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Essay: ‘Make in India’ economic growth strategy

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  • Subject area(s): Business essays
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  • Published: 15 October 2019*
  • Last Modified: 15 October 2024
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  • Words: 2,258 (approx)
  • Number of pages: 10 (approx)

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Introduction

The Make in India was an Economic growth strategy initiated by the honourable Prime Minister of India Mr. Narendra Modi in September 2014. This initiative was devised to revolutionise the Indian economy and transform it into one of the globes leading designing and manufacturing hub. To numerous economists around the world, the Make in India is seen as a prospective panacea to the stagnating Indian economy in the early 2010’s. By 2013, the much-hyped emerging markets bubble had burst, and India’s growth rate had fallen to its lowest level in a decade. The promise of the BRICS Nations (Brazil, Russia, India, China and South Africa) had faded, and India was tagged as one of the so-called ‘Fragile Five’. Global investors debated whether the world’s largest democracy was a risk or an opportunity. India’s 1.2 billion citizens questioned whether India was too big to succeed or too big to fail. India was on the brink of severe economic failure.

The Make in India was launched against the backdrop of this crisis, and quickly became a rallying cry for India’s innumerable stakeholders and partners. It was a powerful, galvanising call to action to India’s citizens and business leaders, and an invitation to potential partners and investors around the world. But, Make in India is much more than an inspiring slogan. It represents a comprehensive and unprecedented overhaul of out-dated processes and policies. Most importantly, it represents a complete change of the Government’s mindset – a shift from issuing authority to business partner, in keeping with Prime Minister’s tenet of ‘Minimum Government, Maximum Governance’.

The Opportunities for India

India is perceived as a young, fast growing and opportunistic nation. There are various factors factors which point towards potential growth prospects and concrete foundation for the Make in India strategies. Certain opportunities for India are as follows:-

Population of about 1.31 billion of which 767 million falls in the age group of 15-64, it is also set to become the youngest country by 2025 with an average age of 29 years.

2nd largest Internet users which is about 462 million people using the internet.

India has demonstrated the capability to reach 100% literacy levels by 2025.

According to a BCG report, there is considerable upward mobility among all sections, more than 150 million will be added to the middle class by 2025 which would create a huge market base of US$3.6 trillion.

3rd largest economy in the world with size of the US$ 8.6 trillion by purchasing power parity (PPP) and is expected to US$ 20 trillion in size by 2025.

Fastest growing major economy in the world with a rate of 7.6% in 2015-16.

India has an immediate investment opportunity of $1 trillion.

India enjoys stable/positive ratings from major credit rating agencies around the globe and has a total foreign exchange reserves of US$ 371 billion as on 30th Sep 16

2nd largest Railway Network in the world, used by 23 million travellers every day

2nd largest Road Network in the world stretching 3.3 million km

12 major ports, 200 notified minor and intermediate ports

All the factors make India a potential market and also lays a path for the nation to be the global manufacturing hub in the coming years. Manufacturing goods in India is seen as one of the primary objectives of the Indian government.

There are several steps taken by the government to systematically create the perfect stage for the setup. The government has primarily targeted to boost the infrastructure facilities available in India.

Driving economic growth and improving the quality of life of the citizens by enabling   industrial and urban infrastructure development.

Industrialisation and Urbanisation

Industrial Corridors and 21 new nodal Industrial Cities to be developed:

Delhi-Mumbai Industrial Corridor (DMIC)

Chennai-Bengaluru Industrial Corridor (CBIC)

Bengaluru-Mumbai Economic Corridor (BMEC)

Vizag-Chennai Industrial Corridor (VCIC)

Amritsar Kolkata Industrial Corridor (AKIC)

These 21 new nodal cities will be having advantages like; Large land parcels, Planned communities, ICT enabled infrastructure, Sustainable living, Excellent connectivity- Road, Rail etc.

Delhi-Mumbai Industrial Corridor is a mega infra-structure project of USD 100 billion with financial and technical aids from Japan, covering an overall length of 1,483 km. Dedicated Freight Corridor (DFC) of 1504 km as the backbone, DMIC will intersect 7 states namely Delhi, Uttar Pradesh, Haryana, Rajasthan, Madhya Pradesh, Gujarat and Maharashtra

Doubling of Network of Roads by 2020 and Construction of 15,000 km new roads by 2017 is targeted under various projects

Railway projects such as Setting up of New Railway Stations, Modernisation of Rolling stock, High Speed Railways, Port Mine connectivity etc. have been initiated for Modernising and better connectivity of Indian Railways.

Eastern Dedicated Freight Corridor of 1840 km length and Western Dedicated Freight Corridor of 1504 km length is under construction as well as many projects are under planning stage.

Sagar Mala project is started by the Govt. of India to modernise India’s Ports and Inland waterways so that port-led development can be augmented and coastlines can be developed to contribute in India’s growth, providing a project outlay of US$ 10 billion

The Smart Cities Mission having a project outlay of US$ 7.69 billion is progressing, with Special Purpose Vehicles for 19 cities already set up.

Aviation industry with target of becoming 3rd largest by 2030 and to cater international and domestic traffic.

New Design, Innovation and R&D

Investment in innovation and R&D offers large payoffs in terms of economic growth and competitiveness in global economy

3rd largest tech driven Start-up ecosystem globally and Tech Startups in India are expected to reach 11,500 in 2020 from 4,300 in 2015

“Start-up India” initiative was launched aiming at fostering entrepreneurship and promoting innovation by creating an ecosystem that is conducive for growth of Start-ups.

3. Intellectual Property Rights Policy launched in May 2016 is having salient features:

Strong TRIPS compliant policy framework, Ease of Access using World-class IT enabled patent offices

Internationally acclaimed systems for International Searching and Preliminary Examination of patent applications

Augmentation of Manpower: 721 additional technically competent Patent Examiners appointed

Time for examination of patents to come down to 18 months from 7 years by March, 2018

Time for examination of trademarks to come down to 1 month from 13 months by March, 2017

Government Policy Reforms

There have been various reforms in the policies obtained by the Indian government to help the Make in India initiative to work smoothly.

Ease of Doing Business

Improved business processes and procedures open up new avenues of opportunities and create confidence among entrepreneurs as a result of which India moved up 12 places in the World Bank’s Doing Business ranking 2016 released in October, 2015

Incorporation of a company reduced to 1 day instead of 10 days

Power connection to be provided in a mandated time of 15 days instead of 180 days.

No. of documents for exports and imports reduced from 11 to 3

Validity of industrial license extended to 7 years from 3 years

Bankruptcy Code 2015 – New bankruptcy law, providing for simple and time-bound insolvency process to be operational by 2017

Goods and Services Tax – Single tax framework by April, 2017

Permanent Residency Status for foreign investors for 10 years

Other Reforms

Online portals for Employees State Insurance Corporation (ESIC) and Employees Provident Fund Organization (EPFO) for:

Real time registration

Payments through 56 accredited banks

Online application process for environmental and forest clearances

2. Department of Commerce, Government of India has launched Indian Trade Portal. Important feature of this portal is to be a single point for relevant information on measures other than tariff called the non-tariff measures like standards, technical regulations, conformity assessment procedures, sanitary and Phytosanitary measures which may affect trade adversely.

3. An Investor Facilitation Cell has been created in ‘Invest India’ to guide, assist and handhold investors during the entire life-cycle of the business.

4. The Department of Industrial Policy and Promotion has also set up Japan Plus and Korea Plus. They are special management teams to facilitate and fast track investment proposals from Japan and South Korea respectively.

There have also been several initiatives take by the Indian government to reform the system in which FDI flows into India. Foreign direct Investment (FDI) is one of the most important factors which contributes towards a nations growth. This reform have been done across various sectors all of which have FDI playing a major part and showing high growth prospects.

Some of the major sectors which have been reform for better and smooth flow of FDI are mentioned below.

Major FDI Reforms

FDI stimulates country’s economic development and creates more conducive environment for the industry to grow:-

Defence: Up to 49% under automatic route and above 49% through Government route.

Civil Aviation: 100% FDI under automatic route in Greenfield Projects and 74% FDI in Brownfield Projects under automatic route beyond 74% for Brownfield Projects is under government route.

3. Broadcasting: New sectoral caps and entry routes are as under:

Broadcasting Carriage Services & down-linking of news channels: 100% FDI

Cable Networks: 100% FDI and in News channels: 49% FDI

Banking: FDI up to 74% with 49% under automatic route rest through government route.

4.Railways: 100% FDI under automatic route permitted in construction, operation and maintenance of Rail Infrastructure projects

5. Construction: 100% FDI through automatic route and Removal of minimum floor area & minimum capital requirement.

6. Pharmaceuticals: The extant FDI policy on pharmaceutical sector provides for 100% FDI under automatic route in Greenfield pharma and FDI up to 74% under automatic route and 100% under government approval in Brownfield pharma.

7. Plantation: Certain plantation activities namely; coffee, rubber, cardamom, palm oil tree and olive oil tree plantations has opened for 100% foreign investment under automatic route.

8. Telecom: FDI up to 100% with 49% under automatic route.

9. Insurance & Pension: FDI Policy has been reviewed to increase the sectoral cap of foreign investment from 26% to 49% with foreign investment up to 26% to be under automatic route.

10. Medical Devices: 100% FDI under automatic route for manufacturing of medical devices has been permitted.

11. E-Commerce: 100% FDI in B2B e-commerce, Single brand retail trading entity permitted for B2C e-commerce and e-commerce food retailing.

12. Retail: 100% FDI and 49% under automatic route is allowed. In case of ‘state-of-art’ and ‘cutting-edge technology’ sourcing norms can be relaxed subject to Government approval.100% FDI is now permitted under automatic route in Duty Free Shops located and operated in the Customs bonded areas.

Benefits of Make in India

It will generate a lot of employment opportunities. It is expected that 10 million jobs would be created.

Employment will increase people’s purchasing power which ultimately helps in poverty eradication and expansion of consumer base for companies.

The model of “look east and link west” policy will strengthen the industrial linkages as well as bilateral ties with many countries.

Government has decided to formulate an auto response mechanism and issues pertaining to procedural clearings will be resolved at different levels in a given time frame, which is a positive step in making industrial friendly environment.

Foreign investment will bring technical expertise and innovative skills along with the much needed foreign capital.

This campaign will make India a key part of global value chain and unfolds numerous opportunities for other countries as well.

Challenges to Make in India

The biggest challenge is to restore the broken trust between industry and government, which was hampered by the policy paralysis.

India has a myriad of infrastructural bottlenecks and to overcome these it needs to invest $ 1 trillion during 12th five year plan. Generating such a huge capital will be a daunting task.

Another contentious issue is of environmental clearance, which has been surfaced in many projects especially related to mining sector.

Uncertainty in tax regime (highlighted by Vodafone case) and delay in implementation of GST is also a matter of concern for industries.

India along with poor infrastructure lacks a proper logistical network for the supply chain of components and materials required in manufacturing industries.

Manufacturing sector demands highly skilled labour whereas India lacks highly skilled labour force.

Complex processes have proved to be hurdles in getting procedural and regulatory clearances especially for new entrepreneurs. This also reflects in World Bank’s “Ease of Doing Business” report which ranked India at 134 out of 189 countries in 2013.

Land acquisition for establishing manufacturing industries will prove to be a tedious task for successful unfolding of this campaign.

Conclusion

By introducing Make in India, the Indian government is targeting India to be the ‘new global manufacturing hub’, the current position that is occupied by manufacturing China. This move by the Indian government would help eradicating poverty by creating numerous employment opportunities. The Indian economy and GDP would rise due to higher rates of employment and the fact that, Make in India would help to bring in foreign investment in India, which would lead to large scale skilled immigration to India. The Indian government through Make in India wants to develop India into a super power, Make in India would transform rural areas in India to urban cities and towns. Make in India has already started to attract tons of multinational  companies, after the initiation of Make in India, India has become the top destination for Foreign Direct Investment.

The Make in India campaign has also inspired the Make in Maharashtra movement, and is expected to inspire other states as well. Make in India has already helped India moved from the  rank of the 130th easiest place to do business to the 118th position worldwide.

Bibliography

  • “About Us.” About – Make In India. N.p., n.d. Web. 9 Feb. 2017.
  • “Why Narendra Modi’s Make In India Is Indeed a Step of a Lion.” N.p., n.d. Web. 6 Feb. 2017.
  • “Make in India.” Make in India – Vision, Criticism, Sectors, Benefits, and Disadvantages. N.p., n.d. Web. 10 Feb. 2017.
  • “Make in India Campaign News: Transform India as Global Manufacturing Hub – The Economic Times.” The Economic Times. N.p., n.d. Web. 8 Feb. 2017.
  • “Samsung Make For INDIA Initiative | Samsung India.” Samsung Make For INDIA Initiative | Samsung India. N.p., n.d. Web. 9 Feb. 2017.
  • “Make in India.” Wikipedia. Wikimedia Foundation, 13 Feb. 2017. Web. 6 Feb. 2017.

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