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Make in India campaign

by Ishan Adhikari, from Independent, on Mar 31
Make in India is an initiative of government of India led by Prime Minister Narendra Modi to increase the production in the country by encouraging domestic as well as multinational firms to manufacture in India.
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Make in India Campaign

Make in India

Make in India was launched on 25th September, 2014. Make in India is an initiative of government of India led by Prime Minister Narendra Modi to increase the production in the country by encouraging domestic as well as multinational firms to manufacture in India. The government primarily aims to establish India in global manufacturing map while simplifying the inflow of technologies and capital thereby creating job opportunities.

The government has either released or relaxed the foreign equity caps in various areas in a move to bring the new investment; the FDI cap in field of Defense has been raised from 26% to 49% and FDI in field of railway infrastructure has been made 100%. The process of applying for business license has been made online and is available 24/7. Validity of the license obtained has been increased to three years. Also several norms and procedures have been changed to make the business easier in India; now more than one domestic company (previously only one was allowed) is allowed to hold 51% share when remaining 49% is foreign holdings, a move to promote domestic players. The graph shows the current FDI of India.

 

 

Background

This campaign in part can be viewed as a result of 2 aspects which are described below:

Narendra Modi, previously C.M for state of Gujrat (awarded with Best State Award), launched a campaign 'Vibrant Gujrat’- a biennial summit for investors, businesses and industries. This campaign brought a huge investment in Gujrat. Narendra Modi promised to increase the investment in India, like he did in Gujrat, in the pre-election phase; Make in India campaign became the result of this promise.

As per 2014 data, agricultural sector contributes 17.9%, manufacturing sector contributes 24.2% and service sector contributes 57.9% in total GDP of the country. To further accelerate the growth of India, the contribution from the manufacturing sector must be significantly increased. This can be only achieved if the government opens the market for new investors; Make in India campaign can be one of the solutions.

Pros of the campaign

  • This campaign could be instrumental in generating more job opportunities; manufacturing sector is expected to create 100 million jobs by 2022.
  • The promotion of India as a brand and hub for manufacturing
  • Increase the share of manufacturing sector in GDP
  • Establish the bilateral ties with different countries

Cons of the campaign

  • It ignores competitive advantage issue. If it is more feasible to import rather than produce, there is no point in producing.
  • MNCs can make it difficult for the local players in the market
  • Given the intensity of corruption and irregularities in the Indian Bureaucracy, MNCs can easily bribe the officials to make the policies in their favor.
  • Environment can be damaged rapidly in the name of production; if properly not investigated by the authorities 

 

Lessons learnt from Chinese experience – and how they can be implemented in India

In any economy, industrial development can be detrimental if equitable development of both the sector (agricultural and industrial) is not ensured.

In China, few decades ago almost 50% of workforce were involved in Agricultural sector. China, with the blend of technology and workforce, significantly improved the productivity efficiently. This gave China abundance of workforce to involve in the industrial sector. China avoided the Lewis turning point (Lewis Turning Point is the point where all workers move to advance manufacturing sector due to high wage and no workers stay in the agricultural sector) by ensuring the return from the agricultural sector; farm household were made responsible to provide contracted output quotas to the state and were free to keep and sell the excess production. This guarantee of return from the state made the workers motivated enough to remain in the agricultural sector. This was how, in part, China was able to make equitable development in both agricultural and manufacturing sector.

India needs to advance its agricultural sector while eyeing on developing manufacturing sector so that with less labor more output can be achieved. Doing this helps to inject more workers into the manufacturing sector while avoiding Lewis Turning Point.

 

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