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 13th to 18th 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 25th 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 15th 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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