The first seeds of ‘Make in India’, a popular concept launched by prime minister in September 2014, seems to have been planted way back in 1944 by Mahatma Gandhi. He was not a professional economist, but advocated certain principles and policies with regard to the development of Indian Economy which he expected the local Indian government to follow after independence in 1947. The objective of the Gandhi Model was to “raise the material as well as cultural level” of the Indian masses, especially those living in six lakh villages dependent mainly on agriculture and the vagaries of nature. He emphasised on reform of agriculture, improving productivity and regional self-sufficiency in villages through cotton and village industries. Gandhi never opposed machineries, however, he always proposed for labour intensive industries to cut down the unemployment problem which was the requirement of that era.
In 70’s, the first Prime Minister of India, Jawaharlal Nehru, and the architect of the first Indian Economic Planning Process, Prof. PC Mahalanobis, a statistician, evolved a model of economic development of India, guided by the directive principles of the constitution of India, which is known as the “Nehru – Mahalanobis Model”.The strategic thrust of this model was on the long term growth in a Mixed Economy, where the state (i.e. the government) has a positive role to play along with the private sector. More emphasis was laid down on the public sector investment, five year planning, import substitution and increasing production. The basic objective was “Growth with Social Justice”. The socialistic slant can be clearly seen in almost all the democratic thinking and policies in the early planning stages. This model worked from 1950 to 1990, for almost 40 years, with the exception of a few years in between under the Janta government.
In 1991, Finance Minister Manmohan Singh, under the Prime Ministership of Narasimha Rao, developed Liberalising, Privatising and Globalising (LPG). The economic situation in India, under the Control Raj, had gone so bad by that time that, there was no other alternative available except to throw the shackles of the control Raj away and adopt a modern open economy for the country by liberalising, privatising and globalising. This model essentially recognised the need for a change in the role of the government in a modern developing economy. The government, however, had a reasonably good success in the area of Liberalisation, which meant reducing / removing the shackles (License Raj Controls) and allowing the private sector, both domestic and foreign, to open up businesses with much lesser restrictions and reservations in India. Thus the economy was opened up for the world players to come and bring with them the new technology and experience. This external investment released the domestic savings to be transformed into desired / planned capital formation to a much greater extent. This is what accelerated the growth rate, after the gestation period of about four to five years. However, the model has few bottlenecks like focus on corporate sector, bypassing agriculture, fear of unemployment in small and medium scale industries, increase in trade deficit and volatility in foreign exchange market, inflation etc.
Dr APJ Abdul Kalam, ex-president of India, has evolved this concept of Provision of Urban Amenities in Rural Areas (PURA) Model, in advocating his vision for 2020 and 2030. The PURA Model involves around connecting physical infrastructure, Electronic communication, Knowledge base economy and Economic Connectivity to enhance prosperity in clusters of villages. The basic idea is to provide urban amenities to rural poor.
All the above mentioned development modules created the boost in manufacturing sector. The percentage share of manufacturing remained at around 15% and the share of agriculture started decreasing and share of services increased over last 65 years. These development modules created a hole in between which is the famous story of “hole in middle” problem. The manufacturing sector has faced a creeping rut over the past decade in India. The focus of past Congress government being on service sector, has led to step-motherly treatment to manufacturing arm.
Modi has combined all development modules and given as his development module which focuses on agriculture, self-sufficiency, FDI, reducing trade deficit and the importantly is boosting the manufacturing. All theories of development modules of economics which proposes the sustainable growth focuses on growth in manufacturing. The make in India campaign focuses on boosting the manufacturing sector which will be sustainable growth for the nation. The campaign is most talked in media as the campaign which increases in employment which is quite obvious, and increases the share in GDP. Instead of naming it Made in India, it is make in India. As the focus of made is in past, whereas make in India pushes to manufacture here in present.
One should wait for one more year to find out whether the lion will roar or not which will depend on political developments rather than economic developments
The success of the campaign depends on several variables rather than only inviting western countries to participate in investment and nation building. We have several examples like POSCO in the past where the foreign investors were not happy after making the investment decision. The campaign requires hand holding of foreign investors by giving them required infrastructural facilities, digital connectivity, improved communication mechanism and creating a sense of ease of doing business.
The other important political variable is centre and state relationship. The way BJP is losing the state elections and PM Modi being singled out in party is a major concern for the investors. The upcoming west Bengal and UP elections are the deciding factors for further investment. BJP won the last election because of failure of congress in 2014, whereas 2019 elections need to be faced based on performance of BJP. Only advertising and lofty claims by central government will not work. However each state government should provide a conducive environment for manufactures. At present the fiscal deficit in north east states are higher than other states, however the states like Jammu and Kashmir, Uttar Pradesh etc. receives highest grant from the government. These will lead to the concentration of power in few states by further leading to the inequality between the states and people of India.
The skilled people of India are not flexible for moving from one state to another. A south Indian does not wish to settle in Delhi where as a person from Delhi can’t settle at Chennai. The people are becoming too possessive regarding their hometown because of the increased income from last 10 years. For companies moving to north east is feasible as they receive enough facilities from government, however getting skilled and committed manpower becomes an area of concern. Make in India will not be a success by establishing only the factories and providing the employment but Government should provide all other facilities including the education, and other support services for families. Sustaining the beauty of the campaign depends on how fast we create all other services which might take several years.
Based on the condition of talent pool in India, imagine the kind of effort government needs to put in to train the unskilled labour and migrating farmers. No foreign country will set its foot on our soil without improving labour skill set. It takes a highly concentrated effort to do this and there should be multiple initiatives as such to identify candidates, train them and track their progress. Every district in each state should have a village development centre to implement the training. If needed the government should involve NGOs who are willing to take this up to conduct training and track the progress.
Make in India logo signifies lion with industrial wheels is a sign of India roaring. The definition of FDI in past, ‘First Develop India’ will change to foreign direct investment if all variables put together works equally. One should wait for one more year to find out whether the lion will roar or not which will depend on political developments rather than economic developments.
Written By: Dr Shailashree Haridas