Economy and Governance
General Studies 2:
- Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
General Studies 3:
- Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
- Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.
Make In India: Is it a failure?
Impending Union Budget for FY 2020-21 in the background of fears of stagflation in economy and completion of five years of Make in India Scheme
What is Make in India Scheme?
- The Make in India initiative was launched by Government in September 2014 to transform India into a global design and manufacturing hub.
- It was launched in the backdrop of India’s growth rate falling and rising youth population who were looking for jobs (which can be absorbed in large numbers by manufacturing sector)
- It is designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best in class manufacturing infrastructure in the country.
- The initiative is based on four pillars:
- New Processes: Ease of doing Business is identified as important factor for promoting investment & entrepreneurship
- New Infrastructure: To develop industrial corridors and smart cities to provide infrastructure based on state-of-the-art technology with modern high-speed communication and integrated logistic arrangements
- New Sectors: Make in India’ has identified 25 sectors in manufacturing, infrastructure and service activities. These include: automobiles, aviation, chemicals, IT & BPM, pharmaceuticals, construction, defence manufacturing, electrical machinery, food processing etc.
- New Mindset: Government will act as facilitator of economic growth (partnering with private sector) and not as regulator.
The targets of the Scheme
- To increase the manufacturing sector’s growth rate to 12-14% per annum
- To increase the contribution of the manufacturing sector to 25% of the GDP by 2020 from the current 16%
- Creation of 100 million additional manufacturing jobs in the economy by 2022
Has the above targets been achieved?
- Growth of investment in the economy: Gross fixed capital formation of the private sector, a measure of aggregate investment, declined to 28.6% of GDP in 2017-18 from 31.3% in 2013-14 (Economic Survey 2018-19). This indicates weak investment by private sector in spite of flexible policies from this scheme
- Output growth: Monthly IIP pertaining to manufacturing has registered double-digit growth rates only on two occasions during the period April 2012 to November 2019.
- Employment: Unemployment leapt to a four-decade high of 6.1 per cent according to the National Sample Survey Office’s study for 2017-18 that was released in May 2019.
- Such type of mega projects which have long gestation periods and lag effects the assessments of scheme can be premature.
- Resolving Banking Sector Crisis: Twin balance sheet problem and NBFC crisis needs to tackled aggressively so as to boost the credit outtake growth rate.
- Boosting Consumer demand: Weak monsoons along with disruption caused by demonetization & hasty implementation of GST lead to falling incomes which impacted the consumer demand. This kick-starts the investment cycle and thus manufacturing growth
- Skilling of people: It will ensure that people are equipped with necessary skills and thus reducing the training costs for firms.
Connecting the Dots
- New manufacturing Policy
- Impact on US-China trade war on Make In India Scheme