Make in India: Challenges & Prospects
Why some PLI schemes are in the slow lane?
Note4Students
From UPSC perspective, the following things are important :
Mains level: Impact of PLI Scheme;
Why in the News?
Six out of the 14 Production-Linked Incentive (PLI) schemes, including textiles, solar modules, IT hardware, automobiles, advanced chemical cells (ACC), and speciality steel, are progressing at a relatively slower pace.
What are the primary reasons for the slow implementation of PLI schemes?
- Stringent Eligibility Norms: Many industries have reported that the eligibility criteria for participation in PLI schemes are too stringent, which limits the number of companies that can benefit from the incentives.
- Initial Setup Challenges: Establishing a domestic manufacturing base from scratch is a monumental task. Industries such as solar modules and advanced chemistry cells (ACC) require substantial time—ranging from one-and-a-half to three years—to set up manufacturing operations, delaying employment generation.
- Access to Resources: Companies face difficulties in accessing critical resources, including Chinese machinery and skilled technicians, which can hinder their ability to ramp up production quickly.
- Market Dependency: Some sectors remain heavily reliant on imports and have not yet transitioned to a self-sufficient manufacturing model, impacting their growth under the PLI framework.
- Slow Disbursement of Funds: The initial years of the scheme saw minimal disbursement of funds, with only a small percentage of the total incentive outlay being paid out in the first two years.
Which sectors are experiencing the most significant slowdowns, and why?
- Textiles: This sector is struggling due to high competition and stringent norms that have slowed down participation and growth.
- Solar Modules: Despite being a strategic sector for renewable energy, delays in establishing manufacturing capabilities have led to slow progress.
- As of June 2024, India’s solar module manufacturing capacity reached 77.2 GW, but the solar cell capacity was only 7.6 GW, leading to supply shortages that delayed projects.
- Automobiles: While some companies are making progress, the automobile sector overall is hindered by initial setup challenges and fluctuating market conditions.
- Factors such as rising raw material costs and shifts in consumer preferences towards electric vehicles are creating a complex environment for traditional automakers.
- Advanced Chemical Cells (ACC): Similar to solar modules, this sector faces long commissioning periods that delay employment outcomes. Because of the lengthy development timelines for manufacturing facilities and the need for substantial investment in technology are contributing to slower growth in this strategic area.
- IT Hardware: Although recently upgraded with increased funding, it still lags behind in implementation compared to more successful sectors like mobile manufacturing.
What measures can be taken to enhance the effectiveness of PLI schemes? (Way forward)
- Revising Eligibility Criteria: Simplifying the eligibility requirements could encourage more companies, especially smaller firms, to participate in the schemes and benefit from incentives.
- Increasing Support for Supply Chains: Establishing robust supply chains is crucial. The government could provide additional support to smaller suppliers who are essential for scaling up production across sectors.
- Streamlining Resource Access: Facilitating easier access to necessary machinery and skilled labor can help companies ramp up production more effectively and reduce dependency on imports.
- Regular Reviews and Adjustments: Continuous monitoring and adjustments based on sector performance can help identify bottlenecks early and allow for timely interventions.
- Encouraging Ancillary Industries: Promoting the establishment of ancillary industries around larger beneficiaries could create additional jobs and enhance local manufacturing capabilities.
Mains PYQ:
Q Can the strategy of regional-resource-based manufacturing help in promoting employment in India? (UPSC IAS/2019)
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Make in India: Challenges & Prospects
[pib] 10 Years of Make in India
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Make in India Programme
Why in the News?
It has been 10 years since the announcement of “Make in India” Programme on September 25 in the year 2014.
About the Make in India Programme:
| Details | |
| Led by | Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry |
| Objective | To transform India into a global manufacturing and investment hub |
| Key Focus Areas | Attract foreign investment, promote industrialization, export-led growth |
| Make in India 2.0 Sectors | Covers 27 sectors, including strategic manufacturing and services |
| GDP Target (Manufacturing) | Increase manufacturing share in GDP from 16% to 25% by 2022 |
| Job Creation Target | 10 crore additional jobs by 2022 |
| Manufacturing Growth Target | 12-14% annual growth in the manufacturing sector |
| Four Pillars |
|
Success of the Project
- India is now the second-largest mobile phone producer globally.
- The PLI Schemes have attracted ₹1.97 lakh crore in investment across 14 key sectors, generating 8 lakh jobs.
- The PM GatiShakti initiative has improved logistics and transport connectivity, while India received $667.41 billion in FDI from 2014-2024.
- Indigenous projects like INS Vikrant and Vande Bharat Trains have showcased India’s growth in manufacturing.
- India improved its Ease of Doing Business ranking, moving from 142nd to 63rd.
- Limitations:
-
- The share of manufacturing in GDP has remained flat at 17.3% in 2023-24, the same level as in 2013-14, despite rising briefly to 18.5% in 2021-22.
- Employment has declined, with manufacturing’s share in total employment falling from 11.6% in 2013-14 to 10.6% in 2022-23.
- India’s share in global exports grew from 1% in 2005-06 to 1.6% by 2015-16, but only increased marginally to 1.8% by 2022-23.
- Additionally, imports as a share of GDP have risen back to 25% in 2023-24, similar to 27% in 2013-14, after a dip to 21.2% in 2020-21 during the pandemic.
PYQ:[2017] “Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-Product (GDP) in the post-reform period.” Give reasons. How far are the recent changes in Industrial-Policy capable of increasing the industrial growth rate? |
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Make in India: Challenges & Prospects
[pib] ‘Vocal for Local’ Initiative
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Vocal for Local Initiative, Aspirational Blockd/Dist Program
Mains level: NA
Why in the news-
- The NITI Aayog launched the ‘Vocal for Local’ initiative under its Aspirational Blocks Programme (ABP).
About Vocal for Local Initiative
- Under this program, indigenous local products from 500 Aspirational Blocks have been mapped and consolidated for sale.
- District collectors and block-level officials will collaborate with partners such as Government e-Marketplace (GeM) and Open Network for Digital Commerce (ONDC) to facilitate sustainable growth of microenterprises in Aspirational Blocks.
- To facilitate this, a dedicated window for Aspirational Blocks Programme under the brand name ‘Aakanksha’ on GeM portal has been established.
What is Aspirational Blocks Programme (ABP)?
- The ABP is set on the lines of the Aspirational District Programme that was launched in 2018 and covers 112 districts across the country.
- The Centre had announced its intention to launch this initiative in the Union Budget 2022-23.
- The programme will cover 500 districts across 31 states and Union Territories initially.
- Over half of these blocks are in 6 states—Uttar Pradesh (68 blocks), Bihar (61), Madhya Pradesh (42), Jharkhand (34), Odisha (29) and West Bengal (29).
- However, states can add more blocks to the programme later.
Back2Basics: Aspirational Districts Programme (ADP)
| Details | |
| Launch Date | January 2018 |
| Objective | To transform identified aspirational districts quickly and effectively through a mass movement. |
| Program Contours |
|
| Selection of Districts |
|
| Weightage of Indicators |
|
| Core Strategy |
|
| Features |
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Make in India: Challenges & Prospects
There is no substitute for an industrial policy
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Make in India (MII)
Mains level: National Industrial Policy (NIP)
Central idea
Make in India (MII) represents a departure from India’s historical self-sufficiency approach, prioritizing global competitiveness. The article critiques potential protectionist tendencies within MII, emphasizing the need for job creation and competitiveness. The efficacy of MII in delivering on promises, particularly in labor-intensive sectors, is a key focus for evaluating its impact.
Key Highlights:
- Make in India (MII) diverges significantly from India’s historical self-sufficiency approach, focusing on global competitiveness rather than isolation.
- The article critiques potential protectionist tendencies within MII, drawing attention to historical pitfalls of reckless protection in the 1970s and 1980s.
- The piece discusses the critical need for MII to deliver on promises, particularly in creating a competitive manufacturing sector, and emphasizes the importance of job creation for India’s abundant labor force.
Key Challenges:
- Concerns are raised about the implementation of MII, especially in sectors where tariff duties are increased for protection, potentially leading to negative consequences.
- The article questions the efficacy of MII in comparison to its objectives, urging a closer examination of its impact on job creation and competitiveness.
Key Terms:
- Make in India (MII): A policy initiative launched in 2014 to transform India into a global manufacturing and design hub.
- License Raj: A regulatory system in India during the pre-1991 era that required businesses to obtain licenses for various activities, leading to bureaucracy and inefficiency.
- Production-Linked Incentive (PLI): A scheme aimed at attracting investments in key sectors and cutting-edge technology to enhance efficiency in the manufacturing sector.
Key Phrases:
- “MII is very different from self-sufficiency, and we should move on from this baseless comparison.”
- “Every country that has ‘taken off’ before us has been export competitive.”
- “Devising an industrial policy for mass job creation in India is the touchstone against which success ought to be gauged.”
Key Quotes:
- “Job creation for our abundant factor, especially women, is key, and that is only possible with labor-intensive manufacturing.”
- “In the absence of high frequency data on PLI, either on value added or jobs generated, a moral compass to shape a better world ought to be employed in abundant measure.”
Critical Analysis:
- The article critically examines the potential protectionist aspects of MII, drawing parallels with historical challenges.
- It highlights the importance of job creation, especially in labor-intensive sectors, as a crucial metric for evaluating the success of MII.
- The absence of high-frequency data on PLI is emphasized, calling for a balance between data interpretation and moral considerations in policymaking.
Way Forward:
- The article suggests that industrial policies, including the National Industrial Policy (NIP), should prioritize labor-intensive sectors to promote mass job creation.
- It emphasizes the need for MII to continue focusing on excelling in labor-intensive manufacturing for the overall betterment of India’s economic landscape.
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Make in India: Challenges & Prospects
Kavro Doma 360: World’s First Rifle-Rated Ballistic Helmet
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Kavro Doma 360
Mains level: Not Much
Central Idea
- Kanpur-based MKU Limited recently unveiled the Kavro Doma 360, world-first rifle-rated ballistic helmet at Milipol Paris exhibition.
About Kavro Doma 360
| Description | |
| Indigenous Development | Developed by MKU Limited in Kanpur, India, through indigenous research and development. |
| Uniform Rifle Protection | Provides uniform protection across all five head zones: front, back, left, right, and crown.
Offers resilience against threats like AK-47 MSC, M80 NATO BALL, and M193 rifle bullets. |
| Boltless Innovation | The only boltless rifle protection helmet globally, eliminating bolts and metal components, reducing the risk of penetration upon impact for enhanced safety. |
| Expanded Protection Area | Features a boltless shell design, providing 40% more protection area against AK-47 assault rifles compared to conventional helmets. |
| 20mm Back Face Signature | Maintains a Back Face Signature/Trauma of less than 20 mm when impacted by AK-47 bullets.
Back Face Signature measures deformation due to high-energy bullet impact. |
| Advanced Harness System | Incorporates Dynamic Impact Technology for protection against direct and rotational/angular impacts, reducing concussions and brain injuries.
Offers top-to-chin and side-to-side harness adjustment. |
| Maximum Compatibility (with MACS) | Ensures seamless integration with advanced head-mounted devices and combat equipment, adapting to the evolving needs of modern warriors. |
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Make in India: Challenges & Prospects
No restriction on Laptop Imports: Centre
Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: Laptop Imports Ban
Central Idea
- In August, the centre announced its intention to subject laptops, tablets, computers, and related products to a licensing regime starting from November 1.
- However, it has now clarified that India will not impose licensing requirements on laptop and computer imports but will instead monitor their inbound shipments.
Lapop Import Restrictions: A Backgrounder
- Import Restrictions: In August, India imposed import restrictions on various IT hardware products to promote domestic manufacturing and reduce imports, particularly from countries like China.
- Industry Concerns: The IT hardware industry expressed concerns following the initial licensing announcement.
- Security and Domestic Manufacturing: The government cited security concerns and the desire to stimulate domestic manufacturing as the reasons for the licensing conditions.
Import Statistics
- Import Values: India imports approximately $7-8 billion worth of IT hardware products annually.
- Recent Trends: Import values for personal computers, including laptops, decreased from $7.37 billion in 2021-22 to $5.33 billion in 2022-23. Imports of certain data processing machines also saw a decline.
- Production-Linked Incentive Scheme: In May, the government approved the Production Linked Incentive Scheme 2.0 for IT Hardware with a budgetary outlay of ₹17,000 crore. A similar scheme for IT hardware was approved in February 2021.
India’s Dependency on China
- Critical Dependency: According to a report by the Global Trade Research Initiative (GTRI), India has significant dependency on China for various products, including laptops and mobile phones.
- Government Initiatives: To reduce this dependency, the government has introduced measures such as the production-linked incentive scheme and increased customs duties on electronic components.
Conclusion
- India’s decision to shift from a licensing regime to monitoring for laptop and computer imports aims to balance its goals of reducing import dependency and promoting domestic manufacturing.
- However, there is a need to ensure smoother transition for businesses and trade.
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Make in India: Challenges & Prospects
[pib] Positive Indigenisation List (PIL) and Swavlamban 2.0
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Positive Indigenisation List (PIL)
Mains level: Not Much
Central Idea
- Defence Minister unveiled the fifth Positive Indigenisation List (PIL) consisting of 98 items to be procured by the armed services from domestic suppliers over specified timelines.
- Additionally, he launched the Indian Navy’s updated indigenisation roadmap, known as Swavlamban 2.0.
What is Positive Indigenisation List (PIL)?
- The Positive Indigenisation List consists of items that can only be procured by the Indian armed forces from domestic manufacturers, including those from the private sector or DPSUs.
- This move is part of the government’s efforts to reduce the reliance on imported arms and promote indigenous manufacturing of defense equipment.
- This concept was rolled out in the Defence Acquisition Procedure (DAP) 2020.
- It emphasizes import substitution of components for major systems, vital platforms, weapon systems, sensors, and munitions that are expected to translate into firm orders within the next five to ten years.
Items on the Indigenisation List
- Diverse Range: The PIL includes a wide range of items such as futuristic infantry combat vehicles, articulated all-terrain vehicles, various types of unmanned aerial vehicles, precision kill systems for artillery, test equipment for guided weapon systems, radars, armour plates for helicopter cabins, automated mobile test systems, and more.
- Strategic Importance: These items are crucial for bolstering the country’s defence capabilities and reducing reliance on foreign sources. They contribute to India’s quest for self-reliance in the defence sector.
Swavlamban 2.0: Industry Challenges and Initiatives
- 76 Challenges: At the Swavlamban 2.0 seminar, Defence Minister Singh also launched 76 challenges for industry participants under the 10th Defence India Start-up Challenges (DISC-10) and Innovations for Defence Excellence (iDEX).
- Global Collaboration: The event marked the launch of two INDUS X challenges, a collaboration between iDEX and the U.S. Department of Defence, showcasing India’s commitment to fostering global partnerships for technological advancement.
Vision of Self-Reliance
- Navy’s Commitment: Indian Navy is committed to becoming fully self-reliant by 2047, aligning with India’s 100th Independence anniversary.
- Strategic Importance: The COVID-19 pandemic and global conflicts have underscored the significance of self-reliance, especially in the defence sector. Dependence on external sources for defence needs is considered a strategic vulnerability that needs to be addressed.
- Achievements: The Navy’s efforts in promoting indigenous innovation have yielded significant results, including technological agreements, partnerships with MSMEs and start-ups, and an expanding ecosystem of defence suppliers.
Way forward
- Future Goals: The Indian Navy has set ambitious targets to develop futuristic technologies in collaboration with domestic MSMEs and start-ups, aligning with its commitment to self-reliance.
- Expanding Ecosystem: The Navy’s initiatives have brought over 100 new firms into the defence ecosystem, with procurement orders already signed and more in the pipeline.
- A Strong Bharat: The vision is to build a force that represents a strong and developed Bharat, utilizing unique concepts and capabilities made in India for India.
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Make in India: Challenges & Prospects
Why are US tech firms sceptical about Digital Trade with India?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: India-US Tech Trade
Central Idea
- During PM’s state visit to the United States, cooperation on technology emerged as a significant topic of discussion.
- While the visit yielded positive outcomes, US tech companies have raised concerns about policy hurdles affecting digital trade with India.
Current Status of India-US Technology Trade
- Bilateral Trade: In FY2023, the US became India’s largest trading partner, with bilateral trade reaching $128.55 billion. However, digital or technology services have not played a prominent role in this trade.
- Deficit in Digital Services: The US has a significant trade deficit of $27 billion in digital services with India, despite the potential for growth in the US digital services export sector and the expanding online services market in India.
Concerns of US Tech Firms
- Imbalance and Misalignment: US tech companies have raised concerns about the “significant imbalance” and “misalignment” in the US-India economic relationship. They argue that India’s policies favor domestic players, creating a tilted playing field.
- Discriminatory Regulations: US tech firms criticize India’s regulations, such as geospatial data sharing guidelines, for providing preferential treatment to Indian companies. They also express discontent over India’s departure from democratic norms, leading to challenges for US companies operating in India.
Policy Barriers Raised by US Tech Firms
- Equalisation Levy: US tech firms object to India’s expanded version of the equalisation levy, which imposes taxes on digital services. They argue that it leads to double taxation, complicates the tax framework, and raises questions of constitutional validity and compliance with international obligations.
- Information Technology Rules: US tech firms are concerned about India’s Information Technology Rules, which impose compliance burdens and tight deadlines for content takedown, appointment of local compliance officers, and the establishment of Grievance Appellate Committees.
- Data Protection Law: Ambiguities surrounding cross-border data flows, compliance timelines, and data localization in India’s draft Digital Personal Data Protection Bill raise concerns among US tech firms. They argue that data localization requirements increase operating costs and can be seen as discriminatory.
Other Policy Barriers to Digital Trade
- Digital Competition Act: The proposed adoption of a Digital Competition Act, including estimated taxes for big tech companies, has raised concerns about anti-competitive practices and potential targeting of US tech firms.
- Competition Commission Fines: The fines imposed by the Competition Commission of India on Google for anti-competitive practices have been seen by US tech firms as part of India’s protectionist industrial policy.
Way Forward
To promote digital trade between India and the United States and overcome policy barriers, the following steps can be taken:
- Transparent and Consistent Policies: Ensure transparency, consistency, and clear guidelines in policy formulation, implementation, and enforcement to create a level playing field.
- Review and Refinement of Regulations: Periodically review regulations, such as the equalisation levy, Information Technology Rules, and data protection laws, to address concerns and strike a balance.
- Mutual Recognition Agreements: Explore the possibility of mutual recognition agreements that facilitate the acceptance of each other’s certification standards and regulatory frameworks, reducing duplicative compliance requirements.
- Data Sharing Frameworks: Develop comprehensive and secure frameworks for cross-border data sharing that protect privacy and enable data flows for digital trade, benefiting both economies.
- Collaborative Research and Development: Encourage joint research and development initiatives between Indian and US companies and institutions to foster technological advancements and drive innovation in emerging areas such as artificial intelligence, blockchain, and quantum computing.
- Cybersecurity Cooperation: Strengthen bilateral cooperation on cybersecurity, sharing best practices, and collaborating on threat intelligence to safeguard digital infrastructure and build trust in cross-border digital transactions.
Conclusion
- By implementing these measures, India and the United States can foster a conducive environment for digital trade, innovation, and investment, strengthening bilateral ties and driving economic growth.
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Make in India: Challenges & Prospects
[pib] NATRAX: Asia’s longest and world’s fifth longest High-Speed Track
Note4Students
From UPSC perspective, the following things are important :
Prelims level: NATRAX
Mains level: Auto sector updates
Minister of Heavy Industries and Public Enterprises has inaugurated the 11.3 km NATRAX- the High-Speed Track (HST) in Indore which is the longest such track in Asia.
NATRAX
- NATRAX, developed in an area of 1000 acres of land is a one-stop solution for all sorts of high-speed performance tests for the widest categories of vehicles from 2 wheelers to heavy tractor-trailers.
- It has multiple test capabilities like measurements of maximum speed, acceleration, constant speed fuel consumption.
- It can conduct emission tests through real road driving simulation, high-speed handling and stability evaluation during manoeuvred such as lane change, high-speed durability testing, etc.
- Also, it is a Centre of excellence for Vehicle Dynamics.
Features of the HST
- The vehicle can achieve a max speed of 375 Kmph on curves with steering control and it has less banking on ovals making it also one of the safest test tracks globally.
- It is the one-stop solution for all sorts of high-speed performance tests, being one of the largest in the world.
- It can cater to the widest category of vehicles; say from two-wheelers to the heaviest tractor trailers
Its significance
- HST is used for measuring the maximum speed capability of high-end cars like BMW, Mercedes, Audi, Ferrari, Lamborghini, Tesla and so forth which cannot be measured on any of the Indian test tracks.
- Being centrally located in Madhya Pradesh, it is accessible to most of the major OEMs.
- Foreign OEMs will be looking at NATRAX HST for the development of prototype cars for Indian conditions.
- At present, foreign OEMs go to their respective high-speed track abroad for high-speed test requirements.
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Make in India: Challenges & Prospects
‘Country of Origin’ on GeM Portal
Note4Students
From UPSC perspective, the following things are important :
Prelims level: GeM
Mains level: India-China trade deficit
The government has made it mandatory for sellers on the Government e-Marketplace (GeM) portal to clarify the country of origin of their goods when registering new products.
Practice question for mains:
Q. India’s quest for self-reliance is still a distant dream. Critically comment in light of the popular sentiment against the Chinese imports in India.
What is Government e-Marketplace?
- The GeM is a one-stop National Public Procurement Portal to facilitate online procurement of common use Goods & Services required by various Government Departments / Organizations / PSUs.
- It was launched in 2016 to bring transparency and efficiency in the government buying process.
- GEM aims to enhance transparency, efficiency and speed in public procurement.
- It is a completely paperless, cashless and system driven e-marketplace that enables procurement of common use goods and services with minimal human interface.
- It provides the tools of e-bidding, reverses e-auction and demand aggregation to facilitate the government users to achieve the best value for their money.
- The purchases through GeM by Government users have been authorized and made mandatory by the Ministry of Finance by adding a new Rule No. 149 in the General Financial Rules, 2017.
- It has been developed by Directorate General of Supplies and Disposals (Ministry of Commerce and Industry) with technical support of National e-governance Division (MEITy).
What is the new move?
- Sellers on the GeM portal will now have to disclose the origins of their products.
- The portal also has a ‘Make in India’ filter, and government offices will be able to ascertain which products have a higher content of indigenously produced raw materials.
Why need ‘Country of Origin’ tag?
- The tag would help bidders choose products that meet the ‘minimum 50 per cent local content’.
- This is the new procurement norm amended by the government earlier this month categorise suppliers based on the level of local content in their goods.
- The GeM portal now allows buyers to reserve a bid for Class I local suppliers, or suppliers of those goods with more than 50 per cent local content.
- For bids below Rs 200 crore, only Class I and Class II (those with more than 20 per cent local content) are eligible.
Why is all of this happening?
- The decision comes in the backdrop of the government’s push for self-sufficiency which intends to promote self-reliance by boosting the use of locally produced goods.
- At $ 70.32 billion in 2018-19 and $ 62.38 billion between April 2019 and February 2020, China accounts for the highest proportion of goods imported into India (around 14 per cent in 2019-2020 so far).
- It also follows the deadly clashes between Indian and Chinese troops in Galwan Valley which have prompted several government departments to launch an offensive against imports from China.
How will ordinary consumers in India be impacted?
- The announcement may over time filter out imported goods from use in government offices and facilities.
- This might provide an opportunity to Indian manufacturers across industries to push their products in government facilities.
- A more direct impact may be seen if the proposal to mandate the country of origin for products on private platforms is implemented.
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Make in India: Challenges & Prospects
Integrating “Assemble in India” into Make in India
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Make in India
Mains level: Expected outcomes of the said integration
Giving a new dimension to ‘Make in India’, the Economic Survey 2019-20 suggested that the government should integrate ‘Assemble in India for the world’ into ‘Make in India’ to boost exports and generate jobs.
Assemble in India
- Survey says India has unprecedented opportunity to chart a China-like, labour-intensive, export trajectory.
- By integrating “Assemble in India for the world” into Make in India, India can:
- Raise its export market share to about 3.5 % by 2025 and 6 % by 2030.
- Create 4 crore well-paid jobs by 2025 and 8 crore by 2030.
- Exports of network products can provide one-quarter of the increase in value added required for making India a $5 trillion economy by 2025.
How to harness the situation?
- The US-China trade war is causing major adjustments in global value chains and firms are scouring alternative locations for operations.
- Even before the trade war began, China’s image as a low-cost location for final assembly of industrial products was rapidly changing due to labour shortages and increases in wages.
- These developments present India an unprecedented opportunity to chart a similar export trajectory as that pursued by China and create unparalleled job opportunities for its youth.
- As no other country can match China in the abundance of its labour, we must grab the space getting vacated in labour-intensive sectors.
Key suggestions made by the Survey
Survey suggests a strategy similar to one used by China to grab this opportunity by:
- Specialization at large scale in labour-intensive sectors, especially network products.
- Laser-like focus on enabling assembling operations at mammoth scale in network products.
- Export primarily to markets in rich countries.
- Trade policy must be an enabler.
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Make in India: Challenges & Prospects
[op-ed snap] Why ‘Make in India’ has failed
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- 'Make in India' , its performance, and reasons for not delivering on the set goals.
Context
Five years after its launch its appropriate time to take the stock of the progress made by ‘Make in India’.
Three major objectives of the initiative
- First- Manufacturing growth rate at 12-14 %: The first objective is to increase the manufacturing sector’s growth rate to 12-14% per annum in order to increase the sector’s share in the economy.
- Second-100 million jobs: The second objective is to create 100 million additional manufacturing jobs in the economy by 2022.
- Third-increase manufacturing’s contribution to GDP to 25%: The third objective is to ensure that the manufacturing sector’s contribution to GDP is increased to 25% by 2022 (revised to 2025) from the current 16%.
Assessment of the progress made so far
- As the policy changes were intended to usher growth in three key variables of the manufacturing sector — investments, output, and employment growth.
- Progress on the investment front:
- Slow growth: The last five years witnessed slow growth of investment in the economy.
- This is more so when we consider capital investments in the manufacturing sector.
- The decline in gross fixed capital formation: Gross fixed capital formation of the private sector declined to 28.6% of GDP in 2017-18 from 31.3% in 2013-14 (Economic Survey 2018-19).
- Gross Fixed Capital Formation is the measure of aggregate investment.
- Increase in private sector’s savings decrease in investment: Household savings have declined, while the private corporate sector’s savings have increased.
- This is a scenario where the private sector’s savings have increased, but investments have decreased, despite policy measures to provide a good investment climate.
- Progress on the output growth front:
- Double-digit growth only in two quarters: The monthly index of industrial production (IIP) pertaining to manufacturing has registered double-digit growth rates only on two occasions during the period April 2012 to November 2019.
- Below 3% for the most part: The data show that for a majority of the months, it was 3% or below and even negative for some months.
- The negative growth implies a contraction of the sector.
- Progress on the employment growth front:
- No progress: The employment, especially industrial employment, has not grown to keep pace with the rate of new entries into the labour market.
Problems with the policy
- The initiative had two major lacunae.
- First- Too much reliance on foreign capital: The bulk of these schemes relied too much on foreign capital for investments and global markets for produce.
- This created an inbuilt uncertainty, as domestic production had to be planned according to the demand and supply conditions elsewhere.
- Second-Lack of implementation: The policy implementers need to take into account the implications of implementation deficit in their decisions.
- The result of such a policy oversight is evident in a large number of stalled projects in India.
- The spate of policy announcements without having the preparedness to implement them is ‘policy casualness’.
- ‘Make in India’ has been plagued by a large number of under-prepared initiatives.
Three reasons why ‘Make in India’ failed to perform
- Too-much ambitious goals: It set out too ambitious growth rates for the manufacturing sector to achieve.
- Beyond capacity rate for the sector: An annual growth rate of 12-14% is well beyond the capacity of the industrial sector.
- Overestimation of implementation capacity: To expect to build capabilities for such a quantum jump is perhaps an enormous overestimation of the implementation capacity of the government.
- Dealing with too many sectors: The initiative brought in too many sectors into its fold.
- Lack of policy focus: Bringing in too many sectors under its fold led to a loss of policy focus.
- Lack of understanding of comparative advantages: Further, it was seen as a policy devoid of any understanding of the comparative advantages of the domestic economy.
- Ill-timed launch
- Given the uncertainties of the global economy and ever-rising trade protectionism, the initiative was spectacularly ill-timed.
Conclusion
- In order to revive the ‘Make in India’ there is a need to make necessary changes in the policy and root out the causes associated with the policy implementation.
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