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.

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now