Gupta 0

ABSTRACT

This paper contains the criticism and

evaluation of all six stages of the Make in

India policy.

Tanya Gupta
MAKING SENSE OF
MAKE IN INDIA
 Gupta 1

Tanya Gupta

Prof. Shanthi Karuppusamy

Introduction to public administration

13th April, 2017

Making Sense of Make in India

Introduction:

In order to fully understand the Make in India project, we must take a brief look at the

history of the country. ‘Swadeshi’ was a movement that was initiated post-independence. It

basically meant that we must produce our own goods and give them preference over goods that

were imported from Britain. The British would export raw products like cotton, jute, rice and

metals from India. They would then manufacture goods using these raw materials in Britain and

then sell them back to our country at a much higher cost. This would discourage manufacturing

in India. Indians then tried to substitute the imported goods by goods they produced in their own

homeland. This substitution would have worked had it not been for one major flaw: India was a

crude oil importer and this could not be substituted by any goods we produced in our country.

Whenever the prices of crude oil hiked, it would take a toll on the economy of the country. In

1991, when Iraq invaded Kuwait, this led to a rise in prices of crude oil and India was close to

bankruptcy. This is when it was realized that the only way to avoid the recurrence of such a

situation in the future was to turn India into a a global manufacturing hub. Over the years, our

government has tried to come up with a solution. Around 30 years later, the Make in Indi scheme

was introduced.
 Gupta 2

Why this policy was formulated:

Make in India was an initiative launched by the Indian Prime Minister, Narendra Modi,

on 25th September, 2014 in order to boost domestic manufacturing and to make attract foreign

investors and buyers into the country. In the past, foreign industries used to acquire Indians to

work for them because of their cheap availability. This was causing a brain drain in the country

as the youth were settling abroad in order to grab better job opportunities. Modi once said,

"Unless we go to the world with innovation and research... like in the IT sector we have shown

our prowess 25 years back but we didn't create a 'Google', our talents have gone abroad”. But the

formulation of this policy would help boost India’s manufacturing department. The Prime

Minister envisioned that this yojana would make India a hub for manufacturing and this would

cause all nations to invest in our country. The investment would be done in almost all the sectors

from electrical to electronics, from automobile to agriculture, satellite to submarine etc. "We

must look at how to develop Brand India globally... Unless it is there we will not be able to make

a name for ourselves in the global market”, the PM said. Earlier, if investors came to India they

would have to face many hurdles due to the policies that were in place. Due to these difficulties,

India would often lose out on investments. The faster India would pull out of poverty and start

earning a living, the better it would be for the progress of the country. India has a unique

combination of democracy, skill sets and resources which need to be utilized to their full

potential. The businessmen in India were not happy because of the policies that were in place

that made trade with the country a very tedious process. There was a need for long term

sustainability in the country along with dignity of labor and equality. Self-reliance, sovereignty

and leadership were also one of the key features that needed attention. The PM of the country
 Gupta 3

said that all round growth and development of the country was one of the key concerns of the

government. And new policies had to be brought in to achieve these goals.

India has recorded trade deficits in the past few years due to higher rate of import of

commodities such as crude oil, gold and silver, as compared to the export ( Fig.1). The biggest

trade deficits were recorded with China, Iraq and United Arab Emirates as can be seen in the fig.

2. The project would help the country get out of the deficit.

Fig. 1: Goods that India imports and exports (taken from the Guardian Newspaper)
 Gupta 4

Fig.2: Trade deficit of our country

Agenda setting:

Modi acknowledged the fact that India was being ranked low in the ‘ease of trade’ (130th

out of 190) category by the world bank and as a method to rectify the situation, he formulated a

special cell in the Commerce Ministry named ‘Invest in India’ which would guide foreign

investors with the policy issues and would assist them to obtain clearances in order to carry out

business in the Indian land. The main objective was to create more jobs for the youth of the
 Gupta 5

country, thereby increasing the rate of employment in 25 sectors of the country that can be seen

as follows:

Fig.3: Sectors In which the project was implemented

Modi’s economic policy has been straight forward. He wishes to attract investors from

China into our country. He has traveled to 29 nations since the commencement of his term and

the main objective of these trips has been to gain investors. The ‘Make in India’ campaign is a

lot like the Nehuruvian policy of large scale industrialization in our country but it also varies in

many aspects because the economy of the country today is very different from what it was in

Nehru’s time. Around 53% of the 475 billion working people in the country work for agriculture

while manufacturing and services together employ 25% of the work force today. (fig. 4) These

numbers suggest that while agriculture employs a large section of the people, the pay is not very

high and so the impoverished villagers try to move to the more industrialized urban areas but

there are not enough jobs available. Most of the jobs in the country are low-paying and labor-
 Gupta 6

intensive. The ‘Make in India’ project will thus attract foreign and domestic investors and create

more jobs in the industrial department.

Sales

Agriculture Manufacturing Non-Manufacturing Services

Fig. 4: Employment sectors in the country

The project has been launched in an attempt to make the country a hub for labor-

absorbing manufacturing, like China. Above, we see that our country had a problem of

unemployment, a solution to the problem was put forth, and the solution was implemented in the

form of the ‘Make in India’ project.

Policy Formulation Process:

There are four major policies under the Make in India project:

1) New Initiatives: this intends to increase the ease of doing business with India. All

income tax returns can be filled online, validity of the industrial license is to be extended
 Gupta 7

by 3 years, businessmen are replacing paper registers with electronic registers so as to

increase speed and reduce errors.

2) Foreign Direct Investments (FDI): In August 2014, the Cabinet of India allowed 49%

foreign direct investment (FDI) in the defense sector and 100% in railways infrastructure.

The defense sector previously allowed 26% FDI and FDI was not allowed in railways.

This was done in the hope of bringing down import goods in the country.

3) Intellectual Property facts: the government is trying to protect the right of intellectuals

by improving the law and by using better technology and infrastructure. A patent,

trademark and a copyright is to be issued to all intellectual property. The process of

attaining these was made much simpler.

4) National manufacturing: the main aim was to increase the manufacturing sector’s

growth by 12-14% per annum, to increase the GDP of our country from 16% to 25%

2022 and to create 100 million new jobs in the country by the end of the year 2022. This

would help India attain global fame in the manufacturing department. All of the above

were to be attained in sustainable way with respect to the environment.

Fig. 5: Various policies under the project

 Gupta 8

India is used to seeing the government as a regulator in the industry but the ‘Make in India’

sought out to bring about a paradigm change in the way the country functions. The government

will partner and help in economic development of the country: it will act as a facilitator and not a

regulator. This campaign was launched by Modi in the Vigyan Bhavan in September, 2014.

After this, a workshop was held in the Department of Industrial Policy and Promotion. The

Prime Minister, cabinet ministers and industry heads attended it. This aided in educating them

about the policy. The program was built on a lot of collaborative effort. Industry leaders as well

as Government secretaries made a plan that aimed to increase the GDP of our country by 25% in

the next few years. As mentioned before, the major objective was job enhancement and attraction

of foreign investors to the country.

The campaign was designed by an American advertising agency, Weiden+Kennedy.

Brochures and an online web portal were launched in the targeted 25 sectors. Applications for

licenses to invest in the country were made easily available. Factor feasibility and efficiency:

Economic technical effectiveness political admin moral and ethical

Factor Feasibility and Efficiency

Economic Technical Effectiveness Administrative Moral and Total

ethical
Weightage 0.4 0.15 0.1 0.2 0.15 3
No Imp. 1 1 0 0 1
=1X0.4 =2X0.15 =0X0.1 =0X0.2 =1x0.15 0.85
Part. Imp. 2 1 1 1 1
=2X0.4 1X0.15 1X0.1 1X0.2 1X0.15 1.4
Full Imp. 3 2 3 2 2
=3X0.4 =2X0.15 =3X0.1 2X0.2 2X0.15 2.5
Table 1: Full, partial and no implementation of Make in India Project
 Gupta 9

Factor Feasibility and Efficiency

Economic Technical Effectiveness Administrative Moral and Total

ethical
Weightage 0.3 0.25 0.25 0.1 0.1 3
No Imp. 1 1 0 0 1
=1X0.3 =2X0.25 =0X0.25 =1X0.1 =0x0.1 0.9
Part. Imp. 2 1 1 1 1
=2X0.3 1X0.25 1X0.25 1X0.1 1X0.1 1.8
Full Imp. 3 2 3 2 2
=3X0.3 =2X0.25 =3X0.25 2X0.1 2X0.1 2.55
Table 2: With changed weightages for all factors.

Through these tables, we can clearly see that fully implementing the make in India policy

is most beneficial. It helps in economic development of the country as well as improving the

quality of life of the citizens.

Legitimization process:

Make in India was a different kind of campaign. It did not base itself on advertisements

laden with statistics. Instead, it required messaging that was actually informative. The policy had

to make India a tempting place for business for potential foreign partners, it had to improve the

manufacturing departments of the country in the said 25 sectors and it had to reach out to global

investors and keep them informed of the investment opportunities in the country. The

Department of Industrial Policy & Promotion worked with a group of highly specialized

agencies to develop a brand-new infrastructure. A helpdesk and a website was also set up. The

website is mainly designed for mobile phone users and it neatly showcases the project in great

detail, thus making it highly informative. Separate brochures for each of the 25 sectors were

developed and these had important facts and images, new policies as well as various other sector

specific details. These were made available both in print and online.
 Gupta 10

However, some people were against the implementation of this policy. Raghuram Rajan,

a former governor of the Reserve Bank of India (RBI) and a well renowned economist, was one

among them. He was of the opinion that the government wanted to make more in India. This

would mean improving the efficiency of production in various industries, be it agricultural,

manufacturing, or services. He said that slow growing companies would not be able to absorb the

significant amounts of imports that they would have to face in the future years while some other

faster growing companies would be able to manage this and India would be able to export goods.

But the world would not be able to handle another exporter like China. According to him, export-

led growth isn’t as easy for Asian counties now as it was earlier. He said that since there would

be a reduced demand externally, we would have to focus more on building our internal market

instead of branching out and seeking foreign investments. We would have to build a strong,

sustainable and unified market of our own.

There was also a political row over the policy. The Congress criticized Modi for taking

credit for the Digital India scheme and the Make in India policy by saying that Rajiv Gandhi had

initiated it and Modi was just reaping all the benefits of these schemes. When Modi visited the

US in order to seek foreign investment, Delhi Chief Minister of the Aam Admi Party (AAP),

Arvind Kejriwal criticized him by saying that the PM should focus on his own country first. He

should improve infrastructure of the manufacturing department of the country instead of going to

other nations and pleading for assistance. He was of the opinion that if we make our own country

strong and able, the world will follow.

Hitting back on the opposition, The BJP said that Modi’s initiative will provide

employment to millions of people in the country. They also said that Arvind Kejriwal should
 Gupta 11

focus on the governance of Delhi instead of looking for flaws in nation-wide policies. Despite all

the criticism, the policy was still legitimized and implemented.

Implementation of the Policy:

The make in India project has been going in full swing ever since its inception in 2014.

but everyone’s mind is concerned with the obvious question; “how is the project doing?”. If one

were to believe the headlines, one would think it is doing very well. There was a 27% increase in

FDI in the year 2015-2016 and the Finance ministry quoted this as an overall success for India.

Apple manufacturer, Fuxconn, decided to open 10-12 manufacturing centers in the country. This

might also trigger the arrival of other multi-national companies into the country. Mercedes Benz

has decided to manufacture more of its car parts in the country. BMW has also increased its

localization to about 50%. Various other companies like Lenovo, Micromax, Qualcomm and

Boeing signed manufacturing deals with our country. This project boosted foreign confidence in

the Indian economy (fig. 6). The project would help increase the value of the Indian rupee. It

would also increase the brand value of the small manufacturers in our country. Currently, most

of the urban population relies on foreign brands. If these brands started producing their products

in India, it will give India manufacturers a fair shot in the global competition. India is currently a

developing country therefore it lacks the latest machinery. If foreign brands come into the

country, Indians get more technology savvy. Currently, most of the young generation of India

move out in search for work, but they will now be able to stay in the country and take the

industrialization to new heights with their fresh mindset. The campaign would also result in the

development of rural areas and the quality of life would automatically increase. Since the

beginning of capitalization, India is spending its currency on foreign brands, but now, foreign
 Gupta 12

currency will be spent on India as well in the form of investments and wages. This is how the

program will benefit the country and help it grow.

Fig. 6: Confidence in Indian economy boosted

Narendra Modi said, “Make in India is a lion’s step initiative. On one hand, it will

increase manufacturing growth and at the same time it will benefit the youth of the nation in the

form of employment.

But a closer look at the situation reveals that the result of the initiative isn’t a bed of

roses: there are many problems too. According to the most recent analysis conducted by the RBI

about the FDI in the country it can be clearly seen that after a jump to 9.6 billion in 2014-2015,

the FDI actually fell to 8.4 billion in 2015-2016. This was even lesser than the FDI in 2011-2012

(9.3 billion). This data is consistent with the data from the Department of Industrial Policy and

Promotion. (fig.: 7)
 Gupta 13

Fig. 7: Fall in FDI in the last fiscal year

the percentage of FDI going to the manufacturing department has also reduced in the last

year. (Fig. 8). The major funds are going to online businesses like Amazon and Flipkart. This is

reducing the amount of funds that can be allocated to manufacturing.

 Gupta 14

Fig. 8: (Source: Reserve Bank of India)

These graphs go on to show that every coin has two sides. Even though there has been a

high FDI in the year 2015-2016, the amount of it going to manufacturing is significantly low.

The policy implementation is not as glamorous as it is portrayed on most of the government

owned website. It has done a lot for the betterment of the country and there is no doubt about

that. 2.75 lakh jobs have been created in the year 2014 (after Make in India) as opposed to the

1.16 lakh new jobs in the year 2013 (before Make in India). This exponential rise is definitely

because of the campaign. But this was largely because of the improvements in sentiments and the

huge optimism as seen in the masses after the formulation of the policy.

On the other hand, this policy would lead to neglection of agriculture which would be

harmful for our highly agrarian economy. 61% of India’s land is fit for agriculture and the

introduction of new industrial centers on this land would disrupt the livelihood of the farmer. The

focus on manufacturing might also lead to a depletion of precious natural resources such as

water, metals, textiles etc. that India may not be able to replenish. The campaign would also

result in a loss for the small entrepreneurs in the country because it invites foreign investments in
 Gupta 15

the country. One of the biggest problems that the campaign would face is pollution. India has a

pollution index of 76.5. increasing the number of industries in the country would only lead to an

increase in the index and this will have an adverse ecological effect. It will also cause bad

relations with China as it challenges Chin’s dominant position in the export center because of the

presence of a younger and more skilled work force in India.

I am of the opinion that even thought this policy has many disadvantages, it should not be

completely done away with due to its multiple advantages. Although, we must try our best to

clean as we move along so as not to damage the environment completely due to the pollution that

will be caused due to large scale industrialization in the country. We must also try our best not to

let the industrialization interfere with the agricultural sector as far as possible because as

mentioned above, agricultural land forms a major part of the country. The manufacturing and

export center of the country should not clash with that of China so as to maintain friendly

relations with our neighboring countries.

Like every other policy, this too has its cons but they can easily out-weighed by the pros

provided we step with caution. Moreover, the Indian workforce is skilled in manufacturing

products like textiles, handicrafts and agro-based products and we mustn’t forget this. Rather

than refocusing the entire Indian manufacturers on industrial products, we must also continue

manufacturing our own Indian textiles and handicrafts because there exists a global market for

these goods. This is the message for the new campaign: a “make in India” policy must have

made-in-India skills as its inevitable ingredients.

In conclusion, I would like to say that the ‘Make in India’ project can take the nation to

great heights only if it is executed properly while keeping all the potential downfalls in mind.
 Gupta 16

Works Cited
"About Us." About - Make In India. N.p., n.d. Web. 07 Apr. 2017.
Das, Bijaya Kumar. "Political Row Erupts over PM Modi's Make in India, Congress, AAP Say Make
India First." India Today [New Delhi] 27 Sept. 2015: n. pag. Print.
D'Costa, Anthony. "Modi’s Mantra to ‘Make in India’." East Asia Forum (n.d.): n.
pag. Http://www.eastasiaforum.org. University of Melbourne, 25 Oct. 2015. Web. 7 Apr. 2017.
"Make in India." Make in India - Vision, Criticism, Sectors, Benefits, and Disadvantages. N.p., n.d.
Web. 07 Apr. 2017.
"Making Sense of `Make in India'." Down to Earth. N.p., n.d. Web. 07 Apr. 2017.
"PM Launches 'Make in India' Global Initiative." Www.narendramodi.in. Narendramodi.in, 25 Sept.
2014. Web. 07 Apr. 2017.
"PMINDIA." Prime Minister of India. N.p., n.d. Web. 07 Apr. 2017.
Sai, Nishi. "PM Modi's 'Make in India' Turns One." DNA [Mumbai] 25 Sept. 2015: n. pag. Print.
Shankaran, Sanjeev. "What Raghuram Rajan Actually Said on Make in India, Hitler and
Tolerance." Times of India. N.p., 20 June 2016. Web. 7 Apr. 2017.
Verma, Prachi. "Why Make in India May Be the Answer to India's Unemployment Puzzle Read More
At:
Http://economictimes.indiatimes.com/articleshow/51002694.cms?utm_source=contentofinterest
&utm_medium=text&utm_campaign=cppst." The Economic Times. N.p., 16 Feb. 2016. Web. 7
Apr. 2017.