Make In India: Or make for India?

jasleen

Jasleen Kaur | May 26, 2015




Launched by PM Modi on September 25, 2014, the Make in India initiative aims at encouraging companies to manufacture in India. This is in line with Modi’s vision of turning India into a manufacturing hub, like China, and create jobs for a burgeoning young population. This initiative, where Modi brings in his much-praised Gujarat experience, is going to be crucial if he is eyeing a second term. 

The initiative focuses on 25 sectors, including defence, automobiles, IT, pharmaceuticals, textiles, ports, aviation, tourism and hospitality, railways, renewable energy and mining, for job creation and skill enhancement. Through this the government hopes to increase GDP growth and tax revenue and attract capital and technological investment in the country.

In August 2014, the cabinet allowed 49 percent foreign direct investment (FDI) in the defence manufacturing and 100 percent in railways infrastructure. The defence sector had a 26 percent threshold for FDI and it was not allowed in railways at all. Of the 25 sectors, 100 percent FDI is allowed in all, except defence, aerospace (74 percent) and news media (26 percent).

Ease of doing business: The government initiated several steps, including reduction in the number of documents for foreign trade,  payment of ESIC and EPFO made online, elimination of requirement of consent for new electricity connection and online application for environment clearance, to improve ‘ease of doing business’ in the country.

Industrial corridors: The government has conceptualised five industrial and economic corridors which are in different stages of implementation. These are the Delhi-Mumbai, Bengaluru-Mumbai, Chennai-Bengaluru, Visakhapatnam-Chennai, and Amritsar-Kolkata industrial corridors.

Opening up of defence manufacturing: Forty-six licences have been issued in the defence sector to produce light armoured vehicles, artillery weapon systems, UAVs and underwater systems, etc,. Private players have also been given industrial licences to produce electronic warfare systems, air defence weapons, and armoured panels for helicopters.

In January, the Spice Group announced a mobile phone manufacturing unit in Uttar Pradesh with an investment of '500 crore. In the same month, HyunChil Hong, president and CEO of Samsung South West Asia, met Kalraj Mishra, union minister for micro, small and medium enterprises (MSME), to discuss a joint initiative under which 10 ‘MSME-Samsung Technical Schools’ will be established in India. In February, Hitachi said it was committed to the initiative and would increase its employees in India from 10,000 to 13,000 and set up an auto-component plant in Chennai by 2016. Huawei opened a new research and development campus in Bengaluru.

While these may sum up the progress of the initiative so far, it may be noted the government is yet to sign an MoU with any foreign country for manufacturing defence equipment or weapons. Industry too has been wary of making big-ticket investments.

All is not well
The biggest criticism has come from RBI governor Raghuram Rajan, who has said India rather needs to make for India. He has said an incentive-driven, export-led growth or import-substitution strategy may not work for the country in the current global economic scenario. He cautioned, ““...the world as a whole is unlikely to be able to accommodate another export-led China.”  His advice was that the government should instead focus on creating an environment where all sorts of enterprise can flourish.

Commenting on the budget in his column for Governance Now, economist Ashok V Desai wrote: “If the government is serious about making India a manufacturing superpower, it should be spending much more on infrastructure. Jaitley missed the chance to do so.”
In another column, he wrote: “The (Economic) Survey takes the view that although population growth led to a rapid increase in labour supply, poor education left most of the workers unskilled, and neither industry nor services had any use for them. So while the prime minister’s obsession with Make in India is appropriate, it cannot be made to happen unless skills are implanted into workers.”


(The article appears in May 16-31, 2015 issue)

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