"Impact of “Make in India"
Inheriting a faltering economy, with GDP growth rate of under 5% (2013-2014), high inflation (9 to 11 %), fiscal deficit of $86.08 billion (2013-14), red tape and rampant corruption, Prime Minister NarendraModi had his task cut out. His immediate challenge was to dispel the uncertainty around the Indian economy and make it a preferred stop for investors. The 'Make in India' campaign was, thus, launched on 25th September 2014 and is part of the government's efforts to promote India as an investment friendly destination.
'Aim of 'Make in India'
The slogan clearly points to the government's aim to make India a global manufacturing hub. This signals a paradigm shift in focus, from tertiary to manufacturing. The government reckons that the next big push for the Indian economy will come from the manufacturing sector, which recorded a declining growth rate of 0.2% in 2013-14, according to the Ministry of Statistics and Programme Implementation. Manufacturing contributes only 15% to India's GDP and the government wants to raise it to 25%. For this, the government has identified 25 key sectors, which include: automobiles, auto components, bio-technology, chemicals, defence manufacturing, electronic systems, food processing, leather, mining, oil and gas, ports, railways, ports and textile.
Opportunity to resolve long pending issues
The 'Make in India' campaign is significant as it provides an opportunity to resolve long pending issues such as land acquisition, unpredictable tax regime, poor infrastructure, unreliable power supply and sluggish bureaucracy, all of which have contributed in dissuading investors from investing in India. The focus on manufacturing will drive growth in allied sectors as well, such as infrastructure and energy. To attract investors, it is also important to ensure safe places away from the city where they can set up their factories. Therefore, only a holistic plan to clear all bottlenecks, which have hindered growth, can put Indian economy back on the accelerator.
Impact of 'Make in India'
The impact of this campaign will be felt both domestically and internationally. The development of the manufacturing sector will create employment opportunities for the youth of the country, alleviate poverty, attract investments, create value for Indian goods and fix the rising trade deficit. Internationally, it will improve India's standing in the world and investors will look at India not merely as a market but as an opportunity. The interaction between domestic and international firms will, inevitably, help transform domestic firms into MNCs. Just as China has emerged as the top manufacturing country in the world (replacing US in 2010), generating an estimated $2.9 trillion in output in 2012 according to United Nations, India, too, can exploit the advantages of democracy, demography and demand to transform itself into a self-reliant force, capable of meeting the aspirations of its own people as well as becoming a preferred destination for foreign funds.
Furthering his development agenda, the Prime Minister has been making an aggressive pitch at various forums to woo not just Indian companies but foreign investors as well. Though, it is too soon to predict the outcome of this particular campaign, the initial signs are encouraging. Foreign governments and investors are warming up to the 'Make in India' campaign. The US-India Business Council has identified upwards of $41 billion for investment in India by its members in the next 3 years. Japan has pledged to invest $33.6 billion in India within the next 5 years. China, too, has pledged investments worth $20 billion.
The government has backed this campaign by taking steps such as:
- setting up 'Invest India' (will act as the first reference point for assisting investors)
- setting up a dedicated web portal "http://www.makeinindia.com" to resolve all queries
- setting up of an expert panel to redress grievances and handle queries of global and domestic investors within 24 hours
- raising FDI caps in railways and defence production to 100% and 49% respectively
The environment of positivity created by this campaign has significantly improved the
perception of the Indian economy.