Putting Vision To Work

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There is no doubt that in Make in India lies the country’s future as a global manufacturing hub. But for that to succeed, the political opposition must be on board, bureaucracy must implement the vision bequeathed to them BY RAKESH KHAR

I do not minimise the difficulties that lie along the long and arduous journey on which we have embarked. But as Victor Hugo once said, “No power on earth can stop an idea whose time has come.” I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now awake. We shall prevail. We shall overcome.

-Dr. Manmohan Singh, 1991 Budget speech

This famous quote was uttered 25 years ago by a man who created history by unleashing the power of economic reforms in India. As the then finance minister, Dr. Singh argued for India becoming a major economic power. He took the first big step by dismantling controls to help align India with the global economy.

The dream lives on. India has indeed made some outstanding strides in the field of business and economy but there is a lot more yet to be achieved. If unshackling Indian economy was the big idea authored by Dr. Singh in 1991, ‘Make in India’ initiative launched by Prime Minister Narendra Modi is an idea waiting to happen. One may rightly or wrongly quarrel over its nomenclature but the ‘Make in India’ pitch has no doubt the ability to empower the Indian economy as never before.

The Modi government, soon after coming to power in May 2014, launched its ambitious programme to make India a manufacturing powerhouse and has advocated for boosting exports and incentivizing import substitution. The launch event on Sept. 25, 2014, witnessed leading captains of industry join the government to endorse the initiative. This set expectations soaring with ‘Make in India’ an all pervasive catch phrase.

The prime minister himself has been drumming up support for the initiative during his sales calls across global capitals, making a fervent plea for investors to make in India. There has been significant reverberation given the hard sell although it is difficult to quantify yet the actual outcomes.

Make in India pitches for a strong manufacturing push, having identified 25 top sectors as focus verticals. These include IT, pharmaceuticals, roads and highways, food processing, mining, oil and gas, thermal power etc

In about four months’ time, the much hyped initiative would complete two years. It is too early to critique the outcomes. The outcomes have to be first viewed in the context of what the initiative aims to achieve. One line take away from the initiative is that it aims to make India into a global manufacturing address. The ‘why & how’ of it is one core area where critical questions persist.

But before one attempts to decode that, it is important to revisit the controversy surrounding the efficacy of the idea itself. Put simply the key question is whether it is more gainful to make for India or just push towards make in India. Efficacy of make in India pitch has come under question from credible and influential quarters.

Reserve Bank of India (RBI) Governor RaghuramRajan has said that India rather needs to make for India, adding that either an incentive-driven, export-led growth or import-substitution strategy may not work for the country in the current global economic scenario. Rajan also cautioned against picking a particular sector such as manufacturing for encouragement simply because “it has worked well for China.”

There are other critics too. There is a strong view that the initiative is a masked attempt to alter the production structure of our economy. The criticism stems from the view that agriculture-led economy (already under severe stress) is being further put under pressure by mounting a state supported plan to push to manufacturing. In a political economy where agriculture is a sensitive issue, this argument might make imminent political sense but does not cut any ice when it comes to making a shred of economic sense.

Make in India pitches for strong manufacturing push, having identified 25 top sectors as focus verticals. These include automobiles, auto components, aviation, biotechnology, chemicals, defence manufacturing, electrical machinery, IT, pharmaceuticals, roads and highways, food processing, mining, oil and gas, and thermal power.

Does Rajan’s counter mean there is no merit in building as a manufacturing powerhouse? Not really! For there is near unanimity on the need to use manufacturing as the driver for the Indian economy. The fruits of manufacturing either for consumption in India or abroad are far too obvious. Manufacturing without doubt, is the most potent tool to create employment in India.

But the key question is why should investors queue up to make in India? Cheap labour, land, apart, there isn’t much to lure investors right away. Posco, billed to be among the most investment intensive projects ever announced in India ($12b), is languishing and unable to proceed due to regulatory hurdles 11 years after it set base in India.

The Modi government has, as part of its intent, been proclaiming that it would bring about a “mind-set change and “an attitudinal shift in how India relates to investors: not as a permit-issuing authority, but as a true business partner.”

Modi himself has repeatedly said that India must increase manufacturing and at the same time ensure that the benefits reach the youth of our nation.

He is actually right but the initiative has to articulate itself beyond a well-crafted marketing campaign. Modi himself has been giving it a singular push but the government has to walk the talk. It has to have clear cut transparent deliverables. At present it has identified key focus areas: deregulation and de-licensing of the manufacturing sector; creating new infrastructure via industrial corridors; opening up India’s high value industrial sectors and focus target on 25 manufacturing verticals.

This is fine in so far as expressions of action points are concerned. But linked to these actions points must be clear outcomes. Is it driving economy to a double digit growth via manufacturing? What is the time frame to achieve this since the target brings with a whole set of variable factors? Is the end objective to increase share of manufacturing in GDP from 15% to 25%? But an increase without a matching identification of outcomes for employment might run the risk of being yet another academic exercise. Mind you jobs are yet the biggest push in favour of this key initiative of the government.

The Modi government, soon after coming to power in May 2014, launched its ambitious programme to make India a manufacturing powerhouse and has advocated boosting exports and incentivizing import substitution

There is no point wasting time now on debating whether or not Make in India makes sense or not? India must become a manufacturing hub simply to absorb its demographic dividend which, in absence of a cogent opportunity, will most surely turn out to be a demographic liability. There is no choice. But for things to move fast, India has to vastly improve the ground reality when it comes to doing business. Most important, the government of the day has to work behind the scene to somehow get opposition on board to fast forward key policy changes.

For that to happen, Make in India has to be marketed not as Modi’s dream project but the dream of India. All ideas around it to make it get better by the day, must be duly acknowledged and incorporated for India to truly assume its rightful place in the global economy.

Summary

  • Make in India is the way forward to transform India into a global manufacturing hub and leverage our demographic dividend
  • The government must reach out to the opposition to ensure they are on board in this ambitious remaking of India
  • The bureaucracy must translate a grand political vision to the ground, ensuring India becomes an attractive destination for world manufacturing
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