Launched in September 2014, the “Make in India” initiative aimed to transform India into a global manufacturing hub. By promoting investment, fostering innovation, and enhancing skill development, the initiative sought to boost domestic production and attract foreign direct investment (FDI). Over the years, this policy has significantly influenced FDI inflows, particularly in the manufacturing sector. This article examines the impact of “Make in India” on FDI and how it has shaped the country’s industrial landscape with relevant statistics.
Increase in FDI Inflows
One of the primary objectives of “Make in India” was to ease regulatory barriers and create a business-friendly environment. As a result:
- FDI inflows surged: According to the Department for Promotion of Industry and Internal Trade (DPIIT), India attracted $81.97 billion in total FDI during FY 2020-21, a sharp increase from $45.15 billion in FY 2014-15. The manufacturing sector alone accounted for $21.34 billion in FY 2021, showing a significant boost post-2014.
- Key sectors benefited:
- Automobile sector: India attracted $35 billion in FDI from 2000 to 2022, with major investments from companies like Suzuki, Hyundai, and Tesla.
- Electronics and mobile manufacturing: With initiatives like the Phased Manufacturing Program (PMP) and PLI schemes, India became the second-largest mobile phone producer globally. FDI in this sector grew from $1.7 billion in 2014 to over $6 billion in 2022.
- Textiles and garments: India received over $3.75 billion in FDI in this sector between 2014 and 2022, supported by schemes like Mega Textile Parks.
- Policy reforms played a crucial role:
- The government liberalized FDI regulations in various manufacturing sectors, permitting 100% FDI under the automatic route in industries such as defense, construction, and single-brand retail.
- The FDI cap in defense manufacturing was increased from 49% to 74% under the automatic route, boosting foreign investments from companies like Lockheed Martin and Boeing.
Impact on the Manufacturing Sector
“Make in India” has had a transformative effect on India’s manufacturing industry in several ways:
- Growth of Industrial Corridors:
- The initiative led to the development of 11 Industrial Corridors including the Delhi-Mumbai Industrial Corridor (DMIC), attracting $100 billion in investments.
- These corridors aim to enhance supply chains and create smart cities to facilitate manufacturing expansion.
- Rise of Global Manufacturers:
- Several multinational corporations, including Apple, Samsung, Foxconn, and Boeing, have set up or expanded their manufacturing bases in India.
- Apple’s investment in India crossed $1 billion, and the company now manufactures 7% of its global iPhone output in the country.
- Employment Generation:
- The increase in FDI has contributed to job creation, with an estimated 4.3 million direct and indirect jobs created in manufacturing since 2014.
- The electronics sector alone has generated over 600,000 jobs with the rise of mobile and semiconductor manufacturing.
Challenges and Concerns
Despite its successes, the initiative has faced several challenges:
- Infrastructure Bottlenecks:
- Although India has improved its ease of doing business ranking from 142 in 2014 to 63 in 2020, infrastructure gaps in power, logistics, and connectivity remain key concerns.
- Regulatory Complexities:
- While FDI norms have been eased, land acquisition and labor laws continue to pose hurdles for large-scale industrial expansion.
- Global Disruptions:
- Events such as the COVID-19 pandemic and Russia-Ukraine war have impacted global supply chains, affecting investment flows and raw material availability.
Future Prospects
To further enhance FDI in the manufacturing sector, the Indian government has introduced complementary policies such as:
- Production Linked Incentive (PLI) Scheme:
- Launched in 2020, this scheme covers 14 key sectors including electronics, automotive, and pharmaceuticals, with an investment outlay of ₹1.97 lakh crore (~$26 billion).
- The PLI scheme has already attracted $16 billion in commitments, with major firms such as Samsung, Foxconn, and Tata Electronics benefitting.
- Semiconductor Mission:
- India has pledged $10 billion to develop a domestic semiconductor industry, with Vedanta-Foxconn investing in a $19.5 billion chip plant in Gujarat.
- EV Manufacturing Push:
- Companies like Tesla and Ola Electric are ramping up investments, with India targeting 30% EV penetration by 2030.
Conclusion
The “Make in India” initiative has significantly boosted FDI inflows in the manufacturing sector by creating a more investor-friendly environment and promoting industrial development. Statistical evidence highlights the remarkable progress India has made in attracting foreign investment across key industries. However, continued efforts in improving infrastructure, simplifying regulations, and adapting to global economic changes will be essential to sustaining this growth. If these challenges are addressed effectively, India is well on its way to becoming a global manufacturing powerhouse, leveraging its strengths as an attractive investment destination.