MAKE IN INDIA: ISSUES AND CHALLENGES

Abstract

“Make in India” is an international campaign slogan coined by Hon’ble Prime Minister to promote India as a destination for foreign investment. However there are certain issues to be addressed while turning ‘Make in India’ vision into a reality. The authors have made an attempt to identify major issues and challenges that may be tackled quickly and smartly to feature India as a global manufacturing hub for addressing its multi-socio economic issues.

Key words: Make in India, Manufacturing Sector, Skill Development, Issues and Challenges, Infrastructure

Introduction

‘Make in India’ movement started in September, 2014, aims at creating such an environment to attract foreign producers and investors to come and create jobs in India and enable domestic firms to compete globally. This program is to exploit every possible source to raise the share of manufacturing in GDP from 16% to 25% by 2022 and to create 100 million manufacturing jobs over the same period. The Make in India initiative is based on four pillars: new processes, new infrastructures, new sectors and new mind-set. These four pillars are worked upon in terms of facilitating ease of doing business, developing industrial corridors and smart cities, opening up FDI in defence production, insurance, medical services, railway infrastructure and construction in a big way, and making government a facilitator of industrialization and not only a regulator. The campaign Make in India focuses on 25 sectors: construction, defence manufacturing, , IT & BPM, automobiles, aviation, chemicals, electrical machinery, food processing, pharmaceuticals, textiles and garments, media and entertainment, ports, leather, mining, , railways, automobile components, , wellness, tourism and hospitality, renewable energy, biotechnology, roads and highways, space, thermal power, electronics systems.

The logo of “Make in India” depicts a “Lion” which refers to “King of Forest”. In the same way, India can become “King in Manufacturing Sector” by converting herself to a self-reliant and self-sufficient country and to give the Indian economy a global recognition.

Much advancement is being headed towards achievement of this innovative mission. Various foreign companies like Hitachi, Fiat, Airbus, Tetrapak, and Ericsson among others have committed to participate in ‘Make in India’ movement. Russia, China, Germany, Spain, Sweden, Oman, Japan and France have shown keen interest for this initiative and they are offering different sources to realize this dream of India. But on the way to achieve 10% economic growth rate, India has to do much on various issues such as infrastructure, employability score of Indians, ease of doing business index, land acquisition implications, power capacity and industrial security etc.

Why Companies were not manufacturing in India:

Make in India campaign is at loggerheads with the Make in China ideal that has gained momentum over the past decade. China is a major rival to India when it comes to the outsourcing, manufacturing, and services business. India's ailing infrastructure scenario and defunct logistics facilities make it difficult for the country to achieve an elite status as a manufacturing hub. The bureaucratic approach of former governments, lack of robust transport networks, and widespread corruption makes it difficult for manufacturers to achieve timely and adequate production. The Modi government has vowed to remove these hurdles and make the nation an ideal destination for investors to set up industries.

The Vision of Make in India:

The manufacturing industry currently contributes just over 15% to the national GDP. The aim of this campaign is to grow this to a 25% contribution as seen with other developing nations of Asia. In the process, the government expects to generate jobs, attract much foreign direct investment, and transform India into a manufacturing hub preferred around the globe. The initiative hopes to increase GDP growth and tax revenue. The initiative also aims at high quality standards and minimizing the impact on the environment. The initiative hopes to attract capital and technological investment in India.

MAJOR ISSUES AND CHALLENGES

The concept could face the following major issues and challenges.

Ease of doing business:

There are different activities involved in starting and doing business such as dealing with construction permits, registering property, getting credit and electricity, paying taxes, enforcing contracts and resolving insolvency etc. As per World Bank report, among 189 economies India ranks 142 for ease of doing business. India needs to improve upon various components of ease of doing business. A business-friendly environment can only be created if India can signal easier approval of projects and set-up hassle-free clearance mechanism. Minimum or reduced capital requirements and faster and simpler procedures will help getting more firm satisfaction and savings and more registered businesses in India.

Micro, Small and Medium Enterprises (MSME) India’s small and medium-sized industries can play a vital role in making the country take the next big leap in the manufacturing sector. India should be more focused towards novelty and innovations for these industries. The government has to chart out plans to give special soaps and privileges to these industries. Furthermore, a direct tax exemption during the initial years of operations for micro, small and medium enterprises (MSME) will give much needed impetus to the manufacturing sector. Acquiring Lands: Land acquisition is one the important steps for setting up manufacturing firm. There are many issues concerning land acquisition such as proper rehabilitation and resettlement of affected inhabitants of that land. One of the alternatives for the Govt. is to use wasteland for Make in India purposes.

Improving employability: Employability rate is very low in India. As per ‘Higher Education in India: vision 2030’ report, 75% of IT graduates, 55% of manufacturing, 55% of Banking & Insurance graduates are deemed unemployable. This is because of theoretical nature of course curriculum and less awareness of applicability of theories in the industry. The course curriculum content and structure should be updated in lines with rapid changes in the field of science and technology.

Capacity addition in the power sector: As per report (2014) by India’s Central Electricity Authority, India had an energy requirement of 1048672 Million Units (MU) of energy out of which only 995157 MU of energy were available. There are issues like delay in environmental clearances and shortage of fuel supply, which hinder the Indian power sector.

Development of Roads and Highways: As roads and highways are vital for an efficient inbound and outbound logistics of a manufacturing firm to ensure proper and cost effective movement of raw materials and finished goods. As per data from website of Ministry of Road transport and Highways (2014) India has a total of 48.65 Lac kilometres of road network comprising of National Highways (92,851 km), State Highways (138,489 km), Major District Roads, Rural roads and urban roads (all together 46.34 Lac Km) which means National Highways comprise 1.7% of India’s total road network but carry 40% of road traffic, which makes it very congested. So it is imperative that Govt. should initiate conversion of single lane or double lane National & State Highways to four or six lane roads to meet growing congestion problem in India.

Privatization: To enforce the inflow of FDI in the country and improve services, it requires to fully or partially privatizing loss making government units. First, identifying those manufacturing units and second, to privatize those with foreign companies may create issues such as percentage holding, management, resistance to change, labour union opposition, etc.

Good Infrastructure Facility: The major objective behind “Make in India” initiative is to focus on heavy industries and empowering secondary and tertiary sectors. If authorities facilitate the requirements of the national programmes of 100 “Smart Cities” and “Industrial Corridors”, we can truly fulfil the “Make in India” concept and make it a worth. We will have to provide internet connectivity with LAN, WAN with high speed data transfer as Information Technology is also a part of Infrastructure now. Further, under the “Make in India” campaign, the rural infrastructure, which is an important ingredient for ensuring sustainable rural economic development, needs to be given a fillip.

World-Class Standards: After all, foreign companies demand highest level of qualitative work which is known as “world class standards”. The quality of product under “Make in India” initiative should not differ with foreign product. Here the Issue is to make Indian labour achieve such competencies to make high quality products through skill development programs.

Ownership and Control: When FDI comes to our country, there will be an issue of ownership and control. How much percentage of ownership of the company established at Indian location? What should be the managerial functions? How board of directors should be formed? Whether any MoU (Memorandum of Understanding) should be signed with Indian companies in order to form a joint venture? Whether Indian law can protect if any issue will crop up in this regard? This issue is being addressed through required reforms by the present government.

Enterprise Specific Performance Requirements (ESPR): Some of the enterprises require several performance standards. Special efforts are needed to achieve such specific performance standards without interference with the internal commercial decisions of the enterprises.

Research and Development: India must also encourage high-tech imports, research and development (R&D) to upgrade 'Make in India' give edge-to-edge competition to the Chinese counterpart's campaign. To do so, India has to be better prepared and motivated to do world class R&D. The government must ensure that it provides platform for such research and development

. Conclusion: The issues and challenges involved in the concept of “Make in India” are being resolved through big thrust in policy initiatives and further commitment by the government to ease rules of doing business, boost manufacturing and provide a stable non-adversarial tax regime to ultimately revive the otherwise sluggish economy which is critical to generate jobs. However MSME forms the base of the large scale industry, so promoting MSME sector will help in flourishing of large scale industry which will help in achieving the goal Make in India. The challenge is to make ‘Make in India’ an economically viable and globally luring project.

Reference:
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