5 Years Of Make In India – Is India Really Making Up?
February 14, 2021
Congress’ Garibi Hatao to BJP’s Make in India, the policymakers have come up with innumerable slogans in the past seven decades post Independence; slogans which were not preceded by a proper homework nor followed up with adequate policy changes and infrastructure support. The only exception was the Incredible India campaign coined during the NDA rule of PM Atal Bihari Vajpayee which managed to significantly enhance India’s image as a grand tourism destination to the outside world, resulting in a significant increase in tourist inflow and revenue.It was also symbolic of the acceleration in economic growth witnessed during the 2000-2010 era ruled by both NDA and UPA. India stood strongly resilient to the global meltdown from 2007-2010. The economy was gradually finding its feet. It was looking forward to a strong policymaker, a majority government, and control on bureaucratic red tape and corruption for sustained acceleration.
Post his mammoth election victory in 2014, PM Modi looked like a beaming captain ready to take flight with the aspirations of billions. He was not tied down with the compulsions of coalition politics and was strongly aided by gradually strengthening rupee and moderate crude oil prices in the global market. The runway was clear for PM Modi to take off. Unfortunately, it was only our PM who took off while the country stayed grounded. In fact, even the economy, which was gradually finding its wings through booms in the real estate, automobile, and services sectors, came crashing down with a thud. The huge gap between the PM’s vision and the economic road-map was manifested in successive RBI governors and deputy governors getting replaced or putting in their papers. During his very first speech in Parliament after his election in 2014, PM Modi had sarcastically remarked that his government will continue with MGNREGA just to remind the countrymen, how badly successive Congress Governments have failed in uplifting the condition of the population in rural India. MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) was a pet project of Sonia Gandhi and the backhanded compliment was not missed by the nation. It was only a cruel reversal of fate that the government had to announce a ₹2000 monthly transfer to the accounts of small and marginal farmers just before the elections, to tide over the acute agrarian crisis en-route to its election victory in 2019.
After the Make in India initiative announced by PM Modi on September 25, 2014, the government laid out the red carpet to international business amid much fanfare at the 8th Annual Global Entrepreneurship Summit in November of 2017. The Make in India programme was launched with an aim to make India a global hub for manufacturing, research and innovation and an integral part of the global supply chain. It was a step forward in the right direction to transform India’s primarily IT and services dependent economy to becoming a major manufacturing hub for the world’s goods. It was to serve the dual purpose of attracting FDI and solving the problem of unemployment.However, five years after the program was announced, observers are now asking: “What has Make in India actually made for India?”
Let’s look at where we stand after five years. In the five years since the introduction of the policy, India’s rank in the World Bank’s Ease of Doing Business has climbed sixty-five places, from 142 in 2014 to 77 in 2019. Further, India now ranks in the top 25 in the world on three indicators- getting electricity, getting credit and protecting minority investors, as per a recent press release by the department of industrial policy and promotion. This signals a positive intent on part of the government towards making India an attractive investment hub.
On the flip side, the Indian economy grew at 6.8% in 2018-19 — it’s lowest in five years. Manufacturing’s share of GDP has risen steadily from 9.8% in the 1950s to about 16.2% in the 2010s. Post that, the Indian manufacturing sector has reached a distressing standstill. Industrial output in 11 of the 23 manufacturing segments contracted in April-June 2019, compared with the same period last year. In a sign of how much demand has been hit, industry figures released recently showed that sales of passenger vehicles to car dealers plunged 30.9 percent in July from a year earlier, the ninth straight month of declines and the biggest drop since December 2000. Real estate, which consumes two-thirds of India’s cement production, is ailing, in part due to a lack of funds in light of the NBFC crisis. Around 1.74 lakh apartments across seven cities are stalled due to a lack of financing or litigation. Another sector heavily dependent on real estate is furniture, whose output saw a 10% decline in the first three months of this fiscal.
There is no looking away from troubling signs about the economy. But if consumers decide to hold back their expenditure further, fearing worse days to come, it could make a bad situation much worse. Biscuit-maker Britannia Industries’ managing director, Varun Berry was recently quoted as saying that consumers are thinking twice before buying even ₹5 packs.
The government’s ambitious goal to increase the gross domestic product (GDP) share of manufacturing from a current 16.5% to 25% by 2020 is grossly off track. The unique feature of Make in India’s implementation was a structural approach towards creating 100 million new jobs by 2022, giving the manufacturing sector an important role in domestic job creation. Unemployment indices are at their highest since last 45 years.
Let’s have a look at the few decisions which have brought things to such a passé. Demonetisation and a hurried introduction of GST had a stinging effect on businesses all across the spectrum. Even noted economist, Kaushik Basu had once remarked that the availability of black money in circulation is essential for an economy to survive fluctuations in the global market. Drying up of liquidity in the unorganised sector and a cash crunch, coupled with an increase in NPAs (non-performing assets) for the banking sector dealt a death blow to existing business ventures. Mass unemployment led to a major shrinking of buying power in the market and consumers have started holding back cash.
To wriggle out of this unpleasant scenario, the government started laying more emphasis on the creation of self-employment through Startup India and Skill India programmes. Of late, India might have become the third-largest startup ecosystem, but it lacks successful innovation. It’s well known that most Indian startups are prone to emulate successful global ideas, by and large fine-tuning an existing model to serve local needs. There’s Ola for Uber, Gaana for Spotify, OYO Rooms for Airbnb and Flipkart for Amazon. But once the big MNCs start matching step for step at the ground level, the local mid-level startups are left gasping for breath as funds available to sustain initial losses start drying up. In the absence of top-notch technical talent and global business skills, the startups gradually start losing their sheen and steam. Unlike its competitors, India is not investing in research and development through international cooperation among different countries that helps in establishing links among local companies, multinationals, and academic institutions. The government’s failure in streamlining investment in education with a vision of being world leaders in technology and innovation is proving costly. In 2016, a survey conducted by the Information Technology and Innovation Foundation (ITIF), a U.S.-based think tank, ranked India near the bottom of a list of 56 countries on global innovation.
To overcome the shortage of skilled workforce and inspired entrepreneurs, the government has decided to open up more and more IITs and Centres of Excellence pan India. Just the initial capital expenditure to build another dozen IITs could be well over ₹18,000 crore. When location, land acquisition and putting up the physical infrastructure are major issues for the recent IITs, it seems ill-conceived to announce new IITs before looking at the performance of existing research and technology infrastructure. India filed 2,013 international patent applications in 2018 with the World Intellectual Property Organization (WIPO), while U.S.-based applicants filed 56,142 PCT (Patent Cooperation Treaty) applications, followed by those from China (53,345), Japan (49,702), Germany (19,883), and Korea (17,014). A simple look at the numbers gives a clear idea of our current status in innovation and technology and the fate awaiting our startups.
The government needs to completely revamp the structure of education and research in the country with the integration of science with technology. The existing CSIR Labs and specialised research labs should be integrated with the expertise of IITs to put an end to isolated and un-directed research. The current focus of the scientific community is mainly on academic research rather than the deliverance of new technology in the market. That’s the reason that while we fare comparably with researchers from neighbouring South East Asian countries in publication of research articles; we are lagging behind miserably in filing of patents.Thus it can be clearly concluded that at its present stage, Make in India initiative is clearly out of sync with ground realities and it needs a lot more than slogans to at least bring the economy on track. Reforms in education, innovation, skilling, credit flow, and other infrastructural and institutional frameworks are the urgent need of the hour if we are aiming at even competing with our South East Asian neighbours in terms of scale and quality as a manufacturing hub.
