

Acquiring Lands– Land acquisition is one the important steps for setting up manufacturing firm. There are many issues concerning land acquisition such as proper rehabilitation and resettlement of affected inhabitants of that land. One of the alternatives for the Govt. is to use wasteland for Make in India purposes. India has a total of 552692.26 square kilometers of wasteland out of total geographical area of 3287263 square kilometers.

Improving employability– Employability rate is very low in India. As per ‘Higher Education in India: vision 2030’ report, 75% of IT graduates, 55% of manufacturing, 55% of Banking & Insurance graduates are deemed unemployable. This is because of theoretical nature of course curriculum and less awareness of applicability of theories in the industry. The course curriculum content and structure should be updated in lines with rapid changes in the field of science and technology. Moreover the entrance tests being conducted for admission to better known institutions should focus on calm and collected thinking rather than memory and speed.

Skill development & thrust on education- Stressing that his government has given top priority to skill development, Prime Minister had said the government is currently doing mapping for assessing skill manpower demand for specific sectors. He noted that there has to be synchronization between the objectives of the government, academic world, industry and job seekers for ensuring that industry specific skills are imparted. Experts argue that the country needs to focus on quality education not just skill development. “In the emerging economy, people will need to continuously learn new skills to meet the economy’s changing requirements,” an official with an industry association observed. Prime Minister also promised that specific sectors would be asked to access Industrial Training Institutes (ITIs) located across the country to train manpower locally as per their needs. “You will get a good worker for your industry and our ITI will start running. Our youngsters will get employment, his family will be strengthened and better purchasing power will help the economy. ,” Modi told top industrialists. In the last couple of years, National Skill Development Agency (NSDA) initiated work on creating a labour

market information system which would help industry sourcing their manpower requirement. After getting information on labour market, the government would provide accredition to manpower agencies so that the industry can access information on the manpower requirement.

Cutting down on procedural delay- However, for making India an investment hub, the first and foremost importance step would be to create a efficient administrative machinery which would cut down on delays in project clearances. Economists say that India has been very stringent when it comes to giving procedural and regulatory clearances. Besides a time bound clearance from all regulatory authority would create a conducive environment for business.The Prime Minister acknowledged that India being ranked low on the ‘ease of doing business’ ranking by World Bank and added that he has started to sensitize the Government officials in this regard. On his recent meeting with World Bank President Jim Yong Kim, Modi said “World Bank President was also expressing this worry. Probably we were 135th in the world at that time. If we have to come to 50 from 135 then Government alone can do this. If Government brings transparency in its decisions and rules, pushes works with simplicity we can occupy number 50 from 135 in ease of doing business,”. Delay in getting regulatory clearances lead to rise in cost of production. A leading multinational automobile major said “costs of production in India increase because of various government policies, procedures, regulations and the way some of the laws are implemented,”. The quicker the government addresses these challenges its better for the industry to set up facilities in the country. For providing better infrastructure for the industry, there has been a big constraint in term of land acquisition. Often land acquisition for the industrial purpose run into trouble at the local level.

Tax sops & focus on innovation– Economists have noted that with the globalization becoming a reality, Indian manufacturers will have to compete with the best and cheapest the rest of the world has to offer even in the domestic market. They urged for providing tax concessions to any industry which would set up manufacturing facility in the country. Besides a critical aspect is the country’s huge small and medium-sized industries which could play a big role in making the country take the next big leap in manufacturing. “India should be more focused towards novelty and innovation for the sectors indentified and integration with the country’s premier institute for carrying out research and development would be critical to the success of the make in India programme,” a leading industrialist said.

Reforms in the labour laws – Besides the skill development, labour law flexibility is a key element for the success of this campaign for increasing manufacturing in the country. Economists say that “labour law flexibility does not imply ‘hire and fire’ policy, it’s about providing a sound social safety net to workers.” Experts say that the country has some of the most comprehensive labour laws at the same time a large parts of working population do not have access to social security net. Prime Minister had stressed the faster the bulk of Indian middle class increases, the faster people move from poverty to middle class, the faster will be their conversion into a favourable market for the world. He said his government’s focus will be on physical infrastructure creation as well as creating a digital network for making India a hub for global manufacturing of goods ranging from cars to softwares, satellites to submarines and paper to power. A leading Economist said the big challenge for ‘Make in India’ campaign would face constant comparison with China’s ‘Made in China’ campaign. The China launched the campaign at the same day as India seeking to retain its manufacturing prowess. “India should constantly keep up its strength so as to outpace China’s supremacy in the manufacturing sector,” he noted. Categorically stating that there is a need for some fundamental changes in Indian economy so that the country emerges as global manufacturing base, Modi explained “on the one hand, manufacturing growth is to be promoted, at the same time we need to ensure that direct benefit goes to the youngsters of India. He should get employment so that there is improvement in the economic situation of even the poorest family. These poor should move towards middle class and there purchasing power should improve. This will lead to manufacturing growth and growth of the market,”.

Demographic dividend– Notwithstanding the challenges faced in making India a manufacturing hub, the country is poised to reap rich dividend for being one of the youngest nations in the world. According to reports by 2020, India is set to become the world’s youngest country with 64% of its population in the working age group. With the Western countries, Japan and even China aging, this demographic potential offers India and its growing economy an edge that economists believe could add a significant 2% to the GDP growth rate annually. Prime Minister also had said that India is the only country in the world which offers the unique combination of

democracy, demography, and demand from a rising middle class. Besides, the campaign would ensure closer centre and states relations for promoting India as a global manufacturing hub. “If investment comes in the States, it comes in India also. States and Centre should work collectively, shoulder to shoulder as a team. they should find solution together and things move forward,”. Modi urged. Although a sound beginning has been made for the Make in India campaign, now the ball is in the government’s court to ensure its success.

Improve the Ease of Doing Business– India has been placed at 134th position in Doing Business Index 2014 by World Bank and IFC while it stands at 179 in the ranking of 189 economies on the ease of starting a business which is below those of the neighbors like Sri Lanka at 85th position, Nepal at 105th, Pakistan at 110th and Bangladesh at 130th. These rankings indicate that we have immense scope to improve the corporate sector performance by reducing the costs of doing business and improving institutions. We believe these rankings should improve in the coming times. Improvement in rankings will not only reduce the costs of doing business but also attract global investors to come and invest in India.

Conclusion – The world’s largest trade fair in April, 2015) to remove unnecessary regulations and simplify procedures, gives a hope to see significant and sustainable growth in the manufacturing sector and thus making India a global manufacturing hub. Modi Govt, has signed a USD 35 Billion deal with Japan for infrastructure development. However MSME forms the base of the large scale industry, so promoting MSME sector will help in flourishing of large scale industry which will help in achieving the goal Make in India. The challenge is to make ‘Make in India’ an economically viable and globally luring project. The states witnessing higher growth in the manufacturing sector should be considered as model states and the growth strategies followed by these states should be adopted by other states also in order to boost growth of the manufacturing sector.

The analysis shows two dimensions of arguments. One side is optimistic nature which expecting more investment by free flow of capital. On the other side, it has criticized as the economy; it is adopting what look like neo-Nehruvian ideas. Instead, Modi should focus on making business as easy and honest as possible, avoiding artificial props, curbing inflation and fiscal deficits, ensuring a realistic exchange rate, and letting the market decide which sectors should flourish. Investors from everywhere will then rush in to make in India. The country is moving away from a mixed to a capitalist economy with corporate honchos appearing set to get a “bonanza of sorts”

and the poor a “pittance. Whatever, we can allow constructive criticisms rather than political gimmicks. Because, there was evidence in the earlier that In 1983 Illustrated Weekly ran an article criticizing Operation Flood or what we in India commonly call as the ‘White Revolution’. plot and India would never become selfsufficient in dairy products.

Thus is ‘Make in India’ economically viable? What are the challenges that the project and ovement will face? What about the projects that are currently running under ‘Make in India’? Can India compete in the global market? We will try to find the answers to all of these questions in the next couple of years.

REFERENCE – Garg poonam and Mitra Debashis (2015), “Can Make in India Compaign will be able to promote small scale industries of India”, Global Journal for Research Analysis, Jan, 2015. | * www.makeinindia.com | * www.narendermodi.com | * www.infraline.com | * http://morth.nic. in | * Newspaper articles * ETC.

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