Why Make in India?

Tariff wars between US and China are forcing nations to have a relook at globalization. Transformation caused by globalization was meticulous. It contributed towards a seamless and borderless world. With time countries that have managed to smartly put their competitive advantage in manufacturing to advantage emerged as big players in global trade. Steadily, the gap between the countries widened as countries with superior manufacturing abilities began make huge profits through trade emerging as winners of globalization. China, having emerged as a manufacturing giant, started recording huge trade surplus at the behest of countries that lost out in this competitive race. As a damage control or in real terms, countries which have been grappling huge trade deficits in this case-US, resorted to levying new tariffs. This trend which is labelled as protectionist is also regarded as an anathema to free trade and open markets. Currently India is facing similar situation with respect to the bloating trade imbalances with China. Over years, India has turned into dumping yard for cheap Chinese goods which subsequently took a toll on the Indian manufacturing sector. While China openly championed for free markets it closed doors to Indian exports especially in pharmaceutical and service sectors and enthusiastically imported raw materials. This uncompetitive manufacturing sector coupled with skill deficit and the growing burden of trade deficits started hurting Indian economy.

Owing to America’s protectionist approach, China pledged to champion globalization. But China mortified concept of free markets by imposing restrictions on access to its economy. It has been violating the basic predicaments of free trade like Intellectual Property rights and transparency. Free trade espoused by China has been a myth and in course of time turned it into a double-edged sword escalating trade deficits. Trade deficits together with deficit budget began to push economies into a death spiral. US experienced this double-whammy for a decade plunging the growth rate to less than 3%.  India could even hardly take such glum economic scenario.

To make country self-reliant, Prime Minister Modi introduced the monumental Make in India initiative. While skeptical Indians rue about this flagship initiative, this on long term holds the promise of stabilizing Indian economy and keeps economy rolling. Modi planned to maintain a reserve of $500billion and aimed at receiving foreign investments of $50 to $60 billion to keep Indian economy robust and prosperous. Modi aspires to turn Make in India initiative into a bed rock for Indian economy. The concept of localized manufacturing with foreign investment can generate new jobs, will prompt reskilling, provide impetus for research and development. With the burden of imports gradually tapering, India can use the profits generated as capital. Local manufacturing can reduce the need for currency manipulation which in turn can mitigate currency volatility.

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