The Make in India Initiative: Did expectations meet reality?
BY GRACE D'SOUZA/ SEPTEMBER 1, 2023
The Make In India initiative embarked on a journey to reshape India's economic landscape, but its course revealed twists. While strides in investments and reforms brighten the path, the shadow of manufacturing growth, job creation hurdles, and export challenges underscore the terrain ahead.
he Make in India initiative was a visionary campaign aimed to elevate the country's status from being a service-driven economy to a global manufacturing powerhouse. It was more than just a catchy slogan but instead, a call to action aimed at redefining India's economic landscape. The objective was to boost domestic manufacturing, attract foreign investment, create employment opportunities, and contribute significantly to the country's overall economic growth. The initiative's 4 pillars (i.e., New Mindset, New Sectors, New Infrastructure, and New Processes) were built on improving the ease of doing business, liberalising policies, and fostering an environment conducive to both domestic and foreign investors.
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Throughout the colonial era leading up to independence, India struggled under the British Flag. Our leaders recognised an apparent fact, an enemy with a sword could not be defeated unless they had a sword of their own. As a result, the Swadeshi Movement was started to encourage and promote the use of indigenous goods produced in India, boycott foreign goods and block colonial government trade. This later proved to be incredibly effective in India’s struggle for freedom.
Building upon the principles of the Swadeshi Movement, Prime Minister Narendra Modi launched the Make In India campaign in September 2014. The important issue that served as the impetus for ‘Make in India’ was that ‘India can never be a developed country if there is export of wheat and import of bread’ as the Prime Minister remarked. The main goal of the creation of Make in India was to promote the export of final goods rather than raw materials and to reduce the consumption of goods and services of foreign origin. The core objectives of its manifesto were the nation's complete economic independence and financial security.
The main goal of the creation of Make in India was to promote the export of final goods rather than raw materials and to reduce the consumption of goods and services of foreign origin.
This article presents a comprehensive overview of the Make in India initiative, from its inception to the present, evaluating its accomplishments against the backdrop of its initial promises.
Pictured: Illustration by unknown via Pinterest
Expectations of the Make in India Initiative
When the 'Make in India' initiative was first introduced, it was seen as a game-changer for the Indian economy. The objectives were clear: to increase the manufacturing sector's growth rate to 12-14% per annum, create 100 million additional manufacturing jobs by 2022, and raise the sector's contribution to GDP to 25%. These expectations were based on the belief that a strong manufacturing sector would lead to economic growth, job creation, and increased competitiveness on the global stage.
The initiative aimed to attract significant Foreign Direct Investment (FDI) by showcasing India as a favourable destination for manufacturing. The government's focus on 25 key sectors, including automobiles, electronics, pharmaceuticals, and textiles, further fuelled expectations of a manufacturing revolution in the country. The introduction of various policies and schemes, such as the Production Linked Incentive (PLI) Scheme and reforms aimed at enhancing the ease of doing business reforms, added to the optimism surrounding the initiative.
The initiative aimed to attract significant Foreign Direct Investment (FDI) by showcasing India as a favourable destination for manufacturing.
Reality of the Make in India Initiative
Despite the initial enthusiasm, the reality of the 'Make in India' initiative presents a mixed picture. While some progress has been made, there are significant challenges and gaps that need to be addressed.
One of the key expectations of the 'Make in India' initiative was to achieve a high growth rate in the manufacturing sector. However, the actual growth rate has been modest at best, averaging around 4.5% from 2014 to 2021. This falls short of the ambitious targets set by the government. The GDP contribution of the industrial sector is still just about 15%, well below the estimated 25% level. The slow growth can be attributed to various factors, including policy inconsistencies, inadequate infrastructure, and a challenging business environment.
Pictured: Illustration by unknown via Pinterest
The 'Make in India' campaign also set high priority on employment growth with the goal of creating 100 million new manufacturing jobs by 2022. However, the reality has been far from this target. While some sectors, such as mobile manufacturing and automobile, have witnessed job growth, employment generation in the manufacturing sector has been limited. The lack of skilled labour, technological advancements, and the shift towards automation have posed challenges to job creation.
Attracting foreign direct investment was a key objective of this initiative. While there has been an increase in FDI inflows since the launch of the initiative, the majority of these investments have been channelled into sectors such as services and software, rather than manufacturing. The envisioned transition towards high-tech industries and the transfer of technology has also not been completely actualized. However, there has been a success in attracting investment in sectors like mobile manufacturing and pharmaceuticals.
While there has been an increase in FDI inflows since the launch of the initiative, the majority of these investments have been channelled into sectors such as services and software, rather than manufacturing.
Another objective was to increase exports and reduce its reliance on imports. However, the growth in exports has been limited, with only marginal increases observed in the overall export numbers. The composition of exports has remained largely unchanged, and India's share in global exports has not increased significantly. The lack of integration into global value chains and limited progress in trade policy reforms have hindered export growth.
Critical Analysis: Expectations Versus Reality
The reality of the 'Make in India' initiative falls short of the high expectations set for it. While there have been some positive outcomes, such as increased FDI and investment in certain sectors, the impact on the manufacturing sector and the economy as a whole has been limited.
One of the key challenges faced by the 'Make in India' initiative is the inconsistency in policies and the lack of its effective implementation. The government's focus on multiple sectors and the introduction of various schemes and incentives has created a complex policy landscape. This has led to confusion and uncertainty among investors, hindering the ease of doing business. The lack of coordination between central and state governments further adds to the challenges.
Pictured: Illustration by unknown via Pinterest
​The success of the 'Make in India' initiative is primarily dependent on the availability of robust infrastructure and a skilled workforce. However, India faces significant infrastructure gaps including inadequate transportation networks, power shortages, and limited access to quality education and vocational training. These challenges hamper the competitiveness of the manufacturing sector and limit its growth potential.
The initiative also aimed to position India as a global manufacturing hub and increase its integration into global value chains. However, limited progress has been made in this regard. India's trade policies and protectionist measures have hindered its ability to fully engage with global markets. The lack of competitiveness in certain sectors and the absence of a comprehensive export strategy have further constrained India's participation in global value chains.
In addition to this, the 'Make in India' initiative has faced criticism for its potential negative environmental and social impacts. The focus on rapid industrialization and the expansion of manufacturing sectors raises concerns about pollution, resource depletion, and the displacement of local communities. Balancing economic growth with sustainable development and social inclusivity is a significant challenge that needs to be addressed.
​ The focus on rapid industrialization and the expansion of manufacturing sectors raises concerns about pollution, resource depletion, and the displacement of local communities.
While the outcome might not have matched the initial grandeur, it's also important to acknowledge the efforts made to attract investment, improve the business environment, and foster innovation. Going forward, a more focused and holistic approach, combined with comprehensive reforms and strategies that address the identified challenges, can pave the way for the initiative's success in driving sustainable economic growth and positioning India as a competitive player on the global manufacturing stage.
Keywords
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Make in India, Manufacturing sector,economic growth, foreign direct investment, Production linked incentives, Job creation, liberalisation
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References
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