The Make in India Concept
I don’t think there are many Indians today who haven’t heard of the Make in India campaign that was launched last September by the Modi government.
The idea behind it is rather simple – increase the share of manufacturing in the GDP, and the reason for that is rather simple as well.
With the exception of oil producing countries, there hasn’t been a single country in the world that has been able to go from developing to developed without having a strong manufacturing base.
This is simply because agriculture can only support a small percentage of population in a developed country and services can only support the better educated ones, so there are millions of people who have to rely on manufacturing jobs to get a better life that an industrialized and developed country promises.
This is obviously a great concept and anyone can see the utility of it, but how does it translate into reality and if you were to evaluate this tangibly – how would you do that?
How do you measure the success of Make in India?
I think the answer to that is fairly straightforward – If five years from now – the share of manufacturing in Indian GDP grows considerably then the campaign would have succeeded in its goal else it would have failed.
I have kept this statement deliberately qualititative because you could say that the Modi government has set up a target of doubling exports to $900 billion by 2020 and if they don’t meet that target then the campaign would have failed, or have any other hard number like that, but realistically, after the last ten years, would falling short of a hard number really be a failure if the manufacturing sector has improved in general?
But how do you know whether the campaign is just a lot of publicity without any real weight behind it before the lapse of five years?
I think you have to look at the GDP numbers and manufacturing PMI index every quarter to see if you can detect any trend and look at the reforms and big ticket investments that take place day to day.
For instance, the currently concluded Hannover Messe fair doesn’t seem to have gone down well because investments for only a few hundred million dollars have been committed as opposed to investments of 1.3 billion dollars when India was the partner country in 2006.
On the other hand, there have been several proposoals and deals from companies like Airbus, Areva, Asus, and Volkswagen that sound promising and will be a very good boost to manufacturing if they come to fruition.
Obviously, the key question here is if they will ever come to fruition, and that hinges on policy changes like the Land Acquisition Bill as well as overcoming the bureacracy and red tape that genereally exists in the Indian landscape.
Will Make in India be successful?
There are a lot of challenges that the current government face in order to make this successful. They don’t have a majority in Rajya Sabha so passing any reforms are difficult, the global economy has picked but it is still not at the pre-recession levels, and in general, it is now believed that it won’t be as easy for a developing country to create a manufacturing base as it has been in the past due to a number of technological advancements that allow roboitics to replace people on the shop floor.
That said, I have no doubt in my mind that this endeavor will be successful because there is a lot of political will to make things happen and this can be seen with the number of small steps that are taken almost every day.
Where the previous government was mired in inertia and scams, the current government has been action oriented and energetic.
Just the absence of self goals like going after Vodafone or Nokia with huge tax bills will go a long way in promoting investment in India.
I don’t think I’m alone in my optimism and since we started consulting people I’ve seen a general change in the mental outlooks of almost everyone I speak and this is best expemplified in the willingness to accept a much higher return on equities over a long period of time. People are in general much more optimistic on what the future holds for them, and I agree with that optimism.
The way things are going, the next ten years are going to be a lot better than the last ten years.
11 thoughts on “Will the Make In India campaign succeed?”
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It is easy to complain about protests and people who are opposing land acquisition when your land is not being taken.
Majority of farmer and land owners in india own a very small land. Many cases it is only source of income. I have seen first hand that land compensation provided by governments in peanuts compared to market rate.
There has to be innovative solutions to get this done. But it will require lot of political will. Current leadership is more interested in marketing that getting things done. If you make people part owner of the industry whose land is being taken then they will also not oppose it as well as that will make sure that they have reliable source of income.
At the same time there are many people in Noida and Gurgaon who have gotten great “muaavzaa” and a few I know personally. So it is not like it is all bad or all good.
I dont agree on the Nokia part. MNCs using loopholes to avoid tax is unacceptable.Govt was right in making claims. As it is these guys get so many exemptions still they want to find loopholes.
The intent may be there with this govt but without results its pointless.Also see focus more on Northern States and the PM needs to remember he no longer represents just Gujarat.In fact never felt South so isolated as in this regime with PM always choosing to communicate in Hindi at prime national events.
States like TN which are auto/IT hubs and contribute significantly to GDP(higher than Guj) continue to be ignored for major initiatives(always Ahmedabad) this despite the present administration has done remarkably well at all levels.
It would be interesting to see the overall growth by state in recent years.
If they were in fact loopholes, they should be plugged with future tax changes, it is not fair to go after a corporation or individual for past dues which is what they were doing if I understand that correctly.
Like you, I don’t agree with the decision to speak in Hindi though.
There seem to be too many hurdles. Most parties and state governments are far left, making very difficult to set up new factories. Every new project is made to look like being pro-rich at the cost of poor, e.g. Tata Nano factory, Vedanta mining. Hope this programme succeeds and unemployment decreases. Once we start manufacturing stuff, we can start designing them too – like China has done with electronics. Nice analysis btw, Manshu.
Thanks Manas. There are definitely a lot of hurdles, and the task itself is quite difficult, I take heart from the fact that governance has been so bad in the past decade that even doing nothing will improve the situation.
Its all marketing campaign. You cannot have manufacturing hub, without infrastructure support.
China and other countries has been building infrastructure for years now.
We should build infrastructure first then ask companies to come other way round is going hamper india more than providing benefit.
Building infrastructure is also part of the plan, there are some discussions on a high speed rail network and port already under way.
I agree with you. I don’t understand why some people are criticizing Modi government for failing to deliver. It will take 3 to 4 years to set up industry and then job creation. We must give that much time to government before judging its performance.
Yeah, I think this is a good parallel with the Obama government where people expected a lot of things too fast but it took time to deliver because that is the normal course of how these things run.