Arshad Shaikh studies the “Make in India” initiative launched by the government amidst much fanfare. The evaluation of the ambitious programme is critical for an objective analysis of the successes and failures of the government. It gains even more importance in the context of civil society joining hands to canvass against the ruling party in the upcoming national elections in 2024, wherein a comprehensive “Report Card” of the performance of the government is envisaged. As the mainstream media has more or less capitulated to the diktats of the government, there is little possibility of a “top-notch” and realistic assessment of the different initiatives of the government since 2014. “Make in India” was supposed to transform “the country into a leading global manufacturing and investment destination.” Maybe it was a pipedream or just a “jumla” (something said in jest and not to be taken seriously).
The “Make in India” initiative was launched in 2014 by the Government of India to promote India as a global manufacturing hub. The initiative aimed to attract foreign direct investment (FDI), foster innovation, and create jobs in the manufacturing sector. It is estimated that the manufacturing sector contributes around 16% to India’s GDP and employs around 12% of the workforce. “Make in India” was meant to increase that share of GDP to 25% by 2022 (revised to 2025). It targeted creation of 100 million new jobs, and attract $1 trillion in FDI in the manufacturing sector by 2022. Table (A) shows the percentage contribution of manufacturing to India’s GDP (Source: macrotrends.net)
TABLE A
| 1960 | 1970 | 1980 | 1990 | 2000 | 2014 | 2016 | 2018 | 2020 | 2022 |
| 14.7% | 13.2% | 16.7% | 15.6% | 15.9% | 15.0% | 15.1% | 14.8% | 13.6% | 16% |
Table (B) compares the percentage contribution of GDP and the percentage of population employed by the three main sectors in India, China and the USA (Source: investindia.gov.in – 2019 data)
TABLE B
| Sector | India | USA | China | |
| % GDP contribution | Agriculture & Allied | 15.4% | 8% | 7% |
| % Population deployed | 53% | 2% | 26% | |
| % GDP contribution | Manufacturing & Industry | 23% | 12% | 40% |
| % Population deployed | 22% | 19% | 20% | |
| % GDP contribution | Services | 61.5% | 80% | 52% |
| % Population deployed | 25% | 79% | 46% |
“Make in India” was launched to rectify the skewed nature of the growth of India’s economy. Normally economies progress from being driven by agriculture, then manufacturing and finally the services sector. However, in the case of India, manufacturing did not take off the way it should have, while the services sector grew rapidly to now dominate in terms of GDP-contribution. While the service sector’s contribution to GDP grew from around 30% in 1950 to 55% by 2009-10, manufacturing sector’s share has stagnated in the 14% to 16% band.
The other significant thing and not often pointed out is India’s relatively small share of manufacturing in the global economy. In 2021, India’s share of global manufacturing was 3.1%. The other major players’ shares are as follows: China (28.7%), United States (16.8%), Japan (7.5%), Germany (5.3%) and South Korea (3%). In 2014, India’s share was 2.2%.
EVALUATION CRITERIA
Investment: In a release dated 24 September 2022, the Ministry of Commerce and Industry declared, “Make in India’ completes 8 years, annual FDI doubles to USD 83 billion. This FDI has come from 101 countries, and invested across 31 UTs and States and 57 sectors in the country. On the back of economic reforms and Ease of Doing Business in recent years, India is on track to attract US$ 100 Bn FDI in the current FY.” However, the same Ministry earlier (29 July. 2022) claimed that “FDI Equity inflow in Manufacturing sectors increased to INR 1,58,332 crore (approx. $ 20 billion) in FY 21-22 from INR 89,766 crore (FY 2020-21).”
This means the share of manufacturing in the total FDI is just 25%. Reports show that in 2014, FDI in manufacturing was $9.61 billion of a total of $24.74 billion (38%). This means there has been a net decline in the share of manufacturing in FDI. This has been grabbed by the services sector. The services sector FDI has almost doubled to $153.01 billion from $80.51 billion (2014 to 2022).
Employment: It is estimated that around one crore young people enter the market in search of jobs. “Make in India” had the ambitious target of creating 10 crore new jobs in manufacturing by 2022. However, in June 2023, the Union Labour and Employment Minister, has informed that India has generated only 1.25 crore jobs since 2014.
It is very unlikely for the government to achieve the target of raising the share of manufacturing to 25% from the current 16% by 2025. Thus, judging by the stated objectives of “Make in India”, the programme has been a resounding failure.
REASONS FOR THE FAILURE
One of the main reasons for the failure of “Make in India” was the unrealistic targets set by the government. Given the state of the global economy, India’s infrastructure woes and poor governance record, aiming for manufacturing in GDP to increase to 25% of the GDP by 2025 and creating 100 million jobs was a pipedream. The initiative was also too broad, spread across a wide range of sectors. This made it difficult for the government to prioritise its efforts and to ensure that the different initiatives were working together in a coordinated way.
Many of the initiatives under the “Make in India” campaign were poorly implemented. This was due to many factors, including bureaucratic delays, corruption, and lack of political will. India’s infrastructure is not up to the standards required for a global manufacturing hub. This includes inadequate roads, railways, ports, and power supply. India has a shortage of skilled workers in the manufacturing sector. This is due to several factors, including poor education and training systems.
MAKE IN CHINA
India’s main competitor in the manufacturing sector is China, which has a much lower cost of production. This made it difficult for Indian manufacturers to compete, and it led to several foreign companies choosing to invest in China instead of India.
There is another dimension to the success of “Make in China”. Tim Cook, the CEO of Apple, explained the reason why many companies remain in China and choose to manufacture their products there. He said, “There is confusion about China; the popular conception is that companies come to China because of low labour costs. I am not sure what part of China they go to. Nevertheless, the truth is China stopped being the low labour cost country many years ago and that is not the reason to come to China from a supply point of view. The reason is the skill and the quantity of skill in one location and the type of skill. Our products require advanced tooling and the precision that you have to have, the tooling and working with the materials that we do are state of the art. The tooling skill is very deep here in the U.S you could have a meeting of tooling engineers and I am not sure we could fill the room. In China, you could fill multiple football fields and this is why Apple and many other businesses chose China as their main manufacturing hub.”
It is indeed a tragedy that despite having an excellent and large talent pool of hardworking youth and a technically qualified workforce, India is yet to make a significant dent in the manufacturing arena. The sooner we realise that we must hold our politicians accountable for their performance in governance and running the economy, the earlier will our country start developing according to its potential.
A greater tragedy would be to allow ourselves to be swayed by emotional issues peddled by greedy politicians and re-elect those who failed to convince the world to “Make in India”.