Propitious Beginnings: Make in India Week

Last week, while the main stream media of India passionately indulged on abrasive anti-national debates, Make in India Week (MII) of Mumbai held from Feb 13^th to 18^th was featured in nearly 3200 articles world over (1). Except for the fateful fire accident that engulfed the main stage during the Maharashtra Night Program at Girguam Chowpatty, MII week was barely covered by the 24X7 Indian media channels. Make in India (MII) was launched by Prime Minister Modi on September 25^th 2014 to turn India into a manufacturing hub by encouraging the multi-national and indigenous companies to manufacture in India. The underlying objective of MII is to create more jobs by increasing the share of manufacturing to GDP which is currently 16% to 25% over the next decade. The idea of ushering India into economic prosperity was envisaged by Modi during his first address to nation as Prime Minister from the ramparts of Red Fort on August 15^th 2014.  Ever since the launch of MII, Modi with his jamboree team of dedicated professionals have consistently worked towards attracting foreign investments. Congruently, business interests, fostering trade and attracting FDI has been high on Modi’s agenda on his bilateral state visits too. In the past 20 months, Modi government received an FDI of $64 billion and now the MII week managed to get investment commitments worth $222 billion (15.2 lakh crore). Out of the total commitment, 30% is from foreign firms and 8 lakh crore was received by the host state Maharashtra alone (2).

Indian economy unlike the stabilized economies of the South East Asia is largely supported by services sector. Modi government believes that the potential of manufacturing sector capable of creating vast number of employment opportunities is largely untapped. Taking the advantage of the demographic dividend, Modi Government objectively pushed MII with a grand aim of creating 100 million manufacturing jobs. Unfortunately, India critically lacks extensive infrastructure, further the global perception of India in terms of ease of doing business and impervious tax regimes largely works to its disadvantage. On the contrary, India endowed with enviable human resources, strong network of entrepreneurs and growing consumer market make it a lucrative investment destination. The campaign of MII stuck a global cord as MII week witnessed the participation of over 2500 international and 8000 domestic companies; foreign delegates from 68 countries and business teams from 72 nations. The opening ceremony was attended by the Prime Ministers of Sweden, Finland and deputy Premier of Poland. Besides, 13 Union Cabinet ministers, representatives from 17 state pavilions were present luring the manufactures to invest in their respective states.

There are conflicting opinions about India’s march towards becoming a global manufacturing destination. To this end, it is important to understand the contemporary global manufacturing scenario. Ever changing wage costs, energy costs, productivity, and depreciating currencies are to be taken into account to assess cost competitiveness of a country. As per Boston Consulting Group (BCG) India has second lowest manufacturing costs after Indonesia making it a potential choice in terms of cost competitiveness (3). But it loses ground in factors related to business environment, ease of operation, transparency, access to credit, administrative hassles and low judicial strength. In order to maintain cost advantage, India has to substantially keep a check on labor wages. India aims to spur development by empowering middle class who can steer the economy but by keeping wages low, the entire glitzy of MII would be counterproductive. Setting stage ready for MII, government of India has increased the FDI in defence (to 49%) and Railways infrastructure (to 100%) in August 2014 itself. MII identified 25 sectors which includes construction, textiles, food processing that require low to moderate skills and high skill-intensive sectors like aviation, defence equipment, manufacturing an electronics. Thus MII, according to some firms is expected to generate 7.2 lakh temporary jobs by next year and as investments gain more traction 8-13% additional jobs can be created (4). MII apart from job creation aims at skill enhancement, production of high quality goods with a minimum impact on environment. The slogan Zero Defect and Zero Effect coined by Prime Minister aptly describes the objectives of MII. Implying that pet initiative of Prime Minister aims at producing goods with zero defects through processes that have zero adverse effects on the environment. In the process, MII will offers a great scope for new innovation too.

In the past 20 months major foreign players have pitched in to invest in India. The illustrious list includes $ 5 billlion investment from electronics manufacturer Foxconn over a period of five years to set up R&D and sophisticated semi-conductor manufacturing unit in Maharashtra and $ I billion investment from General Motors. Lenova has set up Motorola smart phones manufacturing unit at Sriperambadur near Chennai. Boeing announced that it would soon start assembling of fighter planes and defence helicopters Apache or Chinook. Taiwan’s Wistron Corporation will soon start manufacturing unit at Noida. Ministry of Railway signed a deal with Alstom and GE transport to set up locomotive manufacturing at Madhepur and Marhaura in Bihar. Even Spice Group, Samsung, Huawei, Xioami has entered into talks with respective state governments to setup manufacturing units in India and some of them have even begun their operations. Under the Design in India, Qualcomm announced that it would mentor 10 Indian hardware companies in upgrading their innovative solutions. Besides, Japan Prime Minister Shinzo abe on his visit to India agreed to invest $12 billion in Made in India related projects. On his visit to Russia, Modi sealed first defence agreement under which Kamov Ka-226 multi-role helicopters would be built in India. Announcement by Lockheed Martin during MII week to manufacture F-16 possibly by early next year is a major shot in arm for India. Major commitments made during the event include those of Oracle, Ascendas and by the Indian firm Rashtriya Chemicals and Fertilizers. With investors reposing great faith in Indian markets, India clearly emerged as a preferred destination for foreign investments. For the first time at the MII week, India-made robot Tata Brabo was showcased. This affordable robot intended for small and medium enterprises was developed by TAL Manufacturing Solutions of Tata Motors.

With foreign investments entering the Indian markets, there has been palpable excitement and people are optimistic of better employment opportunities. But economists argue booming investments may not create proportionate number of jobs because of competitive rise of robotics. Most of the multinational companies of late, are replacing manual labor with machine. Foxconn which assembles Apple products is now slowly automatizing its units dashing the hopes of creating millions of manufactured jobs. In fact, Modi during the inaugural session of MII met Yu Mi, a state of art robot designed to meet the needs of manufacturing units. Rapid technological advancement and consequent fall in price of robots are paving way for increased automation. Manufacturing units are now opting for robots due to attractive returns on investment. Hence while India might truly emerge as an important manufacturing hub, the extent of job creation may fall short of the expectations. India with a burgeoning pool of employable youth automated manufacturing may be counterproductive. Economists do opine that developed countries have reached saturation levels in manufacturing jobs and China in fact is the latest country to join that pool of industrialization. While the efforts undertaken by Prime Minister are laudable, but India seems to be a late entrant to the process of industrialization. For a sustainable development in a country like India alternative mechanisms of engaging the new labor force entering every year has to be unleashed.

In fact some researchers who believe that industrial revolution has reached a pinnacle are lobbying for an alternative stratagem for MII- the Circular economy. It is a system wherein resources and materials are endlessly recycled. “It’s not just about product recycling or take back-programs or reuse, it’s about the reordering of global production and consumption systems, of sustainable living and of course it heralds new business opportunities”. This latest system pioneered by Aditya Birla Group has been successfully tested and tried by many multinational companies like Dell, Caterpillar, Coca-Cola, General Electric, Ford, Jaguar Land Rover (5).

Finally, to realize the gains made by the ambitious MII program, government has to clearly chart out policies for improving ease of doing business, develop a stable and transparent tax-regime. Moreover, to capitalize the investments there should be greater coordination between the Centre and states. Modi government has strengthened India’s federal fabric by allocating more resources and finances. The success of these enterprising ventures largely depends on firm footing of respective state governments. MII, in part mirrored interests of various state governments. Interestingly, all BJP-ruled states, Karnataka, Odisha, Uttar Pradesh and Telangana have actively participated in the event. Of all, MII is expected to give major boost to the defence sector through strengthening of defence industrial base (DIB). India is currently the largest arms importer accounting for 14% of global share. 

 

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