Surprisingly, Prime Minister Narendra Modi surreptitiously missed “Make in India” success story in Independence Day speech on August 15, 2018, while he was upbeat on the success of all other major schemes during his four years’ stint in the government. “Make in India” was the flagship initiative for Modi’s development model. It was projected the main ship for job creation in the country.
Political observers and economic analysts were at a loss over the real reason. They wondered that It should have been a trump card for Modi to stimulate his voters for the forthcoming Lok Sabha election in 2019. Was Modi paranoid to focus it, having been sunk in quagmire for its failure in job creation. In the election mandate, Mr Modi committed one crore ( 10 million ) jobs a year. A recent opinion poll survey heightened job creation as the important failure of Modi regime.
Most politicians believe elections are own on three factors – job creation, close alliance between the parties with mixing of castes and religions in the regions and the relation between Centre and states. In Modi’s regime, state federalism has improved, resulting BJP wining elections in states one after another. In 2014, BJP had 7 states under its ruling. The number jumped to 14 states in 2018 and BJP supported governments in 2 states.
Paradoxically, excepting job creation, Modi’s other schemes for development were replete with full spirit. Ease of Doing Business laddered up in the global ranking. Main economic parameters , like deficit financing, inflation and current account balance, were contained. GDP growth is expected to bounce back to over 7 percent a year after a short fall in 2017-2018 due to demonetization in November 2016.
Politicians castigated Modi’s model of development as half-baked. As a result, It unleashed half-baked development. “Make in India” was the yardstick for “job” development. But, it failed since its main parameters were swamped by unsuccessful stories. Industrial Index of Production was lying low at 4 percent a year during Modi regime, despite high GDP growth of 7 percent a year. Domestic investors were shied to invest in the country since the uncertainty prevailed due to demonetization.
No major reform, which were essentials to boost investment, was adopted with forceful challenges. Progresses in new land acquisition law and relaxation in stringent labour laws remained dormant.
However, there is another story of Make in India, albeit. Some analysts believe that job creation was not visible. This is because of transformational changes in the manufacturing activities and availability of data. Informal sector is the biggest labour absorbent in India.
According to NITI Aayog, 83 percent of workers in India are self –employed, casual or contact workers. With the advancement of technology and modern industries, the entrepreneurs in organized sectors have chosen to stay away from labour – intensive industries and opted for highly capital or skilled –labour intensive technologies in the industries. It let a number of labour intensive industries shifted to technology oriented and more mechanized factories, which resulted a shrinkage in employment.
Till four years ago, a few were manufacturing mobile phones in the informal sector. Today, 100 million mobile phones are manufactured in the organized sector.
Second, spurt in infrastructure created huge employment opportunities in length and breadth in the country. But, because of intermittent and temporary nature of works, green shoots are not visible in the data form.
Arguably, in contrary to domestic investors, foreign investment surged and it should have been a leg up for buoyancy in job creation. But, two or years are too short periods to unveil the green shoots of FDI on job creation. More than 85 percent of foreign direct investment was in the greenfield areas. Generally, a green field project in manufacturing requires 2-3 three years gestation period to commence the production. Given these, new job opportunities from FDI projects are likely to be visible only after 2018.
As regards start-ups, it was too early to gauge the impact on job creation. Policy on start – up, including various incentives, was launched in November 2016. Bulk of the start-ups are in service sectors, such as in E-commerce. Few were in the manufacturing sector. As a result, this initiative under “Make in India” also failed to make any formidable impact on job creation yet.
A slump in exports is another area which led to failure in job creation. Export linked job is a major job opportunity in informal sectors. About 30 percent of India’s exports are from labour intensive industries. Export growth slumped due to global volatility. With exports slipping into negative growth during Modi regime, job opportunities lost the heyday.
Presumably, the dichotomy of “Make of India” might have abstained Mr Modi from focusing in Independence Day speech.
Against this backdrop, economic observers suggest for a new shape in the “Make in India”. Time has ripen to make transformational change in manufacturing activities in “Make in India” initiative. Indian is integrated into global economy. With the advancement of technology and modern industry concept and fast growth of FTAs and trade blocks, it is the time for India to be embedded into GVC model (global value chain ) value added manufacturing network across the border.
Firms in developed countries have established transnational manufacturing network , combining their high tech know how – with lower wage labour in developing countries. Eventually, production has become increasingly fragmented across the borders. South East and East Asia became the major stakeholders in this new pattern of GVC production network.
Given the low cost production as the base for GVC manufacturing network across the borders, India has an edge over South East and East Asia countries. With the rise in wages in China, Thailand, Malaysia and Indonesia– the main partners for GVC – India stands for a gain full partners for transformational manufacturing network. Precisely, Make In India should give emphasis on GVC across the border and skill development as a new face of manufacturing.
Till now, India trailed behind in this race. Reasons were inadequate skilled labor, lackluster export infrastructure, limitation of scale and difficulty in accessing cheap credit. These economic ills shadowed India’s potential as manufacturing exporter and became detrimental for it to enter the GVC network for manufacturing.
Views expressed are the author’s own.