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Three Key Ingredients For Make In India
Sutanu Guru identifies three policy reforms that can provide a big boost to Make in India
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There was no shortage of sceptics when Prime Minister Narendra Modi launched the ambitious Make in India mission in 2015. Of course, this is not the only ambitious mission launched by this government which has promised Indian citizens and voters a truly transformational process. The other inter linked and important missions that would work in tandem with Make in India are Smart Cities, Skill India, Digital India and Swachh Bharat Abhiyan. Since its launch, Make in India has made remarkable progress is some sectors like telecom and auto components while advances have been less than impressive in some other sectors like footwear and apparel.
More than 35 major companies from across the world have set up manufacturing facilities for handsets in the country. Indian auto component companies now supply to virtually all the global auto giants have lined up impressive expansions plans to boost manufacturing. Something similar needs to be done in other major verticals. For example, India needs to emerge as a major manufacturing hub for textiles, readymade garments, footwear, processed food, engineering goods and even toys.
Analysts and experts have identified three key areas of reform that the government needs to pay attention to so that Make in India becomes a smashing and durable success. As of today, manufacturing contributes just about 15 per cent of the GDP of the Indian economy. The Narendra Modi government plans to raise this to about 25 per cent by 2025. This is essential because India needs to provide jobs and livelihood opportunities to 12 million young Indians who enter the workforce every year and that will be possible only if there is a sustained increase in manufacturing. What are the key reform areas that can help speed up this process?
The first is skills. Almost everyone talks about the demographic dividend that India is set to enjoy as two thirds of its population is below age 35. But there is a paradox here. Employers in India invariably find that the people they hire simply do not have the skills required to operate in high productivity jobs. On the other hand, millions of young Indians struggle to find a decent job even after spending heavily on higher education. The ambitious Skill India initiative promises to solve this problem. The solution doesn't lie in youngsters merely acquiring graduate degrees. It lies in focusing on skills that would be needed by manufacturing plants. It lies imparting skills that will enable millions of self-employed Indians to improve productivity and earn higher incomes.
The second area of reform is labor policies. India has more than 500 million people in the work force. Out of this, barely 10 per cent work in the organised sector and it is this minority that controls all trade unions in the country. Trade unions have been steadfastly against any reforms in labor laws. But the fact of the matter is that rigid and outdated labour laws discourage domestic as well as foreign investors from setting up manufacturing facilities. Imagine the millions of jobs if global retail giants like Walmart, Tesco and others source material from India along with global brands like Nike, Adidas. Armani and many more. But they will come to India only if labor policies are more flexible. Fortunately, some state governments have started taking the lead in this.
The third is to actually bring an end to inspector raj. Call it ease of doing business or whatever, but the biggest hassle face by investors and companies in India is the harassment they are subjected to by corrupt inspectors of various types. Fortunately again, Digital India is playing a positive role as most approvals move from physical inspection by inspectors is being replaced by online compliance.
A faster and stronger emphasis on these reform measures would do wonders for Make in India.