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Modi‘s ‘Make in India’
A Complete Flop:
It’s Attracted a Total of Rs 61,000 Foreign Investment in The Defence Sector

AMITABH DUBEY, The Hindustan Times




How does one judge the high profile program Make in India launched amidst a deafening hoopla a few years ago by Indian prime minister Narendra Modi and his BJP/RSS government?

Recent news that foreign direct investment (FDI) flowing to defence in 2016-17 was an absurd trickle of Rs. 61,000 (or perhaps $61,000, the Ministry of Defence didn’t specify) seems to have not caused much of a ripple.

Nor has the fact that foreign direct investment in India’s defence in the past three years has been – this isn’t a typo either – $174,000, notwithstanding several liberalisation announcements.

Defence is just one, albeit telling, sector, with its own peculiarities such as the much-delayed “strategic partners” policy and a single buyer – the Ministry of Defence.

But it is an exaggerated version of the story playing out across the high-profile ‘Make in India’ campaign, which promises to generate millions of jobs in India by increasing the share of manufacturing to 25% of gross domestic product (GDP).

India has seen strong FDI flows in the last couple of years, but most of this is going to ride-sharing services like Uber and Ola and e-commerce providers like Amazon and Flipkart. FDI in manufacturing hit a high of US$9.6 billion in 2014-15 (slightly better than the previous 2011-12 record), but actually fell the next year to US$8.4 billion. A major pickup in 2016-17 seems unlikely.

Despite rising costs in China, India has made little headway into becoming a global manufacturing alternative, particularly at the low end that generates the most jobs. Textiles and clothing jobs from China are moving to Myanmar, Cambodia and, yes, Bangladesh, while Vietnam, Thailand and Indonesia are gaining in electronics production. India has become a global small-car hub over the last couple of decades, but this relatively high-end segment is not a massive job-creator.

Things are slowly changing. India has a large domestic market to leverage, and the two dedicated freight rail corridors it is now building (connecting Delhi with Mumbai and Kolkata) should contribute to a major reduction in logistics costs in a few years.

But, for now, southeast Asia is eating India’s lunch.

There are limits to what a government can do. India’s can’t, and arguably shouldn’t, try to emulate China’s labour suppression that kept manufacturing costs down, which Myanmar, for instance, could. This government isn’t even pushing the smaller measures forcefully enough.

The focus on “ease of doing business” reforms is commendable, but only four of 31 states have implemented meaningful labour reform in the last three years. Even if the opposition doesn’t want to cooperate, the BJP could certainly prod its 12 other states to follow suit.

And let’s not forget the self-goals. Demonetisation might have contributed to the BJP’s political victory in Uttar Pradesh, but it has shredded the informal sector. Large companies in sectors from automobiles to consumer goods have laid off thousands of workers, as have their suppliers. Demonetisation may have delayed the goals of Make in India by months, if not years.

It’s not a bad thing for India’s aspirations to exceed its political grasp, but a trending social media hashtag won’t generate jobs. India has always done its bit of manufacturing, and the true test of Make in India lies in whether its GDP share meaningfully rises, not in photo-ops.

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Amitabh Dubey is an analyst of politics and economic policy.

[Courtesy: The Hindustan Times. Edited for]
May 6, 2017

Conversation about this article

1: Jasbeer Singh (Edmonton, Alberta, Canada), May 07, 2017, 1:08 AM.

Also, India has a demoralizing environment for its armed forces wherein an SHO is being placed as an equal to an army colonel and CISF people with two years of service are treated as equals to Subedar Majors with twenty plus years of active duty. It is not surprising that nobody takes India's Defence industry(?) seriously.

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A Complete Flop:
It’s Attracted a Total of Rs 61,000 Foreign Investment in The Defence Sector"

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