Make in India: Is it just good branding?

The Make in India campaign was launched by our Prime Minister – Mr. Narendra Modi, back in September 25, 2014. The primary aim of this initiative was to turn India into a self-sustaining manufacturing hub. All the companies, both local as well as global were encouraged to set up their manufacturing units in India itself.

The Department of Industrial Policy leads this initiative with the aim to bring up the overall contribution by the manufacturing sector to 25% of the overall GDP that currently stands at 16%. We aim to accomplish this by 2025. Ever since the announcement of this campaign, our country has seen multiple new initiatives – promoting FDI, implementing the IPR (intellectual property rights) act, and overhauling the manufacturing sector are just a few examples. The logo of this campaign, which consists of a lion embodying a maze of gears, itself goes to show the role of manufacturing in the development of our nation.

Government’s Approach to Make in India

To keep up with the promise of this initiative, our government took the following major actions;

  1. Invest India cell: An investor facilitation cell was set up which will as the first reference point in guiding any foreign investors. It’ll also assist them in obtaining any regulatory clearances.
  2. Consolidated services and faster security clearances: All of the central government services are being integrated with an e-Biz window online portal. States, on the other hand, have been asked to include self-certification. The Ministry of Home Affairs has been asked to give the green light to any investment proposal in not more than three months.
  3. A dedicated portal for business queries: will take you to a web portal created to entertain queries from businesses. The back-end support team is expected to answer the queries within 72 hours.
  4. Easing policies and laws: The validity of industrial licenses has been extended to three years, and a vast number of defense items have been de-licensed.
  5. Interactions with the users/visitors: A state of the art approach will be deployed to track visitors for their interests, geographical location, and real-time user behavior. Visitors registered on the website will be followed-up with relevant newsletters and information.
  6. Industries covered: This initiative covers 25 industries including – automobiles, chemicals, infrastructure, tourism, aviation, hospitality, manufacturing, and many more.

The Impact of Make in India in the Manufacturing Sector

Make In India started out keeping primarily the manufacturing sector in mind – majorly because there is a lot of scope for employment, growth, and contribution in our economy from this sector. Make in India looked to develop India as a manufacturing hub.
Earlier, the contribution of this sector to the total GDP was limited up to 15%, but the impact of Make in India increased the contribution by 7.6% in 2015-16. In the last several years, this was the fastest change in the sector.
But, things aren’t as rosy as they look.

The closer you get to the “lion”, the more it sounds like a “meow” and lesser like a “roar”.

Take a look at the FDI data from the RBI which is broken up by sector. What initially seemed like an encouraging jump (a record $9.6 B in the FY 2014-15) later saw a steep decline (to $8.4bn in 2015-16).

Foreign Investment in India manufacturing
Foreign Investment in India manufacturing

Furthermore, the percentage of the overall FDI flowing to the manufacturing sector – which was always in the range of 35-40% in the last four years, dipped to as low as 22% in the year 2015-16. Instead of the Manufacturing Sector, e-commerce providers or ride-sharing services seem to be drawing a greater share of investment.
Proportion of FDI going to manufacturing
Proportion of FDI going to manufacturing

All this points to just one direction – although the motive behind the initiative was good, the implementation? Not so much. There are certain issues and challenges which have acted as major hurdles.

Make in India: Major hurdles and the way forward

Lack of money and infrastructure.
We need funds to build industries, which in turn need infrastructure – something that’s itself in short supplies and would require more finance.
Robots block the way.
Will increasing manufacturing in the country really create more jobs – jobs that last? The world today is moving towards automation – how do we make sure that our manually-run manufacturing units will trump the worldwide automated manufacturing? You can start manufacturing in India, but will it create jobs that last?
Stringent labor laws.
India has strict labor laws and organized unions which hinder smooth expansion. Ford, Hyundai, Maruti, and Nokia have all had strikes and protests in India at their manufacturing plants in the past two years alone. Whereas in China, the communist government keeps workers in control and wage costs in check.
Lack of skills to impart skills.
A report by the famous consulting firm – Ernst & Young said that India lags far behind other nations in imparting skills training to its workers (this was back in 2012). Not much has changed ever since. The government’s Economic Survey last year said that the skilled workforce in India is counted at a mere 2% of the overall population. The NSDC estimate, on the other hand, suggests a need for at least 120 M skilled people – roughly 10% of the current population.
Research needs overhaul.
If we’re to achieve our targets of the Make in India initiative, we need to take research much more seriously. Long-term competition with the international market demands huge investments in R&D facilities. Although many global companies find India as their R&D hub, our companies are far from taking advantage of R&D. The national companies have been extremely slow to embrace R&D. Giants like Mahindra and Tata are slowly catching up the trend now, but they’re toddlers when it comes to the global landscape.
What looked like something that’d change the face of our Manufacturing Sector is not functioning that way. We have some obvious hurdles which, if not dealt with, will keep pulling us away from our targets. The plan of action for the coming years should be to take these hurdles seriously and focus on eliminating them – one at a time.
In Conclusion..
The economic transition should always follow the route of agriculture-manufacturing-services – take a look at our developed neighbors, for instance. Ours, however, went from agricultural to services which left a huge skill and employment gap. Following the long route allowed these countries to absorb all the skilled as well as unskilled workforce – which is clearly the missing link in our attempt to Make in India. However, as they say, better late than never – if we take this opportunity to tackle all the obstacles in our way, we’ll see ourselves become a Manufacturing hub sooner than we’d expect.
[Written by Arindam Paul (Linkedin | Twitter). He is one of the co-founders at Atomberg Technologies, a startup working towards creating unique energy efficient and tech-savvy products. He is currently heading the Marketing and Long-term strategy division at Atomberg and is aiming to disrupt the world of household appliances.
Prior to this, he worked as a management consultant at Cognizant. He did his undergraduate in chemical engineering from NIT Surat and MBA from IIM Indore.
He also loves reading non-fiction, watching football, blogging and cooking. ]

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