MAKE IN INDIA

Is it an old wine in new bottle?

By Nishant Dharmindra Bhatia-2014UCP1006

Priya Shrimal 2014UCP1
Sonal Kumar Sinha 2014UCP1053
 INDEX
S.no. Content Page

1 Trends in Manufacturing policy and 3

industry

2 Lets Make in India 8

3. Impacts of Make in India 12

4. Similarities with previous policies

5 New Initiatives

6 Conclusion

7 Bibliography

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 MAKE IN INDIA IS IT AN OLD WINE IN A
NEW BOTTLE?

Some would extol the virtues of the manufacturing juggernaut. On the other
hand, some would denigrate it to- "old wine in new bottle". Some others
would term it as a stellar marketing and political gimmick. Let us undertake
an unbiased and a threadbare analysis of Prime Minister Narendra Modi's pet
project - Make in India.
Firstly, Let us understand the reason/need for Make in India by understanding
the past economic era.

Trends in Manufacturing policy and

industry
Reasons for 1991 Economic Reforms
1. Since 1960s, India depended on the Soviet Union for our exports - as we
failed to develop good economic relationships with the US and Western
Europe. It was a good going for a while (India and the Soviets). In late 1980s,
Soviet Union started to crack and by 1991 they were split into 15 nations
(Russia, Kazakhstan, Ukraine, etc). Now, India had a major problem because
our primary buyer was in turmoil. Exports were down significantly.
2. Meanwhile, there was this guy Saddam Hussein who had his
misadventure into Kuwait in 1990. This led US to war with Iraq in early 1991.
Oil fields started to burn and ships found it hard to reach Persian gulf. Iraq
and Kuwait were our big suppliers of oil. The war led to destruction of our oil
imports and the prices shot up substantially - doubling in a few months.

3. In the late 1980s India's political system was imploding. Prime Minister
Rajiv Gandhi was involved in a series of troubles - Bofors scandal, IPKF
misadventure, Shah Bano case that eventually led to his ousting in 1989.
What followed were two more terrible leaders who were as unstable as they
were incompetent. This had a huge effect on Indian economy that was totally
forgotten in the political crisis. in 1991 this stop-gap government crashed.
Until Narasimha Rao was sworn as Prime Minister in 1991, Indian economy
was left in gross neglect.

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Thus, 1991 was the year of perfect storm. This triple crisis brought India on
its knees. On the one end, our primary buyer is gone. On the other hand, our
primary sellers were in war. In the middle, our production was effectively
stopped by political crisis. We were running out of dollars to buy essential
items like crude oil and food from the rest of the world. This is termed a
"Balance of Payments Crisis" - meaning India was not able to balance its
accounts - exports were significantly less than imports.

Since, we didn't have many dollars, we went and begged the IMF - the pawn
shop of the world. They asked us to pledge our gold reserves in return for the
interim loan of $3.9 billion (a huge sum for India then) just as the
neighborhood moneylenders ask for our gold when we want an emergency
loan. We took 67 tons of our gold in two planes - one to London and other to
Switzerland to get this assistance.

1991 New Economic Reforms

India began its "liberalization" when Rao became our Prime Minister on 21st
June 1991. Essentially it was the undoing some of the idiotic policies that
Nehru and his family put in place in our country (sorry, can't resist a dig at
Nehru). Licence Raj

1. We did away with many of the import restrictions. Until 1991, we

imposed a 400% customs duty on many products. Industries had to
beg to get an essential ingredient imported. By 1991, the duties on
many products were reduced substantially. This brought new
growth in our industries.
2. Import licensing was abolished. Until 1991, you need a license to
import anything and this license was very hard to get.
3. Government did away with the production licensing in many
industries. Until 1991, you needed government's permission in
what to produce and how much to produce. In one stroke, the
restriction was removed in many industries.
4. Rao put domestic economic back on track with two stars - Montek
Singh and Manmohan Singh. Huge spur was given to our local
industries. Stock market rules were relaxed.
5. Manmohan abolished "gold smuggling" (remember 1980s
Bollywood movies?) in one go. He effectively allowed Indian expats
to bring back 5 kilos of gold with them with no duty. Now, nobody
had a reason to smuggle gold & electronics.
6. Singh and Rao allowed foreign investors to come. Until then India
was living in the paranoia of East India company. Many sectors

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 were opened for foreign investment and collaboration. Now,
companies like Coke and Nike could come in. Suddenly, Bombay
Stock Exchange found a life.
7. Government started selling some of its businesses to the private.
This brought cash and new round of efficiency.

In short, liberalization in India's context meant a return of the common sense

that was hard to find in our economic circles since 1947. We just removed
some of the rules. there is still a long way to go.

Short Falls of 1991 Reforms

leads to commercial and Political Colonialism
transfers of natural resources
widening gap between rich and poor.
Decline in demand for domestic products
fail to obey the labor laws
Social inequality
agricultural sector
farmers suicide rate
Kills the domestic business
Exploits the Human Resources

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 Leads to unemployment & underemployment

This led to Indias low share in manufacturing, GDP and exports globally.

Primary factor of manufacturing

Total manufactured cost is central to deciding any manufacturing location.

To assess Indias performance on the dimension of cost competitiveness,
we take a look at the BCG Manufacturing Cost-Competitiveness Index 2014
(Exhibit 2.1). Among the top 25 exporting countries, India has the second
lowest manufacturing costs with a relative index of 100 (India taken as
base), after Indonesia (index of 95). Even though manufacturing wages
more than doubled in both the countries over the last decade, these
increases were offset by productivity gains and currency depreciation.
China, with an index of 110, is placed moderately well on cost advantage
when compared to other major exporting countries.
The more important comparison is how we have fared over time. It is
interesting to note that India has held steady over the years in terms of
relative cost. This means that our cost increases have been dwarfed by
that of many of our peers. China for instance, lost ground in cost
competitiveness when com- pared with its performance in 2004, largely

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 due to a
dramatic
increase in
wages as well
as increased
utility prices.

Looking
Beyond
cost,
Secondary
Factors

While cost competitiveness is a critical criterion driving the

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attractiveness of a country, other factors play a key role too.
Factors like infrastructure and those related to business
environment, including operational ease, transparency, and
access to credit carry substantial weight.

While India scores well on cost competitive- ness, it is in

some of these other factors that the country loses out.

When compared on the basis of some of these non-cost

parameters, India ranks poorly not only with respect to the
developed economies, but most of the developing economies
as well (Exhibit 2.4). Indias rank on ease of doing

Business, logistics performance and corruption perception narrates a sorry

tale. Administrative hassles form a key challenge in fostering greater
manufacturing and industrial growth. For instance, critical delays are faced
due to issues in seeking construction permits, utility connections and
credit approvals. Even as India figures in the bottom half of the list of 175
countries on corruption perception, low judicial strength in India leads to
significant delays in the settlement of court cases.

Implication for MAKE IN INDIA

The implications of this ever-evolving global landscape are very important and must
be factored in for the Make-in-India aspiration to be fully realized. India, if it were
to propel the growth of its manufacturing sector, would need to maintain its cost
advantage in this environment of fierce competition. The competition now is not
only with the developing countries but some of the developed countries as well.
Maintaining the cost ad- vantage would entail keeping a check on the increase in
wages and other factor costs.
This is the easiest of the tasks in front of us. The tougher task for India is to address
competitiveness in non-cost factors. To gain investor confidence and attract high FDI
in the future, India would need to fix its poor infra- structure through investment in
highways, ports and power plants. Radical labour re- forms, simpler tax structure and
easier access to formal credit mechanisms are also long awaited. Additionally, India
will need to show dramatic improvement in its ease of doing business. Addressing
-these non-cost factors in spirit and also building a perception around these
improvements in the international arena are crucial for India to succeed in future.

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__________________________________________________________________

KEY MISSIONS OF MAKE IN INDIA

The initiative aims at high quality standards. The initiative hopes to attract
capital and Technological investment in India.
The initiative is meant to cut red tape, spur foreign investment and transform
India into a vibrant economy.
ITS A MAJOR NATIONAL PROGRAM DESIGNED TO -
FACILITATE INVESTMENT
To Build competitive & positive environment for Business.
FOSTER TECHNOLOGY INNOVATION
To Speed up the development of new technologies.
ENHANCE SKILL DEVELOPMENT
Through skill training improve overall performance in any identified
area and in so doing improve the productivity.
BUILD BEST IN CLASS INFRASTRUCTURE
Infrastructure sector is a key driver for the Indian economy. To create
world class infrastructure in the country.
"Zero Defect Zero Effect" is a slogan coined by Prime Minister
of India, Narendra Modi which signifies production mechanisms where
Products have no defects and the process through which product is
made has zero adverse environmental and ecological effects.

MAKING MAKE IN INDIA A REALITY

Turing vision into reality in not easy. To achieve a manufacturing led
transformation, India would need to undertake a well-planned and structured
approach. The road of global leadership requires a structured approach
across three levels:
1. REVIVE MANUFACTURING:
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I. INFRASTRUCTURE - Infrastructure is backbone of any economy. The right
infrastructure ensures key input into the manufacturing process.
II. EASING DOING BUSINESS - Even after two decades of economic
reforms, India has been struggling to provide right environment for
Business.It is necessary to resolve the hurdles in the way of doing
business in India.
III. GOVERNMENT POLICY AND REFORMS - Reforms are required to
unlock the potential of Indias vast human resources.

2. GAIN GLOBAL COMPETITIVENESS

I. BUILDING AN EXPORT ORIENTED INFRASTRUCTURE - To become a
preferred manufacturing hub, the government would need to create an eco-
system for export powered by policy reforms.
II. TECHNOLOGY AND INNOVATION - Indias current standing on
innovation and research is not desirable. High technology exports from India
are less than seven percent of total exports. So there is urgent need to
develop technology and innovation.

3. CLAIM GLOBAL LEADERSHIP

Achieving global leadership will be a function of two aspects:

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I. CHANGING MIND-SET- Moving the Entrepreneurs Mind-set from
Medium-term value creation to long-term visionary transformation.
II. SUSTAINING AND EXPANDING COMPETITIVENESS-Global
competitiveness once achieved needs to be expanded to more
sectors to build the ecosystem in general and also be defended
aggressively.

SECTORS
The major focus behind the initiative is to prefer job creation and
Skill Enhancement in twenty-five sectors of the economy. Automobiles
Automobile Components
Aviation
Biotechnology
Chemical
Construction
Defence Manufacturing
Electrical Machinery
Electronic Systems
Food Processing
IT and BPM
Leather
Media and Entertainment
Mining
Oil and Gas
Pharmaceuticals
Ports
Railways
Renewable Energy
Roads and Highways
Space
Textile Garments
Thermal Power
Tourism and Hospitality
Wellness
REASON TO INVEST
Automobile
By 2015, India is expected to be the fourth largest automotive market
by volume in the world.
Automobile Components
4th largest steel producer in the world and 2nd largest steel producer
by 2015.
IT & BPM

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 The IT-BPM sector constitutes 8.1% of the countrys GDP and
contributes significantly to public welfare.
OIL & GAS
4th largest consumer of crude oil and petroleum products in the world.
2nd largest refiner in Asia.
Media & Entertainment
India has a large broadcasting & distribution sector, comprising 800 TV
channels, 6000 multi-system operator, 7 DTH operator.
Thermal Power
Government is targeting a capacity of 88.5 GW during 2012-17 &
86.4GW during 2017-22.
Wellness
Indian system of medicine & homoeopathy are widely recognised for
their holistic approach to health & capability for meeting health
challenges. The sector is growing at 20% from year to year.

MAKE IN INDIA WEEK

( 13 -17 February, 2016)
Created avenues for showcasing, connecting and
collaborating for manufacturing in India.
Promoted Investment enabling environment and healthy
competitive spirit amongst States.
Encouraged Design, Innovation, Youth and Startups.
A platform where global CEOs, think tanks, policy makers,
Diplomats and Political leaders converged.

Make in India Week at an all-time high!

15,20,000 Crore Investment commited .
8,90,000 Visitors .
102 Countries represented.
150 Events under MAKE IN INDIA Week.

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 IMPACTS OF MAKE IN INDIA
The government has made significant efforts to take the Make-In-India
campaign to global leaders and industry captains through a combination of
events, roadshows, bilateral discussions and overseas visits.
Under the initiative, brochures on the 25 sectors and a web portal were
Released.
THE IMPACTS OF MAKE IN INDIA CAMPAIGN IN THREE
MAJOR SECTOR :
1. EASE OF DOING BUSINESS
The application for licenses was made available online and the validity of
Licenses was increased to three years. Various other norms and procedures
were also relaxed.
Initiatives Taken -
I. Unified online portal (Shram Suvidha) for Registration of Labour ,
Identification Number (LIN) , Submission of returns , Grievance.
II. Redressal Online portals for Employees State Insurance Corporation
(ESIC) and Employees Provident Fund Organization (EPFO) for:

Online application process for environmental and forest clearances.

Payments through 56 accredited banks

14 government services delivered via eBiz, a single-window online

portal. Investor Facilitation Cell established

Documents reduced from 7 to 3 for exports and imports

III. Simplified forms for Industrial Licence ,Industrial Entrepreneurs

memorandum ,Validity of security clearance from Ministry of Home Affairs
extended to 3 years ,Extended validity for implementing industrial licences .

TAKE AWAYS
Though the government has been pushing active reforms and procedural
simplifications to make it easier to do business, the industry is yet to see a
clear change on the ground.An improvement in project clearance and
approvals is there , while land ac-quisition and labour laws continued to be
seen as difficult in terms of ease of doing business.
GSTStill Some Way to Go

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GST is expected to transform India into a single unified market, reduce the
cost of manufactured goods and boost exports by 10-14 percent. But it is still
unpassed.
Land Acquisition Bill
Acquisition of land for industrialization has been a hotly debated issue for a
variety of genuine rea-sons.On average, it takes 14 months, and at times
more, to acquire land for a factory.
Labour LawsSeveral Small Steps Forward
Indian labour laws are the most rigid among the BRICS countries. Reform
efforts should focus on rationalizing the legal requirements as well as
simplifying the compliance procedures.

SIMILARITIES WITH PREVIOUS POLICIES

The high profile launch of Come Make in India by Prime Minister Narendra
Modi is being criticized.Policy of inviting manufacturers to Start production
in the country has been a national priority for many years.

1991 Reforms
Deregulation of Industries.
Ease of Private Investment.
Ease of import & export.

Since 1990 Foreign investment has been consistently eased.

NMCC (National manufacturing competitiveness council)

NMCC was stablished in 2006 & it prepared the national strategy
for manufacturing .

Invest India
Invest India guides investors and also invites foreign investors.
The decision to establish it was taken in 2010 by UPA Govt.

NMP 2011
National manufacturing policy 2011 has many objectives similar
to MAKE IN INDIA.
Targets set by NMP 2011 :
Manufacturing sector contribution to reach 25% of GDP .
Creating 100 millions of Jobs.
Enhance global competitiveness.
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 New Initiatives

NEW INFRASTRUCTURE
Five industrial corridor projects
have been identified, planned and
launched by the Government of
India in the Union Budget of 2014-
2015, to provide an impetus to
industrialisation and planned
urbanisation. In each of these
corridors, manufacturing will be a
key economic driver and these
projects are seen as critical in
raising the share of manufacturing
in Indias Gross Domestic Product
from the current levels of 15% to
16% to 25% by 2022.

Along these corridors, the

development of 100 Smart Cities
has also been envisaged in the Union Budget of 2014-2015. These
cities are being developed to integrate the new workforce that will
power manufacturing along the industrial corridors and to
decongest Indias urban housing scenario.

A National Industrial Corridor Development Authority (NICDA) is

being established to converge and integrate the development of
all industrial corridors.

CONCLUSION

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 BIBLIOGRAPHY

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