Make In India: Has The Ambitious Initiative Lived Up To Expectations?

Make In India initiative | Representative image | Photo courtesy: Special arrangement

The Make in India initiative, a flagship program launched by the Government of India in September 2014, aimed to transform India into a global manufacturing hub and promote domestic manufacturing across various sectors. As the initiative approaches nearly a decade since its launch, it has yet to be able to make a significant impact.

Dr Ajay Sahai, Director General & CEO of Federation of Indian Exports Organisation (FIEO) speaks to Pragynesh. 

Anil Bhardwaj, Secretary General of the Federation of Indian Micro and Small & Medium Enterprises (FISME), states that the initiative, which was supposed to propel the growth of Micro, Small and Medium Enterprises (MSMEs), has failed them. He notes that the Multinational Corporations have benefited from the initiative. “Make in India initiative was conceived with the idea that promoting large companies to manufacture products domestically would create a ripple effect, benefiting Micro, Small, and Medium Enterprises (MSMEs) as suppliers to these local entities. However, the reality has shown that many Multinational Corporations (MNCs) have taken advantage of the initiative, while the impact on MSMEs has been limited. While MNCs have the resources and capabilities to establish large-scale manufacturing operations, MSMEs often struggle with limited resources, technology adoption, access to finance, and market access barriers.”

Bhardwaj adds, “For Make in India to succeed, we must substantially change our public procurement policy both in the state and the central government. They have kept exaggerated value additions like 25 to 40 per cent. The MSMEs face several challenges in meeting the value addition requirements. Only MNCs have the competency to achieve this. The requirements should be realistic and reflective of the capabilities and limitations of MSMEs. The Make in India policy has to be flexible so that different sectors can benefit from it. For MSMEs, it is challenging and cumbersome. Only large companies can lobby with government departments and get the value addition requirements changed. We need to sit and rework the policy".  

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The idea behind the Make in India initiative was to transform India into a global manufacturing hub. The focus was on attracting both domestic and foreign investment in the manufacturing sector and promoting the production of goods within India, and also drive economic growth by increasing the share of manufacturing in India’s GDP. However, despite its goals and efforts, the policy has faced several challenges that have significantly hindered its ability to increase manufacturing in India. 

According to Professor Jayan Jose Thomas, an Economics professor at IIT Delhi, India has not been able to achieve its full potential in terms of manufacturing. He points out that India’s share of manufacturing in growth value addition is only around 17 per cent, which is significantly lower compared to countries like China. Additionally, the proportion of India’s workforce employed in manufacturing stands at only 12 per cent. “The employment figures in manufacturing have not shown substantial growth either. As per the household employment survey, the number of people employed in the manufacturing sector was around 61 million in 2011-12, but it declined to 60 million in recent years. This decline was primarily observed in very small industries, while larger industries experienced some expansion."

According to Amit Basole, Head of the Centre for Sustainable Employment and Associate Professor of Economics at Azim Premji University, a significant obstacle to evaluating Make in India is the lack of available data. This absence of data presents a significant challenge because it hinders our ability to assess the initiative’s effectiveness, identify areas of success or failure, and develop solutions to existing problems. In addition to evaluating the overall effectiveness of Make in India, the absence of data also hampers our ability to identify specific sectors or regions that have benefitted the most or faced the most challenges. This information is crucial for policymakers and stakeholders to allocate resources effectively, target interventions, and address any imbalances that may exist within the initiative.

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Basole points out that while there is an annual survey of industries in the manufacturing sector, the data it provides typically has a lag of a few years. This delay in obtaining relevant information makes it difficult to analyse the real-time impact of Make in India on the manufacturing sector. In order to ensure the initiative’s success, it is crucial to continually monitor and evaluate policies, making adjustments as necessary. However, without timely data, it becomes challenging to adopt evidence-based policymaking and accurately measure the outcomes of such initiatives.

“To ensure the success of the Make in India policy, it is essential to subsidise and promote domestic manufacturing. However, this must be done in conjunction with other initiatives. A significant focus should be placed on investing in local infrastructure. Additionally, addressing issues such as credit accessibility is crucial, as small firms are often excluded from obtaining the necessary funding. Another critical challenge to tackle is the quality of the workforce. Many graduates entering the job market are not adequately prepared, requiring companies to invest additional time training them. To make the Make in India policy truly effective, there is a considerable amount of work that needs to be done,” affirms Basole. 

Dr Ajay Sahai, Director General & CEO of the Federation of Indian Exports Organisations (FIEO), states that there has been some progress in certain sectors. Dr Sahai highlights the positive developments in the electronics sector. According to Dr Sahai, in the financial year 2016-17, the net deficit in the mobile industry alone was approximately $20 billion, indicating that imports of mobile phones exceeded exports by that amount. However, in the subsequent years, there has been a significant reduction in the deficit. By the last financial year, the deficit had decreased to $3.5 billion. Furthermore, Dr Sahai mentions that in March, India witnessed a net surplus in the mobile sector, indicating that mobile phone exports from India exceeded imports, and he notes that similar improvements have also been noticed in other goods with regard to the electronics sector.

The Make in India initiative aimed to simplify regulations and attract investment, but there have been concerns about the actual implementation on the ground. Bureaucratic hurdles, complex regulatory processes, and inconsistent enforcement have acted as obstacles that hindered the ease of doing business in India. The policy also faced challenges in addressing skill gaps and ensuring the availability of a skilled labour force. Along with this, the complex tax system in India has only compounded the problem, not to mention the other issues like the pandemic and the global economic factors that have influenced the outcomes of the Make in India initiative.