"When the lion (India) awakes, the jungle (World) pays attention."
This paper aims to analyse the viability of Make in India campaign and the importance of the manufacturing sector on the growth pattern of the Indian economy in terms of both income and employment generation. It is clearly visible that our economy is over dependent on Services sector. Butyou’ll have demand for services only when you have a vibrant Industrial Sector. When a country starts economic development then the major part of the jobs will come from the Agriculture. But once, the economic development progresses there is a shift towardsIndustrial sector (for instance in Britain there was industrial revolution). And once the industrial sector gets developed it generates Demand for Services leading to a shift from industrial sector to the services sector. So, the standard occupational structure is - Agriculture to Industries and then over a period of time it leads to services. (Agriculture >> Industries >> Services.) However, Indian Economy is an exception. In fact, Indian Economy IS THE ONLY economy which didn't follow the occupational structure.
Why Manufacturing?
I. Ignored Previously: Look at China & India over time In 1985 - India & China were both equal[ly bad] in manufacturing By 2008, China has grown insanely high to be a world leader in manufacturing. India grew too [look at the change in scales] but nothing closer to China. In just 20 years, China has caused all that change. If China can make all that change in the previous 20 years, why can't India too in the next 20? And with China’s economy slowing and increasing cost, much of the world’s hope for future economic growth now rests on countries like India whose per capita income is still at only $1600, compared to China’s $7600, leaving India with substantial room to grow further.
II. Overall Contributor: The importance of manufacturing for the Indian economycannot be over–emphasised. It contributes about 15% of India’s GDP, with estimated revenue of Rs 30 lakh crore2 in 2007 -08. More importantly, the sector contributes a disproportionately large share of nearly 50% to the exports from the country. Besides, around 12% of the workforce today finds employment in this sector .
III. Global trade is based on goods, not services :A country can’t trade services for most of its goods. According to the WTO, 80% of world trade among regions is merchandise trade — that is, only 20% of world trade is in services. For the past 10 years, India has had a trade surplus in services that covers only one-fifth of its trade deficit in goods.
IV. The Multiplier Effect: Most jobs, directly or indirectly, depend on manufacturing — and reviving the sector could provide tens of millions of new jobs, eradicating the unemployment.According to the Economic Policy Institute, each manufacturing job supports almost three other jobs in the economy. Solution to the mess? “The best time to plant a tree was 20 years ago.The second best time is now.” -a Chinese proverb Best solution is to transform the economy from the services-driven growth model to labour-intensive manufacturing-driven growth. This will help in creating jobs for over 10 million people, who join the workforce every year.
In short, this is what "Make in India" is all about. The Indian Prime Minister, Mr. Narendra Modi first mentioned the keyphrase in his maiden Independence Day address from the ramparts of the Red Fort and over a month later launched the campaign in September 2014(the government of India also launched a website to supplement the campaign) with an intention of reviving manufacturing businesses and emphasizing key sectors in India.
Mission: “Manufacture in India and sell the products worldwide.
Why I think this Dream will turn into reality?
“All our dreams can come true – if we have the courage to pursue them.” – Walt Disney
1. Huge Manpower: About 50% of the Indian population is between 25 and 64 years of age which is more than half a billion. This gives India an edge over other countries in terms of human resource.
2. Labour Cost: Labour wage in China is increasing at 10% per year whilewages of Indian workers still remain low and can make a significant difference to the total costs.
3. Ease of Doing Business: Government has initiated steps to create “one-day procedure” by identifying eight key areas. This would reduce the procedure time to start a business.
4. Single country dependency:Many companies in the developed world like US, Japan, etc. are looking to outsource from more than one country to avoid risk of dependence on one country. India is a potential alternative for these companies to look forward to.
5. Foreign Direct Investment: FDI cap in railways and defence is already increased, and investment portals have been created to draw the attention of global investors. This would certainly help India by providing with more capital.
6. Taxation system: Introduction of the GST that would essentially replace all the indirect taxes would aid in redistributing the burden of taxation equitably between manufacturing and services. It will promote exports and most importantly, will spur growth.
Following sectors have been included by the Government in this campaign: • Automobiles • Automobile Components • Aviation • Biotechnology • Chemical • Construction • Defence Manufacturing • Electrical Machinery • Electronic Systems • Food Processing • IT and BPM • Leather • Media and Entertainment • Mining • Oil and Gas • Pharmaceuticals • Ports • Railways • Renewable Energy • Roads and Highways • Space • Textile Garments • Thermal Power • Tourism and Hospitality • Wellness
In a major boost to the 'Make in India' initiative, the Government of India has received investment proposals of over Rs 1,10,000 crore (US$ 16.56 billion) in the last 12 months from various companies around the world. In a large heterogeneous country like India, the gestation period of newly implemented strategy is moderately high and therefore the effects of this campaign would take a year or two to show up its effects. Some of the major investments and developments in this sector in the recent past are:-
• Siemens has announced that it will invest € 1 billion (US$ 1.13 billion) in India to add 4,000 jobs to its existing workforce of 16,000 in the country.
• US-based First Solar Inc. and China’s Trina Solar have plans to set up manufacturing facilities in India.
• Clean energy investments in India increased to US$ 7.9 billion in 2014, helping the country maintain its position as the seventh largest clean energy investor in the world.
• Samsung Electronics has invested Rs 517 crore (US$ 77.82 million) towards the expansion of its manufacturing plant in Noida, Uttar Pradesh (UP). “Samsung India Electronics is committed to strengthen its manufacturing infrastructure and will gradually expand capacity at this plant to meet the growing domestic demand for mobile handsets, as per the company.
• India is currently among the top 10 sourcing countries for IKEA. The plan is to double sourcing from India to €630 million (US$ 711.65 million) by 2020.
• Shantha Biotechnics Private Limited has started building a facility to manufacture Insuman, an insulin product to treat diabetes. Sanofi SA, which acquired Shantha Biotechnics, will invest Rs 460 crore (US$ 69.24 million) to build the facility.
• BMW and Mercedes-Benz have intensified their localisation efforts to be part of ‘Make in India’ initiative. "The localisation efforts will reduce the waiting period and accelerate the servicing process of our cars as we had to (previously) depend on our plants overseas for supply and will help us on the pricing front.”
• Suzuki Motor Corp plans to make automobiles for Africa, the company’s next big bet, as well as for India at itsupcoming factory in Hansalpur, near Ahmedabad, Gujarat.
• Taiwan-based HTC has decided to manufacture products in India. HTC is believed to have partnered GDNEnterprises, which has an assembly set up in Noida.
• Foxconn,the manufacturer of Apple’s iPhones is planning an aggressive expansion in India, building up to 12 new factories and employing as many asone million workers by 2020
• The State Government of Tamil Nadu has signed investment agreements worth Rs 2,42,160 crore during a two-day Global Investors Meet in September 2015.
Things which make me feel Make in India is a Dream far away from reality:
1. Unskilled Labour: Skilled labours are concentrated mainly in urban areas. More than 90% of them are still stuck in unorganized sectors. It is a reasonable concern for any investor to avoid coming to India.
2.Job-Skill Mismatch:75% of IT graduates are deemed ‘unemployable’, 55% in manufacturing, 55% in healthcare and 50% in banking and insurance, as pointed out in a report produced by FICCI and Ernst and Young, called Higher Education in India: Vision 2030.
3. Lack of Electricity: Over 60% of Indian companies have witnessed more than 10% of production loss because of shortage of power in the country; India is already running short of electricity with a deficit of about 5.1.Why would a foreign company outsource in India if such basic needs are not met? 4. Roads:Road connectivity is extremely crucial for the export sector. If India were to be a reliable manufacturing hub, road density should be high. India has 1.1 km/’000 per sq.km of roads which is way too low compared to International standards.
5.Not Business-friendly: India is ranked 142nd out of 189 countries when it comes to ease of doing business. Currently, Taxation system is very complex and Investors are wary of the regulations, Red-Tapism in Indian Bureaucracy and needless to mention the frequent scams that gets noticed at the global level.
6.Clearances: Right now it takes 168 days and 35 procedures to complete the process of getting construction-permit. Everything is tiresome when it comes to land-acquisition and construction. It is even more tedious to get forest and environment clearances.
7. Trade Procedure: Exporting any standard container of goods requires nine documents to fill up and takes minimum 16 days and costs $1,170. While importing it requires 11 documents and takes 29 days and costs $1,250.This makes the trading process cumbersome and complex.
8. Slow Judicial System: Indian trial and judgement takes more than 300 days to complete. There is a dire need of fast track courts to expedite such cases.
9. Technology: The success of “Make in India” relies heavily on Technology, i.e., Computer Integrated Manufacturing. A lot of investment is needed to incorporate these technologies into Indian manufacturing sector. Currently, labour productivity in India is far below the International average.
Concluding Thoughts:
“Believe You Can, and you are halfway there.” -Theodore Roosevelt
Make in India is an ambitious project, but it is one that India desperately needs to kickstart and sustain its growth momentum. With relentless policies towards this end, it is possible to make India the powerhouse of manufacturing sector in the world.The campaign seems to be working as it is achieving, fresh investments- already discussed earlier in this paper, what it was intended to when it was launched. Despite of the issues like unskilled labour, lack of electricity and other issues like red tape and corruption, Indian industry continues to grow, which reinstates faith in the resilience of the economy.
But, from a theoretical perspective, Make in India will tend to violate the theory of comparative advantage. Reiterating the point made by Dr. Raghuram Rajan, India, unlike China, does not have the time advantage as it undertakes a manufacturing spree. The essential question is – Is the world ready for a second China?
How well Honourable Prime Minister MrNarendra Modi is going to implement the ‘sayings’ into actions and how fast it is going to happen, if it really is what they claim as “Goodbye red tape, hello red carpet” is only for us to wait and see. India's future depends directly on its ability to fuse 'Make in India' with 'Skilling India'. "Make in India is not a slogan but a mission to be accomplished by a single-minded commitment about new processes."
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