Make in India- More than just a slogan

January 26, 2015

This article was published in Indiansinkuwait.com  
 

1,060,000,000

That’s how many results you get when you search for the term “Make in India” in Google! That’s more than Lingaa (About 4,520,000 results), the recent Rajnikanth starrer!.

 

After years or decades of mis-governance or no governance, India is now in a difficult position to make up for the lost decades. The new Modi government is now tasked with creating the right atmosphere that can bring the most important thing back to India i.e., CONFIDENCE! This is what is currently lacking among investors, public and other affected parties. The global turn of events is not making that task easier.

 

One of the key tools to bring that confidence back is the announcement of “Make in India” concept. Media and other global and local thought leaders were quick to dismiss this as a gimmick that will not work in real time. The term may sound familiar to people aged 50 and above as we have heard “Made in India” campaign by Indira Gandhi way back. There is difference though. Made in India is a label (like Made in China) while Make in India is an invitation. An invitation signals strong intent more than a label. The initial idea of Made in India was a concept oriented towards import substitution while Make in India goes beyond that to capture export market as well.

 

While the full details of this Make in India campaign can be found in the well-designed website(http://www.makeinindia.gov.in/), we should focus on the following in order to appreciate this concept:

1    .    Why should we “Make in India”?

2    .    What should we “Make in India”?

3    .    To whom should we  “Make in India”? &

4    .    How should we “Make in India”?

 

Why should we “Make in India”

Simply because we are not manufacturing enough! India’s share of manufacturing in the GDP is an abysmal 14%, lower than even countries like Vietnam, Pakistan, Bangladesh, etc. leave alone China which is twice that share. We need to create one million jobs a month and this can be done only by favoring manufacturing. Job creation is the single most important challenge for a young economy like India where a swelling middle class struggles to cope with ever increasing inflation. Apart from the need to create jobs, we should make in India due to cheap labor cost which is half that of China, the main competitor.

 

What should we “Make in India”

China has swamped the world and India with its cheap products. Today, there is no product category where Chinese are not competing with low cost alternatives. However, as Chinese exhaust this option and would want to move higher up in the value chain, it may open up huge opportunities to other aspiring low cost producers like India. The list of opportunities is huge ranging from automobiles, aviation, biotechnology, construction, chemicals, defense, food processing, leather, pharmaceuticals, etc. The idea of “make in India” need not be understood to be only manufacturing centric alone. It can also include service sector like IT, Media, tourism, Hospitality, Wellness, etc. Only imagination can be the boundary to answer this question.

 

To whom should we “Make in India”

This is a tricky question. Recently our RBI governor Raghuram Rajan, while lauding the Make in India initiative, argued that we should Make for India than Make in India. His simple suggestion is, given the weak global condition, the world may not need one more low-cost producer. Hence, it may make sense to focus on the huge domestic market before we focus on the export market. In my opinion, both the options are not mutually exclusive. Hence, we can pursue both to provide for the domestic as well as export market. Exports enable India to earn precious foreign exchange and can enhance our global prestige.

 

How should we “Make in India”

This probably is the most important question. A mere intent to make in India will not take off unless we put together the enabling environment conducive to make in India. The enabling environment is dependent on four key factors of production i.e., land, labor, capital and power which should be augmented by removing the regulatory burden and red tape surrounding it. Several layers of reforms are required to fix each of these four legs. For e.g., it is very difficult to obtain an agriculture land for industrial use and hence pose problems to start an industry. Secondly, we should make sure that if not all, most of the states in India should equitably participate in this make in India mission. Today, only 5 states (Maharashtra, Gujarat, Tamilnadu, Uttar Pradesh and Andhra Pradesh) account for 56% of manufacturing activity leading to wide gulf among Indian states. The make in India activity should have a plan to reduce this gulf and promote wider activity across all states to lift India successfully to the frontline.

 

India is a huge market with a large demography with a burgeoning middle class with high ambition. Indian citizens deserve better education, healthcare, infrastructure and an able society that is seen by the world as the harbinger of knowledge and culture. This is by no means an easy task and Make in India is certainly a good beginning.

 

Let us make it happen!

 

Jai Hind!

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