Reason for Failure of Make in India

Introduction

Make in India is the flagship program of the NDA government to improve the domestic manufacturing industry and attract foreign investors to invest in the Indian economy. India is set to be the third-largest consumer economy, with consumption expected to triple by $4 trillion by 2025. The Make in India campaign invites developed and developing countries to come to India and invest their money in India's future. The government must work to make it happen. This article tracks the nature of the effects of the Make in India movement on the Indian economy and also attempts to develop some recommendations for the government based on the projections and shows the future of the campaign. The Economic Census 2012-13 found that the manufacturing sector slowed down to 2.7% in 2011-12 and 1.9% in 2012-13, compared with 11.3% and 9.7% in 2009-10 and 2010-11. This Indian government initiative promotes the domestic manufacturing industry and attracts foreign investors to invest in the Indian economy. The growth target of the manufacturing sector is 12.14% per year and the share of the manufacturing sector in the country's gross domestic product (GDP) to 25% by 2022. The ambition is to make the country a self-sufficient India for young entrepreneurs and create 100 million jobs by 2020. This project includes programs such as Project Bharatmala, Project Sagarmala, Transport Corridor, industrial corridor, UDAN etc. This will boost India's manufacturing sector. 25 global sectors have been added for the benefit of energy, railways, infrastructure, defense, automotive, and many more sectors. The basic idea of this program is to encourage multinational and national companies to manufacture their products in India and also to facilitate investment, encourage innovation, improve skills development and build the best infrastructure of class workmanship in the country. The basic idea behind this program is to make India a manufacturing hub just like China. The Make in India program is vital to India's economic growth as it utilizes existing talent, creates job opportunities, and strengthens its manufacturing sector and its allies. 

Source: www.wikipedia.org

Reason for Failure

First, Make in India relies on foreign capital to invest in global markets and production. It lacked built-in reliability because it had to schedule its production according to the supply and demand situation. Second, too many sectors have collapsed and lost political focus. Moreover, most of India's key sectors lack domestic comparative advantage in the national economy. Third, policymakers were more concerned about the double deficit, including budget and current account deficits. But they ignore the lack of execution in the economy. This created a scenario where we found a breakthrough in performing our business rankings. Fourth, some of the causes of the investment crisis can be attributed to the declining savings rate of the economy and the NPA crisis in the banking sector. Fifth, the annual growth rate of Indian industrial output in FY 2021 was about 8%. Expectations for construction could significantly overestimate India's industrial manufacturing capacity. Sixth, uncertainty in the global economy. Over the past six years, the world has had to deal with four major “shocks of uncertainty”. The first is Brexit in 2016, followed by the US-China Cold War, the Corona 19 Pandemic, and the Ukraine War in 2022. Trade protectionism has risen, damaging economic growth and prosperity. Finally, India, one of the largest FDI destinations in the world, attracted $100 billion in FDI in fiscal 2022. However, the inflow of foreign direct investment tends to flow into the capital market. FDI to manufacturing in 2022 was only about $21 billion. 

Challenges 

• Investments in shell companies: Much of the FDI in India, comes from Mauritius-based shell companies suspected of investing in black money from India via Mauritius. 

• Low Productivity: Indian factories are low in productivity and workers are inadequately skilled. According to a McKinsey report, Indian manufacturing workers are, on average, four to five times less productive than those in Thailand and China. 

• Small Industrial Units: Industrial units are small in size to achieve desirable economies of scale, invest in advanced equipment, and develop their supply chains. 

• Complex Labor Laws: One of the main reasons for a small business is the complex labor laws of a facility with over 100 employees.

• Investments in shell companies: Much of the FDI in India, although neither foreign nor direct, comes from Mauritius-based shell companies suspected of investing in black money from India via Mauritius.

• Low Productivity: Indian factories are low in productivity and workers are inadequately skilled. According to a McKinsey report, Indian manufacturing workers are, on average, four to five times less productive than those in Thailand and China. 

• Small Industrial Units: Industrial units are small in size to achieve desirable economies of scale, invest in advanced equipment, and develop their supply chains. 

• Complex Labor Laws: One of the main reasons for a small business is the complex labor laws of a facility with over 100 employees. The Labor Disputes Act of 1947 required government approval before dismissing an employee, and the Contract Labor Act of 1970 required government and employee approval for simple changes to an employee's job or duties. demand. 

• Infrastructure: Electricity prices are about the same in India and China, but outages are much higher in India. 

• Transportation: Indian railways are overloaded and Indian ports are worse than many Asian countries. 

• Bureaucracy: Bureaucracy and corruption make India less attractive to investors. India has made progress in the World Bank's Ease of Doing Business (EDB) index but still ranks 77th out of 190 countries. Although the EDB ranking improved, the Make in India campaign was unable to increase production over domestic production. India is ranked 78th out of 180 countries in Transparency International's Corruption Perceptions Index. It is very difficult to secure land for factory construction here. India fell 10 places in the Global Competitiveness Index compiled by the World Economic Forum (WEF) held in Geneva recently. 

• Improper rules and regulations: Labor reform and land acquisition laws have not been finalized while attracting foreign investors to invest in India to support Make in India. Going forward, India will face another external challenge in the form of capital flight. Net capital outflows soared as the rupee fell from $54 in 2013 to over $70 in 2019, exacerbated by higher oil prices. 

• Lack of standardized guidelines: India has few guidelines to support Made in India initiatives. As a result, Make in India's track record and entrepreneurship development programs are incompatible. More work needs to be done globally to make Indian businesses more relevant to global businesses and stakeholders in the global economy. 

Way Forward

First, Make in India initiative has been working to ensure that the country’s business ecosystem is beneficial to the investors doing business in India and contributes to the growth and development of the country. This was accomplished through a series of reforms that resulted in increased investment flows as well as economic growth. Last, with this leading initiative, Indian companies aim to ensure that "Made in India" products are also "Made for the World", complying with global quality standards. The manufacturing industry has been sick and neglected for years in its development. This initiative was launched to revive the manufacturing sector. Most importantly, it is credibility that instills confidence in India's ability in the global investment community. Over the past five years, the government has launched several initiatives to support Make in India initiatives such as Strat up India, Sagarmala, Skill India, Smart Cities, Digital India, etc. to make India a global manufacturing hub and improve ease of doing business in India. However, as ambitious initiatives like Make in India typically have long and short maturation periods, it may be premature to evaluate these initiatives. In this context, Make in India should be backed by structural reforms such as streamlining land acquisition procedures, review of labor laws, etc. Bridging the implementation gap could be the first step in this direction. 

References 

•Amit Singla (2017), Make in India: A Major National Initiative to Build Best-in-Class Manufacturing Infrastructure (A Conceptual Analysis), International Journal of Engineering Research & Technology (IJERT).

•Annual Report 2021-22, Ministry of Micro, Small and Medium Enterprises, Government of India.

• Ashish Saxena and Raj Kumar Tomar (2017, June), Make in India: Issues and Challenges, international journal of Science Technology and Management.

 • Dr. Bulla Thirumalesh and B. Bhagyalakshmamma (2020, September), Make in India Advantage, Disadvantage, and Impact on Indian Economy. 

 • Dr. Satya Narayan Misra and Mr. Sanjaya Ku. Ghadai (2015), Make in India and Challenges before Education Policy. • Dr. Aftab Anwar Shaikh and Eram Khan (2017), Make in India Campaign – Pros, Cons, and Impact on Indian Economy. Pune Research Time- An International Journal of Contemporary Studies. 

 • Ms. Sunita Sanghi and Ms. A. Srija (2015, August), Make in India and the Potential for Job Creation, Confederation of Indian Industry. 

 • Rahul Anand, Kalpana Kochhar, and Saurabh Mishra (2015) Make in India: Which Exports Can Drive the Next Wave of Growth? International Monetary Fund. 

 • Veenu Kumar and Seema (2020), Make in India: Impact on the Manufacturing sector, International Journal of Creative Research Thoughts (IJCRT).

Ritesh Bhurse, M.A. Economics (batch 2021-23), Department of Economics, Faculty of Behavioural and Social Sciences (FBSS), Manav Rachna International Institute of Research and Studies (MRIIRS), Faridabad, Haryana. bhurseritesh@gmail.com