A Look Back at Make in India

A Look Back at Make in India

Swaniti Initiative | January 9, 2015 | The Swaniti Blog

‘Make in India’ – a vision described by the Honorable Prime Minister Modi as he addressed the nation on August 15^th,entails increased manufacturing, reduced imports and subsequently increased exports. As part of his vision, the PM also issued an invitation to global firms to set up manufacturing operations in India and for Indian youths to embrace an entrepreneurial spirit, developing goods the country presently imports. Budget 2014 also provisioned for increased manufacturing growth through the development of industrial corridors, investment allowances of 15% to manufacturing companies, and reductions in customs duties.

However, a look back at India’s performance on growth in exports, imports, and manufacturing jobs under various political regimes reveals contradictory evidence to the vision presented above. Swaniti Initiative, a Delhi-based NGO, carried out an analysis of average growth of foreign exports, imports and domestic manufacturing jobs spanning 1998 – 2011, citing data from the Annual Survey of Industries (ASI) and the Planning Commission of India. The effort is part of Swaniti’s larger mission to compile comprehensive developmental data relating to security, health, livelihoods, education, infrastructure, andthe economy on a single user-friendly platform, called Jigyasa [link].

The analysis revealed different foreign trade and domestic manufacturing landscapes under the past two political regimes. Under BJP rule from 1993 – 1997,foreign imports grew by 3%, exports grew by 4% and domestic manufacturing job creation dropped by a percent. Conversely, under INC rule (2004 – 2011),imports grew by 24%, exports by 21%, with domestic manufacturing jobs growing by 7%.

Historical Growth Rate

Growth in manufacturing jobs is influenced by a number of factors including availability of skilled labour, conducive policy environments, affordable land and power costs, access to raw materials and transportation services. In order to achieve the ‘Made in India’ vision strategic policy frameworks, access to capital, innovative clusters, and well-developed public-private partnerships will be required to help develop competition, boost employment and subsequently improve exports.

Historical evidence from the States and Union Territories reveals that the best performing states typically improved access to capital (e.g. Orissa attracted investments of over $200 bn to the metal industry), provided low cost raw materials (e.g. Himachal Pradesh reduced power tariffs), and conducive policy environments (e.g. support from State and local authorities). Listed below are the best and worst performing states by way of average manufacturing job growth:

Best performing states for manufacturing job creation (1999 – 2011):

Worst performing states for manufacturing job creation (1999 – 2011):

Therefore, the Central Government in conjunction with various State Governments and global and domestic private players will need to formulate strategic opportunities to leverage India’s employment capacity to boost productivity and ultimately influence foreign imports and exports.