From the time Make in India was launched by the Modi government back in 2014, the big challenge has been how to take the plan to fruition. Interestingly, the COVID-19 pandemic may give India just the big bang opportunity to take Make India to fruition. COVID-19 was always a global problem and direct fallout of globalization. The rapid strides in trade and commerce only made the spread of the virus easier and quicker. But some opportunities have opened up. For example, the US and most of the EU nations have accused China having a tacit role in the spread of the virus. The virus has caused much more damage in the US and Europe than in Asia. Secondly, companies are looking to move out of China as the pandemic has reduced their sense of confidence in Chinese policies. It is expected that many of these companies could gravitate towards India and that could be a big boost for Indian industry.
Is it time to actually revive Make in India?
The grand launch of the “Make in India” manufacturing initiative was seen as the coming-of-age of India’s manufacturing potential. But not much has moved in the last six years despite showing some promise initially. That is largely because it has been good on macro ideas but weak on micro implementation. The program has been too broad-based and lacked policy focus. India had progressed from an agrarian economy to services without building its skills in manufacturing and that was coming home to roost. Ironically, in the last few years, as companies have made some moves out of China due to cost considerations, the beneficiaries have been countries like Philippines, Vietnam, Thailand and Bangladesh; not so much India.
Post the pandemic, the situation is stark, all the more. China found itself again facing global scrutiny since the pandemic erupted in Wuhan. Countries are getting wary of China for its delay in not alerting the world community about its severity and for admonishing doctors and journalists who served as harbingers of the pandemic. We are seeing Washington and Beijing continuously locking horns. These have accelerated strategic plans of global companies to diversify manufacturing bases away from China. This is more as an insurance against supply chain disruptions. That is where India needs to leverage its advantages. For example, India’s expanding economy and robust middle class provides a lucrative market. In addition, its abundant skilled and semi-skilled labour supports bulk manufacturing, assembly, and processing. That is the big opportunity for Make in India.
How can India give a billion dollar boost to “Make in India”?
India must not repeat the mistakes of 2014 and cede room to the likes of Vietnam, Thailand, Philippines and Bangladesh. Here is what India needs to focus on right away.
- The government must focus first on the short term. There is a lot of value in optics and this is too big an opportunity to go waste. The government must announce eye-catching schemes to invite companies to manufacture in India’s eastern coast and traditional manufacturing clusters.
- This can be done in multiple ways. Government can convey easy availability of land in mega special economic zones (SEZs), ready-to-move-in facilities, sector-specific business-friendly regulations, simple labour code, tax breaks and other incentives.
- The immediate focus should be on the low-hanging fruits. For example, the targets could likely include pharmaceuticals, mobile phones, machinery, and other sectors where there is a robust network of small and medium-sized enterprises (SMEs). It always to play to your strengths in the early stages than to your weaknesses.
- It is now time for some serious diplomacy on the economic front. India has not done that very effectively in the past. This must begin with expanding diplomatic strength in key missions to engage business leaders. One way is to allow the lateral entry of some of India’s best private sector talent. This is what a lot of other nations are doing.
- Finally, from a medium term perspective, India must work on easing land and labour laws. Exit from business is still too tough and that dissuades investors from looking at a hub. Traditionally, disciplinarian regimes are preferred.
Historically, India has reformed when reforms was a Hobson’s choice. India liberalized in the midst of the currency crisis in 1991. Now, the government has a chance to leverage the changing geopolitical tide to catapult India’s manufacturing. Make in India can give rise to new industries and create millions of new jobs. This may be the best opportunity!