Why ‘Make in India’ has failed (A combination of factors has killed it completely)

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 Why ‘Make in India’ has failed (A combination of factors has killed it completely)

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• A grand project, 2014: When it was announced, the "Make in India" was a spectacularly large programme, that promised to change the investment scene in manufacturing and services sector in India. For a while, it seemed so, as in 2015, FDI in India exceeded that in US and China.
• 2020 situation: Manufacturing hasn't moved forward (as a per cent of GDP), and the general industrial sentiment is completely down. So, what went wrong?
• A global manufacturing hub: The Make in India focused on it, with three objectives -

1. Increase manufacturing growth rate to 12-14% p.a. so its share in GDP would rise
2. Create 10 crore new manufacutring jobs by 2022
3. Ensure mfg. share in GDP becomes 25% by 2022 (up from 16%)

• All this would be done via policy easing, better infrastructure and opening up new sectors for FDI.
• Analysis in 2020: The govt. is explaining the poor performance by two arguments - such projects take a long time (gestation period), and big earlier problems were inherited. But ultimately, three variables can be studied - investments, output, employment growth.

1. Investments - In general, investments slowed from 2015-2020, more so in manufacturing. The GFCF of private sector (Gross Fixed Capital Formation) went down from 31.3% in 2013-14 to 28.6% in 2017-18. As savings rate went down in economy, private sector's investments fell (not public sector's). Household savings reduced, but Corporate savings went up!
2. Output - The IIP (Index of Industrial Production) grew in double-digit rates only two times from 2012 to 2019. Mostly, it was either 3% or lower. Contraction was the worst part.
3. Employment growth - Data collection was dodgy, and reports not released. But it is clear that employment growth hasn't kept pace with new entrants in jobs market.

• Overall summary: Clearly, Make in India has failed. NDA 2 accused UPA 2 of policy paralysis, and launched new policies. But end result is far from satisfactory.

1. Most announcements were based on foreign capital coming in and of a global market for the produce. So domestic production was dependent on external conditions.
2. Implementation deficit of Indian economy was simply overlooked! Economists can afford to do that, but policymakers (politicians) cannot. 

• Net result - huge number of stalled projects in India. This "policy casualness" is killing.
• So why did it fail: It failed because it was just too ambitious for India (annual 12-14% growth), it was too broad-based (too many sectors covered), and it was ill-timed (Trump and protectionism). So we witness a rise in Ease of Doing Business rankings, while investments are not coming in. Industrialisation clearly is beyond policy pronouncements and new laws!
• Summary : The spectacular failure of Make in India has bitter lessons, pertaining to both vision and execution.

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