Q. Make in India, which was envisaged to boost manufacturing in India, has failed to meet its objective. Critically examine. (150 words)23 Oct, 2019 GS Paper 3 Economy
- Briefly mention the aims and objectives of ‘Make in India’ campaign.
- Give a comparative analysis of its objectives and respective outcomes achieved.
- Mention the issues faced by Indian manufacturing sector.
- Conclude by mentioning a few steps taken by government and suggestions to improve the situation.
- The ‘Make in India’ initiative was launched in 2014 with the objective of promoting India as an important investment destination and a global hub in manufacturing, design and innovation.
- This initiative aims to create a conducive environment for investment, development of modern and efficient infrastructure, opening up new sectors for foreign investment and forging a partnership between government and industry through a positive mind set.
The key outcomes in the last 5 years with respect to the desired objectives can be analyzed in the following manner:
Parameters Objectives/ Targets Outcomes Manufacturing sector growth: Increasing it to 12-14% per annum over the medium term. 6.9% (2018-19) Share of manufacturing sector in GDP 25% by 2022 16.4% (2018-19) Additional jobs creation 100 million by 2022 Unemployment Rate = 6.1%
Highest in last 45 years (PLFS)
Other objectives include skill development, technological upgradation, enhancing the global competitiveness and adopting environmentally friendly policies to achieve sustainable growth.
However, apart from the above parameters, there are a number of missed opportunities:
- FDIs in the manufacturing sector are becoming weaker than before. It has come down to $7 billion in 2017-18 as compared to $9.6 billion in 2014-15.
- India’s share in the global exports of manufactured products remains around 2% which is far less than 18% share of China.
Issues faced by Indian manufacturing sector:
- Low Productivity: McKinsey report states that Indian workers in the manufacturing sector are, on average, almost four and five times less productive than their counterparts in Thailand and China.
- Disproportionate size and age of industrial units: Indian MSMEs suffer from the ‘bane of dwarfism’ as mentioned in Economic Survey 2018-19.
- Dwarfs (firms employing less than 100 employees but in existence for more than 10 years) account for half of all the firms, their share in employment is 14.1% only and share in NVA is 7.6% only.
- Thus, firms that remain small despite becoming older remain the lowest contributors to employment and productivity in the economy.
- Complicated Labour Laws: Government approval is required under the Industrial Disputes Act of 1947 before laying off any employees and the Contract Labour Act of 1970 requires government and employee approval for simple changes in an employee’s job description or duties.
- Poor Infrastructure: Electricity costs are almost the same in India and China but power outages are much higher in India. Similarly, Indian transportation sector also needs significant upgradation.
- Red Tapism: Bureaucratic procedures and corruption make India less attractive for investors. India ranks 78 out of 180 countries in Transparency International’s Corruption Perception Index.
- The current status of Indian manufacturing sector indicates that the ‘Make in India’ campaign did not have much success till now.
- Thus, significant policy initiatives are needed to revive manufacturing growth such as:
- Directing credit flow to MSMEs by re-orienting Priority Sector Lending(PSL) norms,
- focussing on High Employment Elastic Sectors such as rubber, plastic products, electronic , transport equipment, chemicals, textile , leather, etc.
- Government’s move to rationalize FDI norms and reduction of corporate tax rates to 25% are significant steps that could boost manufacturing growth in India.
- Indian government has to take more initiatives to create a conducive environment for the growth of industries and especially manufacturing systems. A targeted approach towards specific goal can be used to address the issue.