Last week, Indian Prime Minister and South Korean President celebrated the inauguration of the world’s largest mobile phone factory. This initiative was extremely important for the Make in India initiative to boost manufacturing to 25% of India’s economy by 2020 and create a lot of jobs.
Indian economy has taken over France to become the world’s sixth largest economy, though the manufacturing sector has shrunk to about 15% of Gross Domestic Product (GDP) from its peak of 18.6% in 1995. Some data shows that new investments in India has dropped and stalled investments are on a rise.
Make in India is an aspiration for the Modi Government, but in the absence of supporting infrastructure and ease of doing business environment, it seems to be a tough challenge.
The stalled investments rose to Rs. 7.63 trillion from 5.29 trillion during that period. India’s corporate capital expenditure has also fallen. Make in India project hasn’t been much successful because Indian companies invested heavily for years up till 2012 and now have an excess industrial capacity.
FDI has flowed into India and the country’s ease of doing business ranking has improved, under the Modi Government. Most investments in India has gone into dominant services and technology industries. More jobs are created in the services sector, so the program needs to focus on investments there.
Job creation in India could hugely benefit if Make in India’s focus is expanded to include more services, relative to its overemphasis on manufacturing. “India’s tough labor laws and higher bureaucratic entry barriers into manufacturing, along with its widespread fluency in English — a boon in global services — suggests that its comparative advantage lies in services.”
“Manufacturing’s share of GDP continues to stagnate in India as in other major economies. One large deal will not change that overnight.”
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