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Make In India Framework Needs An Overhaul

Robust macroeconomic policies, sustained and multiple directional action is required to realise the ‘Make in India’ goallabour

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In the last decade the developed world ‘lost’, downsized, and off shored 20 million manufacturing jobs, leading to productivity gains. While China perched itself as the ‘workshop’ of the world, our share is a miniscule two per cent.  Every one per cent incremental share of  the global manufacturing market is estimated to add 20 million jobs, and is a threefold multiplier. Manufacturing is the new hope, and at the beginning of the curve.

The Make in India campaign, was predictably cheered and lauded, capturing everyone’s imagination. Industry envisaged it to be a comprehensive overhaul and the advent of ‘Minimum Government Maximum Governance’.  Prime Minister Modi timed it well, planned better, and committed fully; leaving nothing to chance. Several sectors including holy cows like defence, the railways, space, etc. were ‘opened up’. Regulatory framework ‘relaxed’ infrastructure corridors off  the drawing board. Focus on ‘ease’ of doing business enhanced credibility. The states vied with one another to woo industry to invest and ‘make’ in their state.

However, the campaign is out of square with the ground realities and inherent challenges. ‘Slowing’ China is correlated to India’s arrival as the ‘factory’ to the world and challenging China’s dominant position. This is far from the truth. Leather and footwear business moving to Bangladesh and Vietnam are a case in point. Our competition is not with China. Even a slowing China adds in India’s GDP every three years.

The government needs to appreciate that modern manufacturing necessitates specialised and cutting-edge technology. Quality is the currency to compete with. The key feature is its dependence on capital and skill as against unskilled labour and low capital. This precisely is the main challenge.

Our bane is a serious shortage of capital and much needed technical expertise. ‘Investment’ in poorly planned, badly implemented upskilling hasn’t helped. Similarly, debt laden, precariously leveraged industry causing slower traction, triggers a vicious cycle of increasing NPA, credit ‘trimming’ and choking industry. Eventually.

Our response to currency devaluations and dumping is mostly inadequate, often timid. Infrastructure is the big elephant in the room. Merely dismantling obsolete and obstructive frameworks and bottlenecks will not help. More is needed; amongst them, fostering innovation, upskilling, and global scale infrastructure etc. Revitalising the manufacturing sector will need a holistic policy framework and a healthy ecosystem that enables regulatory clearances, eases stringent procedures, equitable land acquisition, speeds implementation and rewards innovation and outcomes. Bankruptcy Act and GST is value enhancing, yet not robust, not holistic enough.  
More is needed on the ‘softer’ side. Our ability to insight, design and deliver, as well as the flexibility and competency of the bureaucracy is key to reshaping our world. Prevalent labour laws, complex tax structure, and bureaucratic hassles only diminish competitiveness. Problems are real, and the efforts; the L move i.e. two steps forward and one sideway.

Sadly, leadership alone will not do it. Robust macroeconomic policies, sustained and multiple directional action is required to realise the ‘Make in India’ goal. The goal should be to establish India as a global hub for manufacturing, design and innovation, using it as an instrument for foreign investment to turn around the manufacturing sector. The larger goal should be to kickstart the economy, fuel economic growth, capitalise on the demographic dividend and propel India into the league of developed nations.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Dr. Vikas Singh

The author is a senior economist, columnist, author and a votary of inclusive development

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