Make_in_India_vs_Make_for_India
I
would like to discuss the debate triggered by the comments made by the remarks
of the Governor of RBI, Raghuram Rajan on the government’s ambitious ‘Make in
India’ campaign. He said instead of Make in India, we should focus on Make for
India. So Make in India or Make for India? He was referring to the focus
of government on making India a manufacturing hub to serve both domestic and
external demand. Adding to it he said in East Asian countries
manufacturing led economic growth is driven by both domestic and external
demand. Encouraging internal and external demand encourages them to develop
good quality products and constant refinement of products. Similar proactive
measures in India may not work as our internal demand is not encouraging
enough.
Manufacturers
in India may have to deal with problems of domestic demand. 56% of our
population do not have regular access to basic needs. About 95% of families
make less than 1.5 lakh per year. Where is the scope for increasing domestic
demand? There is low scope for domestic demand but even if manufacturers
depend on domestic demand there may be other issues. Indian demand is highly
price sensitive and not so quality driven. Also Chinese manufacturers can
be huge competitors as they have moved up in quality and can easily provide
same goods at competitive prices leading to tough time for Indian
manufacturers. So focussing on external demand and internal demand at this
point may lead to devastating results. Less than 1 percent of consumer demand
is driven by quality in India. Hence focus on domestic demand may force
manufacturers to cut costs and thereby discount quality.
But
should we undermine the ‘Make in India’ program just because it is not
currently serving domestic demand? Make in India is aimed to add 90 million
jobs in next decade. It covers 25 major sectors like automobile, IT&BPM,
oil and gas etc. It can also make India self-reliant in investment,
innovation, skill requirements and manufacturing infrastructure. It can make us
ready for future by improving the present. Let’s not forget the large
unemployed youth in this country. Make in India can solve their problems
through more jobs more skill development via exposure to better technologies
and processes. India is on its way to have largest number of ‘young’
people in its workforce in the world. These jobs and skill upgradation programs
are essential for our success in future. Also let’s not overwhelm
ourselves with the concern for the domestic demand. Though Raghuram Rajan spoke
of export promotion and import substitution not working for India, many experts
feel the inflow of capital will lead to appreciation of rupee which can in turn
reduce exports. Make in India will encourage foreign manufacturers to get
finance themselves from Indian banks which will work in India’s favour
but providing incentives for one particular field like manufacturing may not work
for India as it worked for China, we may have to look for more holistic view in
designing for our strategy for sustainable growth. I think efforts are on
in place for such holistic development. The Modi government is working on
labour reforms, less governance, environment clearances to improve the current
business scenario as a whole in India. Certain policies are in place to
ensure infrastructure development. Development of 100 smart cities is an
epitome of the efforts in this direction.
Make for
India may be an ideal strategy for India’s growth but given our low domestic
demand and price sensitive customer behaviour, our manufacturing can grow
steadily with make in India approach and focus on more foreign demand. The flow
of capital and increasing per capita income via employment may increase
domestic demand which may drive ‘make for India’ in future.
Mr. K. Kranthi Kumar MBA I year