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Ten Years of Make in India
Context:
The Make in India has completed ten years on September 25, 2024.
About Make in India
- On September 25, 2014, the newly elected Union government launched the Make in India (MI) policy with two key objectives:
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- to increase the manufacturing sector’s share of GDP from 14%-15% to 25%
- to create 100 million additional industrial jobs (from about 60 million) by 2025.
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- This policy mirrored the earlier New Manufacturing Policy of 2012, which had been formulated but not implemented.
Outcomes:
Ten years later, the outcomes are mixed:
- According to National Accounts Statistics (NAS), the real gross value added (GVA) growth rate in manufacturing has slowed from 8.1% during 2001-12 to 5.5% between 2012-23.
- The sector’s share of GDP has stagnated at 15%-17% for three decades, though it’s slightly higher in the new GDP series due to methodological revisions.
- Employment in manufacturing has also declined.
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- As per NSSO sample surveys, manufacturing employment fell from 12.6% in 2011-12 to 11.4% in 2022-23.
- Most jobs in this sector come from the informal or unorganised segment, which saw a drop in employment by 8.2 million—falling from 38.8 million in 2015-16 to 30.6 million by 2022-23.
- Meanwhile, agriculture’s share of the workforce has increased, from 42.5% in 2018-19 to 45.8% in 2022-23.
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- Increased FDI: The initiative has successfully attracted significant foreign investments across various sectors, including defence and railways.
- Global Partnerships: Collaborative efforts with countries like the USA and Russia have strengthened India’s position as a manufacturing hub.
- Local Initiatives: States have launched their own initiatives (e.g., “Make in Odisha,” “Vibrant Gujarat”) aligned with the national campaign, fostering regional development.
Deindustrialisation:
This trend marks a significant reversal in structural transformation, with the workforce moving from higher-productivity manufacturing to lower-productivity agriculture. Such premature deindustrialisation is unprecedented in post-independence India, indicating a failure to achieve industrial maturity before shifting away from manufacturing, unlike advanced economies. Several factors contributed to this de-industrialisation:
- Industrial production growth stagnated despite the official annual GDP growth of 6%-7%.
- Fixed investment growth also faltered.
- Data from the Annual Survey of Industries (ASI) show that both GVA and gross fixed capital formation (GFCF) growth were minimal between 2012-13 and 2019-20.
- Why didn’t domestic investments pick up under the MI policy, despite India’s significant improvement in the World Bank’s Ease of Doing Business (EDB) index, moving from 142nd place in 2014-15 to 63rd in 2019-20?
- One reason is that the EDB index is flawed—politically motivated and lacking a solid analytical or empirical foundation.
- In hindsight, the government wasted six valuable years pursuing a dubious metric.
Way Forward:
- To reverse de-industrialisation, India must rethink its industrial policy.
- Trade and industrial policies need to align in a way that promotes domestic value addition and fosters learning.
- Protectionist measures should focus on building dynamic comparative advantages, rather than offering cash subsidies for static gains.
- India should aim for investment-driven growth and technological catch-up, supported by domestic R&D that encourages adaptive research and indigenisation of imported technologies.
- Additionally, publicly funded development finance institutions or “policy banks” are essential to provide affordable, long-term credit to socialise the risks involved in learning and catching up to the technological frontier.
