The Make in India scheme is an initiative that Prime Minister Narendra Modi launched on 25th September 2014. The scheme aimed to not only make India self-sufficient but also transform India into a global design and manufacturing hub. As an invitation for foreign direct investment, India opened its gates to accelerate globalisation in India. This vigorously opened up the economy’s various sectors, such as defence, railways, construction, insurance, etc for FDI. It covers 25 key sectors ranging from Aerospace and Defence, Pharmaceuticals and Medical Devices to Bio-Technology, etc.
Another initiative was also launched under this scheme by the Prime Minister on January 16, 2021 called Startup India. It is a flagship scheme meant to build a strong ecosystem for nurturing startups in the country. The Production Linked Incentive (PLI) scheme was launched in 2021 across 14 key manufacturing sectors as an addition to boost the Make in India scheme. It promotes and strengthens domestic production in strategic growth sectors to give India the upper hand.
For quite some time, India faced the drawback of poor infrastructure which was slowing down the manufacturing sector and acted as a roadblock to attracting investments. One of the targets of the Make in India scheme was to upgrade the current infrastructure and provide modernised high-quality logistics infrastructure. Making administrative processes and regulations uncomplicated was a fundamental step to make the manufacturing process easier for companies and to also avert red tape hindering as well as bureaucratic hurdles. There was a widespread deficit of skilled workers across the country, and they were in desperate demand in all the manufacturing industries. Further India was trailing behind when it came to technological innovations and advancements which were desperately needed to boost the efficiency and productivity of the country.
So what did the Government of India expect from the initiative?
The scheme was designed to generate employment opportunities for millions of people in various manufacturing-related sectors. Thereby increasing the productivity of the nation as a whole. Boosting economic growth by adding to the country’s GDP can improve India’s position globally, and according to the Ease of Doing Business index, India was ranked 63rd in the world out of 190 countries in 2020. This brought down India’s dependency on other countries and developed a sense of self-reliance by promoting domestic production to strengthen the Indian economy. It brought in huge inflows of Foreign Direct Investment by building the confidence of international investors in India’s manufacturing potential. It additionally promoted smaller initiatives and programs like Skill India 2015 to instil skills and knowledge in the workforce and youth, enhancing their competence to meet the demands of the manufacturing industries.
The impact of the scheme in question is very promising. The FDI inflows in India stood at $44.01 billion at the end of 2014 which gradually increased to $60.22 billion in 2017 and hit an all-time high of $84.83 billion during the FY 2021-22. The latest FDI inflows stand at $70.95 billion for FY 2023-2024. These FDI inflows have come collectively from 101 countries and India is currently moving towards obtaining $100 billion this FY. In the last six financial years (2014-20), India has received an FDI inflow worth USD 358.30 billion which is 53 percent of the FDI reported in the last 20 years USD 681.87 billion. India’s GDP has been on the rise since the introduction of the scheme and is expected to reach US $6 trillion by FY27. The only low was in FY21 when the GDP growth was at 5.8% due to the COVID-19 pandemic, which slowed down the manufacturing sector greatly as exports were at an all-time low. Further, the GDP growth rate during 2022-2023 was 7% while the estimated GDP for 2023-2024 is at 8.2%. There has been a rapid increase in job creation and employment generation since the launch of the initiative. A significant increase of over 80 million jobs from 2017 to 2023 has been recognised.
As a result of the manufacturing sector growth, exports of both merchandise and services have largely increased. In the previous fiscal year, the export value stood at $762 billion, $453 billion from products, and $309 billion from services.
On the other hand, the former RBI governor, Raghuram Rajan had a contrasting view on the growth of India. He thought that India was making a big mistake in believing the “hype” about its growth. According to him, India had to do a lot more work to get to 8% growth on a sustainable basis. Rajan had sounded a word of caution about the new government's 'Make in India' campaign, saying it assumes an export-led growth path of China and it should rather be 'Make for India' with a focus on manufacturing products for the domestic market. Countering that, Arun Jaitley, former Minister of Finance, remarked, "Whether Make in India is made for consumers within India or outside is not so relevant. The principle today says that consumers across the world like to purchase products that are cheaper and of good quality. They hire services which are cheaper and of good quality". Articles have mentioned that the manufacturing sector in India has experienced a decline. The manufacturing growth rate has averaged around 5.9% since 2014, which is lower than the target set by the government of 12-14%.
Additionally, the share of manufacturing in the GDP has remained stagnant at 16.4%. The labour force representation in the manufacturing sector decreased from 12.6% in 2012 to 11.6% in 2022. Contrary to the government's claim of employment generation, there has been a loss of 24 million jobs from 2017 to 2021.
In conclusion, the Make In India scheme has provided a significant breakthrough for India's manufacturing sector and economic growth. However, there still exists some room for debate, as it has been highlighted by various sources that some of the sector's growth has fallen short of the target. While there is still room for improvement and specific targets to meet, the initiative has proven to be enterprising through its achievements.
Arshya Mahidher
