UPSC

Why Make in India Programme has Failed?

Make in India Programme was started by Modi led BJP government in September 2014. Understand how it failed, UPSC Examination point of view.

Make in India Scheme - Reason of Failure
Make in India Scheme – Reason of Failure

‘Make in India’ initiative was announced by the Indian government in September 2014 to encourage manufacturing in India. It had targeted 25 sectors of the Indian economy and was led by the Department for Promotion of Industry and Internal Trade (Ministry of Commerce and Industry).

Objectives

The major objectives of the ‘Make in India’ were:

  1. Increase the manufacturing sector’s growth rate to 12-14% per annum: leading to an increase in the sector’s share in the economy.
  2. Create 100 million additional manufacturing jobs by 2022
  3. Ensure the manufacturing sector’s contribution to GDP is increased to 25% by 2022 (later extended to 2025).

Policy approach

The approach of the initiative was to:

  1. Create a conducive environment for investments: in 2015 India surpassed US and China to emerge as the top destination for foreign direct investment (FDI).
  2. Develop modern and efficient infrastructure
  3. Open new sectors to foreign capital

Are the policy objectives achieved?

It has been five years since the initiative was launched and now is a good time to analyse the success of the policy. Since the policy was aimed at increasing growth in three key variables-investment, employment growth and output – analysing how much has been achieved in each variable can help understand whether the policy succeeded or failed.

VARIABLE ANALYSIS STATUS
Investment The Slow growth of investment in the manufacturing sector in the last 5 years: Gross fixed capital formation declined from 31.3 % of GDP in 2013-14 to 28.6% in 2017-18 (Economic Survey 2018-19).Private sector’s share declined from 24.2% to 21.5%. Public sector’s share remained more or less same during the same period. Failed
Employment growth The government had delayed releasing data and had attempted to revise data collection mechanisms. Industrial employment has not grown to keep pace with the rate of new entries into the labour market. Failed
Output The monthly index of industrial production (IIP) relating to manufacturing has registered double-digit growth rates only on two occasions during the period of April 2012 to November 2019. Majority of the months:3% or below, even in negative for some months: indicates a contraction of the manufacturing sector. Failed

From the above information, it is clear that ‘Make in India’ has failed on all three counts.

Reasons for its failure

  1. Policy casualness
  2. ‘Make in India’ was an under-prepared initiative. Announcing policies with catchy slogans doesn’t ends the task, proper framework is required to meet the objectives, which was missing in the policy.

  3. Too much dependence on foreign capital and global market
  4. The policy relied too much on foreign capital for investments and on global market for selling the produce. This created an inbuilt uncertainty, as domestic production had to be planned in accordance to the demand and supply conditions elsewhere.

  5. Implementation deficit
  6. Policy makers often focus on budget and fiscal deficit. They often ignore the third and most important deficit i.e. implementation deficit. Due to implementation problems several projects were stalled. Clearly, ignoring the implementation aspect had affected the policy.

  7. Too ambitious
  8. India has never achieved an annual growth rate of 12-14% in the manufacturing sector and expecting such huge outcomes within a short period of time is an overestimation of the government’s implementation capacity.

  9. Number of target sectors
  10. The policy targeted as much as 25 sectors. This led to a loss of policy focus.

  11. Ill-timed
  12. ‘Make in India’ was announced at a time when there were uncertainties in the global economy and trade protectionism was rising. Therefore, it was not the right time to launch the initiative.

Conclusion

Various factors have led to the failure of the ‘Make in India’ initiative. The major factors for its failure are policy casualness and implementation deficit. The government needs to understand that industrialization cannot be kick-started by a series of bills in the parliament, effective policy changes are also required. So, there is an urgent need to improve policy implementation mechanism.

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