Last Updated: May 2023 (Make In India)
Make In India
What is Make in India (MII)?
MII is a program started by the Government of India to make India a global hub of manufacturing, design, and innovation.
Why do we want to Make in India?
- Remove excess of population in Agriculture to be employed in Manufacturing Sector.
- To reap Demographic Dividend by providing jobs to the youth in the manufacturing sector.
- Use Cheap Labour available in the country to fill the lacunae left by China, where labour wages have risen.
- We have substantial domestic demand in India & still importing from abroad. Why not make it in India & save our foreign exchange?
- To address issues created by the fact that India directly jumped from Agricultural to Service sector economy without first passing through low skill manufacturing economy.
The need for a dedicated government policy to support domestic industrialization amidst foreign competition can be better appreciated from the industrialization experiences of East Asian economies such as South Korea & Taiwan in 1960-1990. These countries supported their domestic industries during their high growth phase while also ensuring healthy competition required for the industries to grow
Make In India: 5 Pillars
1. Simplify Processes
- Ease the regulatory framework and cut red-tapism to invest easily, and entrepreneurs can set up industries.
2. Improve Infrastructure
- End infra bottlenecks by investing in new Industrial corridors, smart cities, roads, railways and world-class ports.
3. Focus on Sectors
- The government has recognized 27 sectors under Make in India 2.0 (as of 2023), where
- India has the potential to become the global champion.
- Which can drive double-digit growth in manufacturing.
- Generate significant employment opportunities.
- These include
- Manufacturing Sectors: Capital goods, Auto, Defence & Aerospace, Biotechnology, Pharmaceuticals, Food Processing, Gems & Jewellery, New & Renewable Energy, Construction, Shipping and Railways.
- Service Sectors: IT, Tourism & Hospitality, Medical Tourism, Logistics, Legal Services, Educational Services etc.
4. Open up Sectors
- India will open new sectors for investment.
5. IPR protection
- Protection & Promotion of Intellectual Property Rights like Patents, GI, Copyrights, Trademarks and Industrial Designs.
Initiatives in various sectors to promote Make in India
1. Production-linked incentive (PLI) scheme
- Production Linked Incentive refers to a rebate given to producers. This rebate is calculated as a certain percentage of incremental sales by the producer.
- The scheme is applicable on Automobiles, Advanced Chemistry Cell (ACC) Battery, Pharma, Telecom, Food Products, Textile, Specialty Steel, White Goods (home appliances), Electronic goods and Solar Modules.
- E.g., As a part of the PLI scheme for mobile and electronic equipment manufacturing, an incentive of 4-6% on incremental sales is given to electronic companies manufacturing mobile phones, transistors etc.
- This scheme is in line with India’s Atmanirbhar Campaign.
- Total of Rs. 1.45 trillion will be given in 5 years.
- The design of the earlier PLI scheme is such is compatible with WTO as the support is not linked to exports or value-addition.
2. Defence and Aviation Sector
- Defence Procurement Procedure (DPP): The government will prioritise the indigenously designed, developed and manufactured (IDDM) equipment.
- Defence Offset Norms: When the government buys defence equipment from a foreign company, foreign companies have to procure a certain percentage of components from India.
3. Food Processing
- The government is encouraging the opening up of new Mega Food Parks.
- The government has started SAMPADA Scheme to promote Food Processing Industry.
- FAME-India [Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles – India] has been started To promote the manufacturing of electric vehicles in India.
5. Renewable Energy
- Preference is given to domestic manufacturers for purchasing equipment for Jawaharlal Nehru National Solar Mission.
- India Handloom Brand has been launched.
- Special Textile Package to increase jobs and machinery up-gradation has been started.
7. Leather and Shoes
- CSIR- Central Leather Research Institute (CLRI) has started a project to build its own standards for shoe sizes. CLRI has already started an anthropometric survey for this. It will be ready by 2022.
Problems with the Scheme
1 . Directly Moving towards high skill model
- India ideally should have been moving from Agrarian Economic to Low Skill Manufacturing to leverage our Demographic dividend. But MII is trying to move directly to high skill jobs from the agrarian economy.
2. Promoting Exports is a multifaceted process
- Making goods in India will making goods will not increase exports. Along with manufacturing, it requires various steps such as currency undervaluation (like China), signing FTAs on a large scale etc.
3. Weak Logistics
- There are logistics problems in India. Indian ports cant handle huge container ships. As a result, products made in India are first sent to Colombo, Singapore etc. Trans-shipment ports. This increases the export cost and time.
- Time to reach container to the US
- From India (Chennai) = 28 days
- From China = 14 days (half)
4. Danger from Automation
- A report from the Citi group claims that increased use of automation will likely lead to a renewed “onshoring” of production.
5. Blindly copying Chinese Model
- India shouldn’t blindly follow China success story. It might not replicate everywhere.
- Archaic labour laws: The labour laws in India are quite complex. Hence, private investment in the manufacturing sector is not very attractive.
- The problem of Missing Middle: There are a large number of small-sized firms and a small number of large-sized firms with a complete absence of mid-sized firms. There is a need to convert small enterprises to mid-sized firms.