Make in India: Ten Years of Mixed Outcomes
- September 30, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
No Comments
Make in India: Ten Years of Mixed Outcomes
Sub: Eco
Sec: National Income
- Objectives of Make in India (MI):
- Launched on September 25, 2014, the MI policy aimed to:
- Increase the manufacturing sector’s share in GDP to 25% from 14%-15%.
- Create 100 million additional industrial jobs by 2025 (from about 60 million).
- Manufacturing Sector Performance:
- Over the last ten years, manufacturing growth has slowed to 5.5% (2012-2023) from 8.1% (2001-2012).
- The sector’s GDP share has remained stagnant at 15%-17%, failing to achieve the target of 25%.
- Employment in manufacturing has decreased, with the sector’s employment share falling from 12.6% (2011-12) to 11.4% (2022-23).
- Decline in Informal Sector Employment:
- Most employment in manufacturing is concentrated in the unorganized sector, which saw a reduction of 8.2 million jobs between 2015-16 and 2022-23.
- The number of workers in this sector fell from 38.8 million to 30.6 million during this period.
- Premature De-industrialization:
- A reversal of structural transformation has been observed, where more people are returning to agriculture. The share of agriculture in the workforce rose from 42.5% (2018-19) to 45.8% (2022-23).
- This shift is seen as premature de-industrialization, where the economy de-industrializes before reaching industrial maturity, which is unprecedented in post-independence India.
- Fixed Investment and Industrial Output Growth:
- Fixed investment growth collapsed during the MI period, with gross fixed capital formation (GFCF) growth stagnating.
- The industrial output growth rate is significantly lower than official estimates, as per the Annual Survey of Industries (ASI).
- Booming Imports:
- Imports, especially from China, have increased, meeting domestic demand and affecting local manufacturing growth.
- India’s domestic investments did not grow under MI, despite an improvement in India’s Ease of Doing Business (EDB) ranking, which rose from 142 (2014-15) to 63 (2019-20).
- Critique of Ease of Doing Business Index:
- The EDB index has been criticized as a “bogus, politically motivated” measure with little empirical foundation. The government’s focus on EDB is seen as a misallocation of resources.
- Policy Recommendations for Re-industrialization:
- To reverse de-industrialization, India must re-imagine its industrial policy and align trade policies to promote domestic value addition.
- Protectionist measures should focus on securing dynamic comparative advantage, rather than offering cash subsidies.
- The policy must aim for investment-led growth and technological catch-up, supported by domestic R&D and the indigenization of technology.
- The establishment of publicly funded development finance institutions (policy banks) is recommended to provide long-term credit for technological advancement and learning.
In summary, while Make in India set ambitious goals for manufacturing growth and job creation, it has not achieved its targets, with slow growth, stagnant GDP share, and a decrease in employment in the sector. Reindustrialization will require a shift in policy focus towards investment, technology, and domestic innovation.
Make in India Programme
About:
- Launch: The Make in India initiative was launched in 2014 with the goal of transforming India into a global manufacturing hub.
- Lead Agency: It is led by the Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, Government of India.
- Global Invitation: It serves as an open invitation to investors and business partners globally to be part of India’s economic growth story.
- Strategic Sectors: The program focuses on 27 key sectors across manufacturing and services under Make in India 2.0.
Four Pillars of Make in India:
- New Processes:
- The program emphasizes improving the Ease of Doing Business through deregulation and streamlining processes for industries.
- It aims to simplify licensing and reduce bureaucratic red tape across the business lifecycle.
- New Infrastructure:
- Development of industrial corridors, upgrading existing infrastructure, and creating faster business registration systems are part of the agenda.
- New Sectors:
- A focus on 27 sectors in manufacturing, infrastructure, and services, with detailed information available through an interactive web portal.
- New Mindset:
- A shift in the government’s role from being a regulator to a facilitator of industrial growth and economic development.