Why is it in the News?

• While India has experienced positive outcomes from liberalization efforts, it is important to acknowledge a significant shortcoming—the country did not successfully establish a robust manufacturing foundation and underwent premature de-industrialization.
• It's crucial to recognize that no nation has achieved industrialization solely through deregulation.
• To facilitate the structural transformation of the economy, the implementation of a well-crafted industrial policy becomes imperative, with thoughtfully selected import restrictions serving as a key component of this policy mechanism.

The Make in India (MII) Initiative and Its Goals:

• Make in India Campaign: Officially inaugurated by Prime Minister Modi in September 2014, the Make in India campaign is a strategic effort aimed at advancing manufacturing, attracting foreign direct investment (FDI), fostering innovation, and generating employment opportunities within the nation.

Objectives of the Make in India:

• Advancing Manufacturing: The initiative strives to elevate India's status to a global manufacturing hub by encouraging both domestic and international companies to establish manufacturing units within the country.
• Attracting Foreign Investment: Make in India seeks to allure foreign direct investment by streamlining the business environment, simplifying regulatory norms, and providing incentives to foreign companies for investing in India's manufacturing sector.
• Infrastructure Enhancement: Emphasizing infrastructure development, the campaign focuses on improving key elements such as roads, ports, and logistics to ensure the seamless operation of manufacturing units.
• Skill Development: Recognizing the pivotal role of a skilled workforce in a thriving manufacturing sector, Make in India incorporates initiatives to enhance the skill sets of the Indian workforce, aligning them with the requirements of modern manufacturing.
• Innovation and Technology: The campaign places a significant emphasis on fostering innovation and integrating modern technology into manufacturing processes.
  • This strategic approach aims to enhance efficiency and competitiveness in the manufacturing sector.

Differentiating Made in India (MII) from Previous Policies:

• The Make in India campaign, launched in 2014, represents a departure from the self-sufficiency doctrine that India adopted in the 1970s.
  • It does not bring back memories of the licensing raj or import-substituting industries of the past.
• While concerns have been expressed about the implementation of Make in India, particularly in certain sectors where tariff duties are raised to provide protection and incentivize the establishment of domestic industries, it is crucial to note that the campaign is fundamentally different.
  • Worries about a potential spread of protectionist tendencies to other sectors, though possibly overstated, are not entirely unfounded, especially for those who experienced the challenges of the 1970s and 1980s.
• During those years, indiscriminate protectionism led to shortages, black markets, and widespread rent-seeking, all ostensibly in the name of the poor and distributive justice.
  • Producers who benefited from such protection actively advocated for its continuation.
  • Importantly, considering that an average mobile phone manufactured in India consists of 80-85 percent imported content (India Cellular and Electronics Association, 2022), it is empirically evident that Make in India significantly differs from the concept of self-sufficiency.
• Given these empirical distinctions, it is imperative to move beyond baseless comparisons and recognize the unique nature of the Make in India initiative.

Evaluation of Commitments and Performance of Make in India:

• A Sizeable Domestic Market Falls Short of Competitiveness in Exports: Make in India (MII) encompasses two related concepts, namely Made in India and Make for India, with MII serving as the foundational and overarching policy.
  • While Made for India focuses on manufacturing for the domestic market, it is essential to recognize that a substantial domestic market alone does not substitute for the crucial aspect of export competitiveness.
    • Historical examples, such as Japan, Korea, and China, underscore that export competitiveness has been a common feature of nations that have experienced significant economic growth.
• The necessity of an Effective Make in India Operation: Made in India functions as a branding strategy, promoting manufacturers rooted in Indian factors of production—land, labor, capital, entrepreneurship, technology, etc.
  • However, the success of Made in India hinges on the effectiveness of the broader Make in India operation.
• Alignment with National Manufacturing Policy (NMP 2011): Make in India was launched as a follow-up to prior initiatives, particularly the National Manufacturing Policy (NMP) of 2011, which aimed to cultivate a robust and competitive manufacturing sector.
  • The NMP 2011 identified challenges such as inadequate physical infrastructure, a complex regulatory environment, and insufficient availability of skilled manpower hindering manufacturing growth.
  • The policy set ambitious targets, including raising the manufacturing contribution to GDP from a stagnant 15 percent since the 1980s to at least 25 percent and generating 100 million additional jobs.
• Dynamic Objectives of Make in India: Beyond the objectives outlined in the NMP 2011, Make in India aspires to elevate India into a global design and manufacturing export hub.
  • In essence, Make in India envisions a transformation where India becomes a manufacturing powerhouse catering to the global market.

Requirement for Supplementary Industrial Policy Measures During Ongoing PLI Implementation:

• Diversified Articulation Beyond Production Linked Incentive (PLI): Beyond the current implementation of the Production Linked Incentive (PLI) scheme, there is a crucial need for an additional industrial policy tailored to sectors such as toys, readymade garments, and footwear.
  • A more nuanced and sector-specific articulation of industrial policies is essential to meet the unique requirements of diverse sectors.
• Emphasis on Job Creation: Industrial policy must prioritize job creation, especially in a country abundant in labour but with average educational attainments and skills.
  • Policies should be designed to create productive job opportunities, particularly focusing on labour-intensive manufacturing and opening avenues for women in the workforce.
• Addressing the Jobless Growth Critique: Acknowledging the criticism of jobless growth, the absence of quality jobs with social protection has contributed to this narrative.
  • Industrial policies should explicitly target mass job creation, considering both job quality and the provision of social protection.
• Navigating the Challenges of Inclusive Policy Formulation: The government should confront the complexities of formulating industrial policies that foster mass job creation, especially in comparison to policies solely focused on exports.
  • Inclusive policies that align with the overarching goal of creating high-quality jobs and ensuring social protection are essential.
• Treating Job Creation as the Benchmark: The effectiveness of industrial policies should be assessed based on their impact on mass job creation in India.
  • This underscores the significance of addressing concerns related to jobless growth and prioritizing policies that generate inclusive and high-quality employment opportunities.
• Confronting Labor Market Challenges: India's labour market research indicates the prevalence of low-paying, low-productivity, and largely informal jobs in the unorganized sector.
  • With more than 99 percent of India's 63 million micro, small, and medium enterprises (MSMEs) in the unorganized sector, there is limited flexibility for creating productive jobs.
• The assessment of how Make in India, complemented by other policies, has addressed these challenges is crucial.
  • However, the lack of frequent and short-interval official data poses a significant hurdle, necessitating attention to enhance policy efficacy through more regular and timely data collection.

Conclusion

A thorough examination of the nation's circumstances and capabilities is imperative for effective government decision-making.

• India must formulate an industrial policy that extends the advantages of technological advancements beyond just the privileged laptop class.
• However, it is essential to exercise caution in steering discussions on industrial policy, avoiding the pitfalls of showmanship, theoretical oversimplification, or misleading historical comparisons.
• The global landscape demands that India adopt a substantive industrial policy, placing a genuine emphasis on the significance of manufacturing.
• In this context, it is evident that there is no substitute for a well-considered and serious industrial policy.