Make in India: Is there enough meat in the country for this lion?
One of the major campaigns started by the Modi Government, ‘Make In India’ has been designed to transform India into a global manufacturing hub. The program focuses on manufacturing sector, predicting that it would lead to increase in 15% GDP from the secondary sector to 25% by 2020. With the primary objective to make India a suitable place for doing business, the campaign also seeks on increasing employment through this increased focus on manufacturing sector. When the manufacturing sector gets a boost, employment levels will rise and factories which are now dead will again start emitting smokes from their chimneys! Does this mean that this campaign is a solution to all the problems that plague the Indian Economy at present? Let’s find out.
Initiated by Amitabh Kant, the program has been criticized by the RBI Governor: Raghuram Rajan who called for ‘Make For India’ instead of ‘Make In India’.
Make for India focuses on manufacturing product for the domestic market. He criticized the export based strategy and claimed that a strategy which has worked for China before does not mean that it would work for India as well. Given that a similar strategy had worked for Japan and China before does not imply that it would work for India as well. Japan just went through a recession. Past also proves that a similar policy taken from China, which was of creation of ‘Special Economic Zones’ never worked that well in India. Moreover, it seems highly doubtful that the world right now requires another China, i.e. whether there is a need for the products that would be manufactured.
Also, the line of distinction between Made and Make in India should be understood. While any level of production activity undertaken in the country will contribute to the Make in India campaign, Made in India ensures that the products which are made in the country reach their final stage of production when they are within the domestic boundaries of the nation. Therefore, it makes sure that companies are not exploiting nation’ For example, a Parle-G biscuit is made entirely in the country right from the procurement of raw materials to the packaging of the finished good for sale. But if the same company procures and processes the raw materials from India but packages the final product and sells it abroad, even though the early stage of production started in the country ( Thus. A part of Make In India ), the benefits were never really reaped by its own citizens.
Through ‘Make In India’, the MODI led government aims on improving India’s rating from 134 to 50 in ease of doing business. However, the success of this campaign is surely not as easy as a cake-walk!
The main issues which might arise in implementation of this scheme are:
Labor Reforms: Outdated labor laws have been a deterrent in conducting business smoothly within the country. A series of labor reforms was carried out in 2014 and many more policies have been introduced or revamped in this law. However, a lot of them are still being fought over by the labor unions. Stories of plants closing down due to frequent labor strikes and loss in output are still found frequently in the news. The labor laws have a long way to go in order to ensure a conducive business environment for the industries as well as garner a safety net for the labor market.
Land Acquisition Act: The land acquisition is one other law which is in severe need of a complete upheaval. India is majorly an agriculture based country. There needs to be a balance between the land access to farmers and land given to the industries otherwise it would lead to a situation where 50% of the country is dependent on agriculture for its livelihood but contributes only 14%to GDP.
The government has passed ordinances which make it easier for industries from specific sectors to take over land but such ordinances are highly criticized and opposed and claimed to be against the farmers.
Moreover, cases like the Vodafone Tax Issue or the Microsoft and Nokia case, make India a very unpopular destination to conduct business in. If despite the Supreme Court’s ruling of Vodafone not being liable to pay any tax, the Parliament can go forward and change the law retrospectively, it doesn’t set a good example for all future activities by any other firm in such a country. The upheaval of such policies would be difficult and time consuming due to the level of red tapism and corruption in India.
Thus, Red Tapism and Corruption are the two biggest challenges for the implementation of ‘Make in India’.
Instead of choosing 25 golden sectors, what the economy needs at present is self-sufficiency in the sensitive sectors like defence and pharmaceuticals. Rather than being an importer of the defence equipment from the rest of the world which even puts the security of the nation at stake, government should primarily focus on being independent in order to look after its defence sector.
From a leading exporter in antibiotics in the world earlier, India is now one of the main importer of medicines. Why not regain the lost strength and entail activities to revive the sick production units?
Make In India, undoubtedly is an ambitious step taken by the Narendra Modi led government but to make it a success, the government has to address the ground realities. Instead of offering incentives and rebates to foreign companies, it is essential that the government first focuses on building an environment conducive for the domestic players. Be it HNIs or MSMEs, equal opportunities for growth and incentives for setting up business in the country should be first provided to the domestic businessmen.
Until and unless these issues are resolved, or in Mr. Modi’s words, ’red tape’ replaced by ‘red carpet’, no level of monetary incentives will help to get them start industries in India. Moreover, adequate modifications to cater to the issues stated above need to be inculcated in the existing policy, not only through rhetoric, but through suitable and sustainable measures on the part of the government and people of India.
Image Courtesy: Google Images
By Vaibhav Agarwal