This article is written by Paridhi Dave, a student at the Institute of Law, Nirma University. This is an exhaustive article which deals with the ‘Make in India’ program, initiatives taken under it, its impact, the challenges, the success and failure of the program.
It is an established fact that since the industrial revolution took place, no country has become a major economy without becoming an industrial power first.
Over the past few decades, globalization and industrialization have accelerated at a rapid pace. Most importantly, the globalization of manufacturing has played a critical role in creating jobs and raising the living standards for the middle class in emerging national economies.
India is one of these emerging nations. It has performed well in the past two decades owing to its tertiary sector. To fall in line with the global patterns, the Government of India has launched the ‘Make in India’ program.
This article discusses the program, its impact, the pros and cons.
‘Make in India’ Initiative
Make in India Initiative is a strategy for expansion and growth; it also functions as an international marketing strategy. The idea was conceptualised by the Prime Minister of India, Mr Narendra Modi. The program was launched on 25th September 2014. The primary objective of this scheme is to attract investments from various businesses situated across the world, and through this process, promote the manufacturing sector of India and protect the intellectual property. This vision was manifested by the creation of skilled manpower for the overall growth and development of the country.
The campaign has the objective to create more employment opportunities for the people of the country and also attract Foreign Direct Investment (FDI). The Government has also formulated a National Manufacturing Policy, 2012 which aims to increase the share of the manufacturing sector from 16% to 25% of the Gross Domestic Product by 2022. Apart from this, it also aims to create 100 million additional jobs in this sector. The National Investment and Manufacturing Zones form an instrumental part in this policy. The basis of this policy is the principle of industrial growth in partnership with all the States.
The logo of the campaign is a lion’s silhouette, which is filled up with cogs. It is a symbol for depicting manufacturing, strength and national pride.
Objectives of Make in India
The campaign aims to fulfil the below-mentioned objectives:
- Facilitate investment,
- Provide an impetus for innovation,
- Enhance the development of skills,
- Protect the intellectual property,
- Build the best in class manufacturing infrastructure,
- Make India digital,
- Create healthy relationships with various countries,
- Provide employment opportunities.
Pillars of the initiative
The initiative is based on four pillars, namely:
- New Processes – The initiative recognizes ‘ease of doing business’ as the first and the foremost significant factor for the promotion of entrepreneurship in the country. To achieve this, several initiatives have been undertaken by the Government to ease the business environment, such as de-licensing and de-regulating the industries during the entire life-span of a business.
- New Infrastructure – Availability of a facilitative and modern infrastructure is an essential requirement for any industry. To foster this, the Government has laid down project plans for the development of industrial corridors, smart cities, improved technology and integrated logistic arrangements.
- New Sectors – The program has identified 25 sectors across manufacturing, infrastructure and service sectors. Additionally, foreign direct investment has been opened up in railways, construction and defence production.
- New Mindset – It is usually observed that the role of the Government is more of a regulator in an economy. But, with the introduction of this program, the role has been shifted to that of facilitator rather than a regulator.
Sectors in the Indian Economy
The program covers 25 significant sectors across the economy. The primary motive of the program is to convert the nation into a global manufacturing hub. The Government has allowed 100% foreign direct investment in the below 25 sectors except for media, defence and space industry.
Electronic System Design & Manufacturing
IT & BPM
Media & Entertainment
Oil & Gas
Roads & Highways
Hospitality & Tourism
Reasons for choosing the manufacturing sector
India is in a dire need of a ‘roar’ as a result of this ‘lion step’. The principal reasons are highlighted below:
- India’s growth over the past two decades has largely been due to the service sector. This led to a huge pay-off in the short run, wherein the Information Technology and Business Process Management thrived expansively. However, although the share of this sector was approximately 54% of the Gross Domestic Product in 2018-19, it does not provide many opportunities for employment. India is primarily an agriculture-based economy.
The tertiary sector has helped boost the economy but the secondary sector, i.e. manufacturing is severely lagging. This program was initiated to provide the much-needed boost to the manufacturing sector, which would also provide employment opportunities.
- When the program was yet to be launched, the condition of the manufacturing sector was poor. It contributed approximately 17% to the Gross Domestic Product in 2014-15. The tertiary sector could not make up for the dwindling trade deficit in goods. The process of manufacturing had to be brought in. This sector would encourage both Indian and foreign investment and simultaneously generate employment opportunities in both organised and unorganised sectors.
- The program of ‘Make in India’ can help the country in getting rid of its dependence on imports of defence and medical equipment. This can lead to an improved position at the international level, in terms of geopolitics and diplomacy.
- The demographic dividend is favourable for ushering in an industrial revolution, as half of India’s population is below the age of 25. If the people are properly employed and made to engage in the program, then India can unlock its potential.
- The process of manufacturing will lead to innovation. This can also offer a chance to the unskilled and semi-skilled workers to transform into skilled workers.
Initiatives Taken under ‘Make in India’
The Government has taken several measures to bolster the manufacturing sector in India:
- Opening up of sectors such as insurance, railways, defence, etc for more foreign direct investment.
- The upper limit for foreign direct investment in the defence sector has been increased to 49%.
- The establishment of the Investor Facilitation Cell under the scheme of Invest India, which helps the investors by providing services in all phases of the business, such as pre-investment, execution and even after delivery services.
- Portals like Shram-Suvidha, eBiz, etc. have also been launched.
- The Government has also provided relaxation in the permits and licenses required to begin a business. Other measures are also being taken to facilitate the ease of doing business.
- Industrial corridors are being developed, ports and airports have also witnessed a considerable increase in investments. The Government aims to build new infrastructure and upgrade the existing infrastructure through PPP mode – Public-Private Partnership.
- Several schemes such as Skill India, Startup India, Digital India, Pradhan Mantri Jan Dhan Yojna, Smart Cities, AMRUT, Swachh Bharat Abhiyan, Sagarmala, AGNII, etc. have been launched under the aegis of Make in India.
- The Government also launched plans for establishing industrial corridors. These corridors focus on inclusive development.
- Delhi-Mumbai Industrial Corridor
- Amritsar- Kolkata Industrial Corridor
- Bengaluru-Mumbai Industrial Corridor
- Chennai-Bengaluru Industrial Corridor
- Vizag-Chennai Industrial Corridor
Impact of ‘Make in India’
The campaign has made considerable progress, which is enlisted below:
- Introduction of GST – Goods and Services Tax has removed the cascading effects of tax and thereby has eased the tax system for the businesses.
- Through programs such as Digital India, the digitisation process has been augmented in the country. The procedure for taxation, company incorporation, etc. has been made online which eases the overall process and also improves efficiency.
- The introduction of the new Insolvency and Bankruptcy Code, 2016 as an integrated law has taken the legislation at par with the global standards.
- Schemes of financial inclusion, such as Pradhan Mantri Jan Dhan Yojna have led to the creation of new bank accounts.
- Major development can be witnessed in the infrastructure and connectivity due to schemes such as Sagarmala and Bharatmala.
- The Government also introduced the ‘National Intellectual Property Rights Policy’ in 2016 to spur creativity and innovation in the country. In 2017, approximately 9,847 patents and 3,541 copyrights were granted.
The success of the program
The program has been successful, which offers several advantages.
- There has been significant growth in Foreign Direct Investment after the launch of this program. The total FDI inflow was approximately USD 222.89 billion between April 2014 and March 2018. In 2017-18, the inflow of FDI was USD 61.96 billion, which is the highest ever recorded amount in a fiscal year. This has led to a surge in investments concerning automotive and electronics manufacturing.
- India is ranked at 63 out of 190 countries in the Ease of Doing Business Index according to the recent ‘Doing Business 2020’ Report. The report also mentions that India is one of the economies with the most notable improvement.
- In 2018-19, the share of the industrial sector in the Gross Value Added was 29.6%. There was a 6.8% growth in this year. According to the Economic Survey 2019-20, 2019 was a difficult year for the global economy and resultantly, there was only a 2.5% overall growth in the industrial sector in 2019-20.
- The India Cellular & Electronics Association (ICEA) in 2018 stated that due to the manufacturing of domestic mobile handsets and components, the country has saved a whopping INR 3 lakh crore rupees of possible outflow in the last four years. This money was saved as the domestically manufactured and assembled handsets replaced the import of completely built units (CBUs). This also provided employment opportunity to approximately 4.5 lakh people.
- India is ranked at 52 out of 129 countries in the Global Innovation Index, 2019 published by the World Intellectual Property Organisation (WIPO), Cornell University and INSEAD annually. India has moved up 24 places since 2014.
Sectoral-Specific Achievements of Make in India
There are several sectoral-specific achievements. These are listed below.
- Aerospace & Defence – Indigenous defence products have been unveiled, the Defence Procurement Procedure was amended.
- Aviation – There was a 5 times increase in FDI, the National Civil Aviation Policy was introduced to boost regional air connectivity, 160 airports, 18 greenfields airports were approved, GAGAN was launched as well.
- Biotechnology – First indigenously developed Rotavirus vaccine was launched, 30 bio incubators and biotech parks are supported, India’s first Public-Private Partnership agreement was announced between Indian Council of Medical Research and Sun Pharma.
- Automotive – There was a 1.7 times increase in the automobile industry; a major investment by global players such as Ford Motors, Mercedes-Benz, Suzuki Motors was observed.
- Food Processing – Nine mega food parks were operationalized during 2014-2018, eighty-three cold chain projects operationalized, an app called Nivesh Sandhu was launched in 2017.
- Gems and Jewellery – There was a 4.6 times increase in FDI in the period of 2014-2018, Jewellery Park at Mumbai is being developed.
- Leather and Leather Products – A program called Indian Footwear, Leather & Accessories Development Programme was launched in 2017, approximately 4.44 lakh people have been trained.
- Media and Entertainment – There was a 1.8 times increase in FDI in Information & Broadcasting, the Print Media Advertisement Policy, 2016 was launched, National Film Heritage Mission was launched.
- Railways – The first semi high-speed train called Gatimaan Express was launched, an investment of INR 15,000 crore was achieved through Public-Private Partnership.
- Tourism – Schemes such as Swadesh Darshan and PRASAD were launched.
These are some of the key factors. There has been a development in other sectors as well. This data dates to 2018 and was released by the Department of Industrial Policy and Promotion and the Ministry of Commerce and Industry.
Failures of the program
- Due to the poor implementation of the Goods & Services Tax (GST) and demonetization, the country’s Gross Domestic Product has fallen terribly.
- Increase in the unemployment rate.
- The ambitious growth rate of 12-14% annually is beyond the capacity of the industrial sector.
- The initiative brought under its ambit too many sectors at once. This has led to a loss of policy focus.
- The policy is inbuilt with inconsistencies. The uncertainties of the global economy have led to fallacies in the program. Although there is a considerable jump in the ‘ease of doing business’, the proportionate investments are yet to arrive.
- The policy is highly dependent on foreign capital for investments and the global markets for produce.
Although the program has been successful, there are certain challenges. A clash is imminent between various sectors if such lofty targets have to be achieved.
- India is primarily an agro-based country and thereby has 60% cultivable land. The augmentation of the secondary sector can hinder upon these arable lands and affect agriculture in a negative manner.
- Even if a ‘green strategy’ is adopted, the rapid increase in industrialisation can lead to depletion of natural resources.
- Increase in large-scale foreign direct investment can lead to disruptions in the domestic market, as the farmers and small-scale entrepreneurs may not be able to compete with the international players. Therefore, the government should focus on novelty and innovation in these sectors.
- Industrialisation can lead to adverse effects on the environment and can lead to disastrous effects.
- There exist serious lacunae in the infrastructural facilities in the country. Although several programs have been initiated, the implementation of these programs has not been up to the mark.
- The Government should also ensure that there are sufficient platforms for improving research and development in the country.
Apart from these, the development of skills in the human resources of the country, up-gradation of existing infrastructure, creation of labour-intensive technology, etc. are some other factors which have caused obstruction in the success of the program.
The program has seen its portion of success and failures. Although the intention behind introducing this campaign was novel, there were several issues in its implementation. It is a judicious mixture of administrative reforms and economic prudence, with the aim of catering to the call of people’s mandate of an aspiring India. An attitudinal shift can be observed since the launching of the program. India is not a permit-issuing authority for the investors now; instead, it functions as a true business partner.
The program had high ambitions but failed in its implementation. The policymakers introduced too many schemes and did not focus on the implementation mechanisms. Since a situation of world recession is arising due to the present COVID-19 outbreak, the chances of any success are bleak.
LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: