In a week from now, Mumbai will host the “Make in India Week” – an event planned to give fillip to one of Modi Sarkar’s flagship program – Make In India. This was aimed at reviving the interest of domestic and MNCs in setting up/expanding manufacturing footprint in India – a sure shot elixir to tackle the unemployment malady and create millions of jobs. When this Govt. kicked off this initiative, one would have expected more cheers than jeers. However the reality was different. Leaving aside the noises from the opposition which anyway criticizes what the ruling Govt. does in India (this is irrespective of who is in power and who is in opposition), the naysayers included reputed economists and thinkers. They were of the view that it was too late for India to board the “Manufacturing” bus. China is already in the driver’s seat being the “factory for the world” and global companies are already heavily invested in China. Also the general view that with increasing automation in the shop floor, you don’t need much of low cost labour for manufacturing. So betting on manufacturing to generate millions of jobs may not be a cool idea any more. The session during the recently concluded World Economic Forum in Davos about “The Fourth Industrial Revolution” powered by Connected devices, 3D printers, Super Smart Robots and the like,… probably put paid to this idea of the critics. So instead of playing the catch up, the cynics’ view was that India should play to its strengths namely “Services” and invest further in developing soft skills to scale up further.
There is probably merit in this argument. However if one analyses the different states of India in terms of the economic condition it is clear that no state can hope to survive and grow by just focusing on services. For a diverse country like India with a huge disparity in income and social strata an even economic growth can be achieved only with a mix of manufacturing, services and agricultural activities. The top states in terms of GDP in India like Maharashtra, Tamil Nadu,.. have a very healthy mix as I noted in one of my earlier posts on “Car manufacturing” in Chennai (Read here). A fourth Industrial Revolution may augur well for developed countries with shrinking population, ever rising wages and diminishing demographic dividend but in India we still need to reap the benefits of the 2nd and 3rd.
So I think that this Govt. is right in pursuing the Make In India initiative particularly at a time when China is facing economic headwinds. The labour in China can no longer be termed cheap with wages ever-increasing to keep pace with the aspirations of the people. Many of the global corporations do not want to put all eggs in one basket that too Made in China😁😁. I know for sure that the Japanese are expanding into Vietnam in a big way for production. So could be other countries like the US, Germany,…,.. soon. So the moot question is are we positioned well to make them Make In India??
As the logo of India’s Make In India program demonstrates, there are many cogs in the wheel for a country to be successful in manufacturing that too for the world. Cheap and Skilled labour, Vendor base, Access to cheap raw material, Quality awareness, Access to ports and logistic hubs (particularly for exports), flexible labour laws, Ease of doing business (which applies not just for mfg.) and above all a very efficient infrastructure (Roads, airports, ports, broadband connectivity,..,…) in short a “pro manufacturing eco system”. And for India while all the other cogs could fall in place over time, the biggest challenge is in infrastructure. One would argue that the eco system will be in place when growth picks up and factories are set up. Necessity is the mother of everything you know. For example wasn’t Gurgaon just a “Gaon” before Maruti?? Today it is a recognized Auto mfg. hub. Similarly there are many examples of PSU Units which were set up first which then turned out to be manufacturing hubs in course of time. Goes the argument. No argument can be more specious than this. Maruti was set up at a time when India was a protectionist state where the promoters (in this case the Govt. of India) can patiently wait for more than 10 years for the 1st car to roll out! Same is the case with many PSU units where the overarching mission was upliftment of the society rather than shareholder value or profits! Not in these “QSQT” (Quarter Se Quarter Tak) days!!!😁😁 And in these days of strict WTO regime the Government cannot slap high duties on imported goods to protect the local manufacturers.
So for Make In India to succeed India needs to get the Eco system right first up. While India has a natural advantage in some aspects like availability of not just cheap labour but also skilled, large Engineering pool,.. the road is long for areas like “Ease of doing business” and Infrastructure as I mentioned before. And fortunately the Govt. has rightly recognized these challenges. Its’ for the 1st time that a Govt. website has spotlight on “Ease of Doing Business” like in the Make In India home page, I reckon. See here. It was a pleasant surprise to see the list of initiatives already taken and ones on the way when I clicked on “Ease of Business” tab. And it is also great to see every day in Newspaper one state or the other hosting Investor summits to lure potential investors with Make In India being an important aspect. So while pitching for investments is all right, I think the state Govts. must also focus on getting the infrastructure in place in their respective states which helps not just manufacturing but in general fosters economic activity. Today inspite of higher labour costs if many companies are still outsourcing mfg. to China it is because of their fantastic infrastructure overall which helps to keep indirect costs lower. India’s labour costs is lower but the indirect costs due to poor infrastructure weighs us down.
I think now the world is quite convinced on the intent of the Modi Sarkar to promote Make In India. Now the time has come to morph the intent to reality by focusing on Infrastructure for which the states have to work in tandem with the Centre. That’s what will wake up Make In India and not the raking up of intolerance debate every other morning😩
Toon courtesy: Satish Acharya