Introduction
Make in India was launched as one of the most ambitious initiatives of the BJP, aiming to transform India into a global manufacturing hub. As we reflect on the past decade, it’s essential to evaluate whether this initiative has truly succeeded or if it has fallen short of its lofty goals. Let’s explore the objectives of Make in India, the challenges it faces, and the potential solutions that could help revitalize this critical endeavor.
The Four Key Objectives of Make in India
When Make in India was introduced, it came with four primary objectives:
* Decrease dependence on imports.
* Achieve a manufacturing growth rate of 12-14%.
* Increase exports relative to imports.
* Attract foreign direct investment (FDI) and create 100 million jobs in manufacturing.
Analyzing the Performance of Make in India
On the surface, it might seem that Make in India has led to substantial progress. However, a closer look reveals a stark reality.
Dependence on Imports
While there has been a slight decrease in imports as a percentage of GDP—from 25.95% in 2013-14 to 23.96% in 2023—this reduction is minimal and does not reflect a significant shift in India’s manufacturing capabilities.
Manufacturing Growth Rate
The government aimed for a manufacturing growth rate of 12-14%, but the reality is sobering. The growth rate has only reached 5.5% over the past decade, with notable declines, including a negative growth rate of -2.4% in 2019. Furthermore, the share of manufacturing in India’s GDP remains stagnant at 15-17%, far from the targeted 25%.
Export Growth
India’s exports have indeed doubled, rising from $317.545 billion in 2014 to approximately $776.68 billion in 2023. However, the crucial metric of increasing exports relative to imports has not improved. In 2014, India had a trade deficit of $32.4 billion, which has now ballooned to $54.5 billion by 2024.
Foreign Direct Investment
While foreign investment has increased from $46 billion to $71 billion, gross disinvestment has also surged from $13.6 billion to $44.4 billion. This indicates that more money is leaving India than is coming in, which raises significant concerns about the effectiveness of the Make in India initiative.
Job Creation
Make in India set an ambitious target of creating 100 million jobs in the manufacturing sector. However, the current employment figures stand at only 18.4 million, highlighting a massive shortfall in job creation.
Identifying the Root Causes of Failure
As we investigate why Make in India has not achieved its intended success, it is vital to consider the systemic issues plaguing the Indian economy.
1\. Bureaucratic Red Tape
One of the most significant obstacles to business growth in India is the cumbersome bureaucracy. Setting up a business can take anywhere from 1.5 to 5 years due to the multiple approvals and clearances required. This lengthy process discourages foreign investment and stifles local entrepreneurship.
2\. Land Acquisition Challenges
Land acquisition for industrial projects poses severe challenges due to legal disputes and compensation issues. The case of POSCO, a South Korean steel company, exemplifies this issue, as their $12 billion investment plan faced a decade-long delay due to land acquisition hurdles.
3\. Environmental Clearances
Obtaining environmental clearances has become a bottleneck for numerous infrastructure projects, causing delays and escalating costs. For instance, the Delhi Metro project has faced significant delays due to these regulatory hurdles.
4\. Infrastructure Deficiencies
India’s infrastructure, including roads, ports, and rail systems, lags behind international standards. For example, the average speed of goods trains in India is only 25 km/h, compared to 45 km/h in China. This inefficiency increases transportation costs and reduces competitiveness.
5\. Skills Gap
The skills gap in the workforce is another pressing issue. Only 2% of India’s workforce possesses a certificate of professional skill mastery, compared to much higher rates in countries like South Korea and Japan. This lack of skilled labor hampers the growth of the manufacturing sector.
Potential Solutions for Revitalizing Make in India
To turn the tide and ensure the success of Make in India, several key reforms are necessary:
1\. Streamlining Bureaucracy
Implementing reforms to reduce bureaucratic red tape and simplify the process of setting up businesses would significantly enhance the ease of doing business in India.
2\. Establishing a Land Banking System
A land banking system, similar to the one in Gujarat, could expedite land acquisition processes and make it easier for businesses to secure the land they need for operations.
3\. Improving Infrastructure
Investing in infrastructure development, including roads, ports, and rail systems, is crucial for enhancing efficiency and reducing costs for businesses.
4\. Enhancing Skills Training
Expanding skills training programs to better align the workforce with the needs of the manufacturing sector is essential. This includes improving the quality of education and vocational training.
5\. Promoting Foreign Investment
Creating a more attractive environment for foreign investors through tax incentives and streamlined regulations could help increase FDI and bolster the manufacturing sector.
Conclusion
While Make in India has made strides in some areas, the overall performance has been disappointing. The initiative’s failure to meet its objectives stems from systemic issues within India’s governance and economy. By addressing these challenges and implementing strategic reforms, India can revive its manufacturing ambitions and work towards becoming a global manufacturing powerhouse.
As responsible citizens, it is crucial to ask not just whether the current government has succeeded but why India as a whole has struggled in this endeavor. Understanding the underlying issues is the first step toward finding effective solutions that can lead to a brighter future for India’s manufacturing sector.
Study materials:
https://www.thehindu.com/opinion/op-ed/why-make-in-india-has-failed/article30601269.ece
https://www.cesifo.org/DocDL/CESifo-Forum-2022-4-nam-make-in-india-july.pdf
Link to my other case study:
https://geocrit.com/Japan’s-lost-decade