MAKE IN INDIA

Author: Suyog Jadhav

 

India’s Export Transformation

Rahul & kalpana et al (2015) presented the, India’s export story has two sides. On one hand, its service exports, especially in IT and business services, are a global leader, offering sophisticated services that surpass those of many high-income countries. This success is driven by modern, high-productivity services like telecommunications and computer information.

On the other hand, goods exports face challenges. While there has been progress, India still lags behind peers like China in areas like:

• Quality: Some products, like diamonds and nuclear reactors, are top-notch, but overall, the quality of India’s manufactured goods needs improvement.
• Sophistication: India’s goods exports have lower technological content compared to competitors, limiting potential for growth.
• Complexity: India’s goods are less complex, meaning they have lower levels of embedded knowledge and innovation.
• Diversity: While India exports a range of goods, its service export diversity is limited, mainly relying on IT.

To strengthen its export sector, India needs to diversify beyond IT services into other growing service areas like freight transport, marketing, and research.

 

Make in India – scheme transforming India ( challenges)

S. Soundhariya (2016) they explained, The “Make in India” initiative was launched by Narendra Modi on September 25, 2014, to attract FDI (Foreign Direct Investment) and encourage Indian people to start their own businesses. However, there are challenges:

1. India’s manufacturing market is 16%, with a major role played by small and medium-sized industries. 

2. The Indian taxation system is very complicated, and infrastructure facilities are poor. 

3. Indian people have to purchase Indian-made products because more than ₹3,000 crore goes to foreign countries for foreign products like cosmetics, snacks, tea, beverages, etc. 

With this initiative, the aim is to increase manufacturing’s contribution to the country’s GDP to 25% by 2025, up from the current 10%. The main focus is on 25 sectors, with the rest being service and infrastructure.

 

The Make in India Initiative: Boosting Employment and Infrastructure* 

Dr. Vikas (2015) presented that, Around 1 million people enter the workforce every month, and with the unemployment rate at 3.7% in 2013, the Indian government launched the Make in India scheme. The aim was to transform India into a global manufacturing hub. The initiative primarily focuses on sectors such as mining, telecom, textiles, automobiles, biotechnology, chemicals, construction, defence, food processing, leather, pharmaceuticals, and railways. 

Following this, the government placed greater emphasis on improving the ease of doing business and boosting physical infrastructure. Efforts were made to simplify rules and procedures, making it easier to start and operate businesses. Better infrastructure was seen as a key factor in enabling businesses to function more efficiently. In December 2014, during the interim budget, the government increased the allocation of funds for infrastructure by 8.6%, from ₹166,756 crore in 2013-14 to ₹181,134 crore. These funds were directed toward projects spanning power, coal, roads, and civil aviation, with the creation of a National Investment and Infrastructure Fund to support these initiatives.

 

FDI Inflow

K.Esakki & k.Rajamannar (2020) presented that, When a foreign country invests or puts money into our country, it is called ‘FDI inflow’—money coming in. When we invest money in a business in another country, it is called ‘FDI outflow’—money going out. We look at the difference between the money coming in and the money going out, which is called looking at it on a net basis. If more money comes in than goes out, it is positive; if more money goes out than comes in, it can be negative.

The FDI inflow grew by 63.9% from April 2009 to March 2014, and from April 2014 to March 2019, it grew by 60.2%. India is the fastest-growing economy in the world and was ranked 10th in terms of FDI inflow for 2017 by UNCTAD. In 2018-19, the FDI value of India was US $44.37 billion. The highest FDI inflow came from Singapore (US $16.23 billion), followed by Mauritius (US $8.08 billion), the Netherlands (US $3.87 billion), the USA (US $3.14 billion), and Japan (US $2.97 billion).

*Impact of Make in India on the Indian FDI Sector:* 

1. During 2016-19, the highest amount of FDI inflow was in the service sector, amounting to almost ₹74,149 crore (18%). 

2. It also shows a drastic change in the car industry. In 2016-17, the inflow was US $1.6 billion, but in 2017-18, it grew to US $2.09 billion. 

3. The electronic industry in India saw a 242% growth in FDI value inflow during April 2014-17.

 

 

Improving Logistics for Manufacturing Growth

 Yash & john (2017) presented that, India’s manufacturing sector can improve significantly by cutting logistics costs. Currently, logistics costs account for 14% of the country’s GDP. The government has proposed setting up multimodal logistic parks across the country to reduce costs and increase efficiency. These parks will help move goods quickly and easily, and will also provide services like storage, warehousing, and customs clearance.

In the first phase, 15 parks will be set up in areas with high freight movement. This initiative is part of the Logistics Efficiency Enhancement Program (LEEP), which aims to improve efficiency and cut logistics costs. The parks will cover approximately 5,000 acres and will be built at an estimated cost of Rs. 33,000 crore.

By reducing logistics costs to 9% of GDP, India can save around $50 billion. The government is also encouraging public-private partnerships in the logistics sector and has opened up foreign direct investment (FDI) in multi-brand retail, which is expected to boost the industry’s growth.

Issue in FDI Data

K, S Chalapati Rao & Dhar, Biswajit, (2016) presented In the report, they found serious problems in the official FDI inflow data. The report highlighted three main issues: 

1. Fake or incorrect numbers: In the report, some recorded investment amounts were wrong or did not seem to exist upon verification. For example, the single largest tranche amounting to $2.25 billion related to Serene Senior Living Company couldn’t be verified. 

2. Delayed reporting: Investments that happened years ago are being reported now, making it look suspicious. For instance, in 2007, Keyman Financial Services, which appears to be a ₹75 crore inflow, was reported as ₹7,500 crore during 2025. 

3. Misleading classification: Investments are being categorized into the wrong sectors. For example, HUL, which specializes in detergents, cosmetics, and toiletries, was shown under the food processing sector. 

The government’s claims about a surge in foreign investment might not be true.

 

India’s Accelerated Path to Manufacturing 4.0

Dilip & Shobha et al  (2019) India’s manufacturing sector is undergoing a transformation driven by advanced technologies like AI, ML, IoT, and robotics, creating “smart factories” that are more efficient and adaptable. The government is supporting this shift through initiatives like Digital India and Make in India, aiming to boost the sector’s contribution to GDP. Programs like SAMARTH Udyog Bharat 4.0 promote the adoption of Industry 4.0 technologies.

India is also investing in infrastructure, including smart grids and green energy corridors, with the automotive sector leading in automation and robotics. Both domestic and international companies are investing in advanced manufacturing, focusing on IoT and M2M solutions.

Recognizing the need for a skilled workforce, India is emphasizing new-age training to meet Industry 4.0 demands, positioning itself as a global leader in smart manufacturing. Digital technologies will play a key role in the sector’s growth in the coming years, accelerating India’s transition to Manufacturing 4.0.

 

Impact of Manufacturing Growth on Indian Economy

Dr. Richa (2019) presented, The growth of India’s manufacturing sector is expected to have a significant impact on the country’s economy. Domestically, it will create employment opportunities for the youth, alleviate poverty, and attract investments. The sector’s growth will also increase the value of Indian goods and help reduce the trade deficit.

Internationally, India’s standing in the world will improve, and investors will view the country as a lucrative opportunity. The interaction between domestic and international firms will transform Indian companies into multinationals.

The government has supported this growth by setting up initiatives like ‘Trvest India’ and a dedicated web portal to assist investors. The Boston Consulting Group predicts that India’s consumption may triple to $4 trillion by 2025, and PricewaterhouseCoopers estimates that India will surpass the US to become the second-largest economy in terms of purchasing power parity by 2040.

Growth and Investment in India’s Agritech Sector

Anil & Ashutosh et al (2020) presented the, Agritech sector in India is growing fast, with startups getting significant funding. In the first half of the year, Indian agritech startups raised over $248 million, showing a 300% growth from the previous year. The sector is growing at 25% per year, and India has more than 450 agritech startups. India contributes to one in nine agritech startups worldwide, highlighting its potential in agriculture. Over the past five years, five global agritech companies entered India, while 25 Indian companies have gone global.

AgroStar, a leading agritech startup, raised $27 million in funding. India is among the top five countries in food processing, and by 2024, the sector is expected to employ 9 million people. However, the organised sector only holds 60% of the market share, meaning there’s room for improvement. Corporate investors have put over $200 million into B2B agritech startups in the last 18 months, helping boost growth.

Impact of Make in India Policies on Economic Growth and Trade

Sen & Rahul et al (2020) Presented that, The Make in India (MII) initiative has had a positive impact on India’s economy, boosting real GDP and exports. Proactive policies, like investment pushes, contributed around 1% to GDP growth and 1.2% to export growth. However, reactive protectionist policies, such as tariff barriers, negatively impacted economic growth, reducing exports and investment. Despite these challenges, MII led to a $4.2 billion welfare gain, improving the real GDP by 0.25%. The policies resulted in allocative losses (more tax revenue) but also endowment gains, with higher investment leading to more economic activity. However, the increased reliance on capital due to foreign investment led to a decline in both skilled and unskilled labor growth. In the end, the overall trade balance improved by $19 billion, but avoiding protectionist measures could have led to an even more favorable outcome.

Conclusion

India’s economy is experiencing significant changes, especially in manufacturing and exports. While the IT and service exports are thriving globally, the goods export sector still faces challenges in quality, sophistication, and diversity. The Make in India initiative aims to boost manufacturing by improving infrastructure and attracting investment, although challenges like a complex tax system and small market share persist. The FDI inflow has grown steadily, with sectors like electronics and automobiles seeing the most growth. Overall, with continued focus on infrastructure, innovation, and diversifying exports, India’s manufacturing and agritech sectors have the potential to drive significant economic transformation.

 

Refrences

Aniil Kumar Singh, ashutosh upadhyaya , sonia kumari , prem k sundaram and pawan jeet “Role of Agriculture in making India $5 trillion Economy under Corona Pandemic Circumstance”, Journal of AgriSeaech, vol.7 no. 2 (2020)

 

Chenoy, D., Ghosh, S. M., & Shukla, S. K. (2019). Skill development for accelerating the manufacturing sector: the role of ‘new-age’ skills for ‘Make in India.’ International Journal of Training Research, 17(sup1), 112–130.

Dr. Vikas Kumar, 2015. “Make in India by Reviving Investment, Manufacturing and Job Creation,” Journal of Commerce and Trade, Society for Advanced Management Studies, vol. 10(1), pages 36-40, April.

Dr.Richa Srivastava,2019. “Impact of Make in India in Indian Economy” Internation Journal of Trend in Scientific Research and Devlopment, Volume:3, Issue:4, may-jun 2019

K Esakki Muthu & K Rajamannar, 2020. “A Study on Impact of Make in India in Indian Foreign Direct Investment,” Shanlax International Journal of Economics, Shanlax Journals, vol. 8(2), pages 54-58, March.

K, S Chalapati Rao & Dhar, Biswajit, 2016. “The Tenuous Relationship between Make in India and FDI Inflows,” MPRA Paper 76468, University Library of Munich, Germany.

Rahul Anand, Kalpana Kochhar and Saurabh Mishra  “Make in India: Which Export Can Drive The Next Wave of Growth” IMF Working Paper 2015

 S. Soundhariya, 2016. “Make in India – Scheme For Transforming India,” Working Papers id:11188, eSocialSciences.

Sen, Rahul & Narayanan, Badri & Srivastava, Sadhana & Khorana, Sangeeta & Iyer, Chidambaran, 2020. “The Long-term Impact of Trade Wars and ‘Make in India on the Indian Economy,” Conference papers 330229, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

Yash Mehta, A. John Rajan, 2017. “Manufacturing Sectors in India: Outlook and Challenges”, Procedia Engineering, Volume 174, 2017, Pages 90-104, ISSN 1877-7058.