Make in IndiaA Boost to the Indian Manufacturing Sector

Dr. C. MuthurajaDean, Curriculum Development & Research &

Head, Research Department of EconomicsThe American College, Madurai - 625 002

(cmuthuraja@gmail.com) - (M-09486373765)

(Presented in UGC Sponsored State Level Workshop on ‘Make in India: A Boost to the Indian Manufacturing Sector’ on 22.03.2016 organized by Department of Economics, Devanga Arts

College (Autonomous), Aruppukottai-626101)

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CONTENTS INTRODUCTION Make in India Campaign Thrust to Industry / Manufacturing/Service

Sector Focus of Make in India: on 25 sectors What is ‘Make in India’? Evaluation & Political Economy of Make in

India Concerns on Make in India Government Initiatives Road Ahead ! APPEAL

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Introduction India is set to emerge as the world’s fastest-

growing major economy by 2015 ahead of China, as per the recent report by The World Bank

India’s Gross Domestic Product (GDP) is expected to grow at 7.5 per cent in 2015, as per the report

The improvement in India’s economic fundamentals has accelerated in the year 2015 with the combined impact of strong government reforms, RBI's inflation focus supported by benign global commodity prices

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Make in India Campaign

Launched by Prime Minister Sh. Narendra Modi and the key objective of Make in India campaign is to invite businesses not only in India but across the world to invest & manufacture in India

The purpose of this campaign is a) Job Creation, b) Economic Development and c) Global Recognition

Make in India initiative aims to correct the composition of Indian GDP which is the root cause of recession

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Make in India Campaign

Currently India’s GDP is heavily tilted in favor of service sector

Three sectors which contribute to GDP are (a) Agriculture (b) Industry / Manufacturing & (c) Services

Current contributions of these sectors in Indian Economy are a) Agriculture: 28% b) Industry / Manufacturing: 16% (Lowest) and c) Services:  56% (Highest)

It is clearly visible that our economy is over dependent on Services sector

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Make in India Campaign New economic policies and its impact on Indian

Governments focused extensively mainly on Services sector

Service sector generated employment for skilled workforce whereas low skilled workers were completely marginalized

Every year approximately 12 million people are added to existing workforce and overwhelming majority is either unskilled or low skilled workers due to urbanization

There was no road map in place for these low skilled workers

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Thrust to Industry / Manufacturing/Service Sector

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Make in India initiative is an honest attempt to revive the fortunes of Industry / Manufacturing sector

Digital India will help to maintain contribution of Service sector but manufacturing / industry sector has to grow at much faster pace to out-pace service sector

Government should target to increase contribution of Industry / manufacturing from existing 16% to 35% in next 5 years

Make in India will help to achieve this goal but it comes with its own set of challenges

Manufacturing is capital and resources intensive sector which will require conducive environment for business

Thrust to …..

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Labour issues will be major hurdle which the government is trying to handle through labour reforms

Besides this, a major push is required to upgrade infrastructure of country

Basically objective is to create ecosystem of small industries in periphery of manufacturing hub

Government will provide all the approvals under Make in India initiate in a time bound manner through single online portal

Make in India is designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best in class manufacturing infrastructure in the country

Thrust to …..

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The primary objective of this initiative is to attract investments from across the globe and strengthen India’s manufacturing sector

This programme is very important for the economic growth of India as it aims at utilizing the existing Indian skill/talent base, creating additional employment opportunities and empowering secondary and tertiary sector

The programme also aims at improving India’s rank on the Ease of Doing Business index by eliminating the unnecessary laws and regulations, making bureaucratic processes easier, making the government more transparent, responsive and accountable

Focus of Make in India: on 25 sectors

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These include: automobiles, aviation, chemicals, IT & BPM, pharmaceuticals, construction, defence manufacturing, electrical machinery, food processing, textiles and garments, ports, leather, media and entertainment, wellness, mining, tourism and hospitality, railways, automobile components, renewable energy, biotechnology, space, thermal power, roads and highways and electronics systems

What is ‘Make in India’?

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Deregulation and delicensing of the manufacturing sector

New Infrastructure Opening up India’s ‘high-value’

industrial sectors Specific targeting of twenty-five sectors ‘New Mindset-“an attitudinal shift in how

India relates to investors: not as a permit-issuing authority, but as a true business partner”

Evaluation & Political Economy of Make in India

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Question the objectives and the strategy itself what sort of industry are we promoting? Domestic markets are extremely narrow – Ford and

Honda aren’t producing for the typical rural agricultural worker or urban casual labourer

These industries are capital-intensive and/or employ largely skilled labour (employment growth is therefore likely to be minimal, especially since domestic industry will undergo considerable upheaval and displacement)

Manufacturers producing abroad are likely to have developed processes that reflect the capital-labour ratios that are prevalent in advanced capitalist countries

Concerns on Make in India You can get cheap products as they are

manufacturing in the same company Change our country from being dependent on

imports to a country of exports Provide large scale employment to both skilled and

non-skilled workers Call to biggest manufacturers of the world whose

product we import regularly, to open their production units in India

Biggest sector after agriculture in India which is not utilized to its full capacity

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Concerns on Make in India

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Increase in employment : We have 475 mn (2nd largest in the world) persons as a cheap labour from which 90% is unorganised

Improvement in infrastructure Improvement in education and lifestyle of

common man Company makes goods in developed country, the

cost gets higher due to higher salaries and maintenance cost

Making of goods by foreign companies increases job possibility

Government Initiatives

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This initiative is expected to increase the purchasing power of an average Indian consumer, which would further boost demand, and hence spur development, in addition to benefiting investors

Government has come up with Digital India initiative, which focuses on three core components: creation of digital infrastructure, delivering services digitally and to increase the digital literacy

Currently, the manufacturing sector in India contributes over 15 per cent of the GDP. GOI, under the Make in India initiative, is trying to give boost to the contribution made by the manufacturing sector and aims to take it up to 25 per cent of the GDP

Road Ahead !

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IMF forecasted that India will witness a GDP growth rate of 7.5 per cent in 2016, due to improved investor confidence, lower food prices and better policy reforms

According to mid-year update of United Nations World Economic Situation and Prospects, India is expected to grow at 7.6 per cent in 2015 and at 7.7 per cent in 2016

Global Economic Prospects (GEP) report by World Bank, India is leading The World Bank’s growth chart for major economies

India to become the fastest growing major economy by 2015, growing at 7.5 per cent

QUESTIONS PLEASE

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QUESTIONABLE QUESTIONS

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