The “Make in India” initiative, launched in 2014, aims to transform India into a global manufacturing hub by boosting the sector’s growth, creating jobs, and increasing its GDP contribution. While it has shown progress in attracting investments and fostering innovation, its impact on the manufacturing sector is complex, with both achievements and unmet targets.
Current Impact on Manufacturing
Research suggests the initiative has led to increased manufacturing activity, particularly in sectors like automotive and electronics. For instance, Google is set to manufacture Pixel smartphones in Tamil Nadu, starting in September 2024, primarily for export markets. However, the manufacturing sector’s GDP share remains at 15.9% in 2023-24, far below the 25% target set for 2022. Employment has seen some growth, with 18.5 million jobs in 2022-23, but the goal of creating 100 million additional jobs by 2022 was not achieved.
Foreign Investment and Sectoral Growth
The initiative has likely boosted foreign direct investment, with inflows of US$70.9 billion in 2022-23, though a 43% decrease was noted in 2023 due to global economic factors. Specific sectors like automotive (e.g., Kia investing over $1.1 billion in Andhra Pradesh) and electronics have seen significant investments, enhancing production and exports. However, challenges like skill shortages and infrastructure gaps hinder broader impact.
Unexpected Detail: Policy Adjustments
An unexpected detail is the recent policy adjustment in 2024, liberalizing FDI in the space sector to attract more investors, reflecting ongoing efforts to adapt and strengthen the initiative despite earlier setbacks.
Detailed Analysis of “Make in India” Impact on Manufacturing Sector
The “Make in India” initiative, launched on September 25, 2014, by Prime Minister Narendra Modi, is a strategic campaign designed to transform India into a global manufacturing hub. It aims to facilitate investment, foster innovation, enhance skill development, and build best-in-class manufacturing infrastructure. This survey note provides a comprehensive analysis of its impact on the manufacturing sector, covering its objectives, current status, and detailed sectoral effects, based on extensive research from government reports, international data, and industry analyses.
Background and Objectives
“Make in India” was introduced as part of a broader set of nation-building initiatives to address India’s economic challenges in 2013, when growth rates had fallen to a decade-low. The initiative focuses on four pillars: new processes (easing business regulations), new infrastructure (developing industrial corridors and smart cities), new sectors (opening up for investment), and new partnerships (fostering government-industry collaboration). Its stated objectives include increasing the manufacturing sector’s growth rate to 12-14% per annum, creating 100 million additional manufacturing jobs by 2022, and raising the sector’s GDP contribution to 25% by 2022 (later revised to 2025).
Key components include:
- Streamlining regulations to improve ease of doing business, such as the eBiz portal and unified payment gateways.
- Infrastructure development, with investments in industrial corridors like the Delhi-Mumbai Industrial Corridor.
- Sectoral focus on 25 key areas, including automobiles, textiles, pharmaceuticals, and electronics, with recent expansion to 27 sectors under “Make in India 2.0.”
- Skill development programs to enhance workforce capabilities, aligning with industry needs.
Current Status: Economic Indicators
The current impact on the manufacturing sector can be assessed through key economic indicators such as GDP contribution, employment, and FDI inflows.
- GDP Contribution: The manufacturing sector’s share in India’s GDP has been a point of contention. According to the World Bank, in 2022, manufacturing value added was 13.6% of GDP, while Statista reported it at 13% in 2023. However, the New Indian Express noted a share of 15.9% in 2023-24, compared to 16.7% in 2013-14, indicating a slight decline. The IBEF suggests a 17% share, possibly referring to GVA, highlighting data discrepancies. The government’s target of 25% by 2025 seems challenging, with experts expressing doubts .
- Employment: The initiative aimed to create 100 million additional jobs by 2022, a target not met. The Annual Survey of Industries (ASI) by MoSPI reported employment at 1.85 crore (18.5 million) in 2022-23, up from 1.72 crore in 2021-22, exceeding pre-pandemic levels by over 2.2 million. However, earlier reports from Business Standard in 2021 mentioned a decline from 51 million in 2016-17 to 27.3 million in 2020-21, suggesting fluctuations. The Economic Survey 2021-22 noted an increase from 57 million in 2017-18 to 62.4 million in 2019-20, but these figures indicate the target was far from achieved.
- Foreign Direct Investment (FDI): “Make in India” has been associated with increased FDI inflows. White & Case LLP reported US$70.9 billion in FDI for 2022-23, with India ranking eighth globally in 2023. However, Forbes India noted a 43% decrease in 2023, attributed to global economic tensions. The initiative liberalized FDI policies, with 100% automatic route in many sectors, and recent changes in 2024 for the space sector aim to attract more investors. Between April 2014 and March 2019, FDI inflows were $286 billion, nearly 47% of total inflows since 2000, indicating significant growth.
Sectoral Impact: Success Stories and Challenges
The initiative has had varied impacts across sectors, with some achieving notable success while others face hurdles.
- Automotive Sector: Companies like General Motors, Kia, and Maruti Suzuki have invested heavily. Kia announced a $1.1 billion plant in Andhra Pradesh in 2017, creating 3,000 jobs and producing 300,000 cars annually. Maruti Suzuki began exporting the Fronx SUV to Japan, marking its first SUV launch there. These investments have boosted production and exports, aligning with the initiative’s goals.
- Electronics Sector: Google is set to manufacture Pixel smartphones in Tamil Nadu from September 2024, leveraging the Production-Linked Incentive (PLI) scheme, primarily for export to Europe and the US. This reflects growing interest in electronics manufacturing, with FDI inflows increasing substantially. Sansera Engineering Limited signed an MoU with Karnataka for a $251 million facility, aiming to create 3,500 jobs, further enhancing sector growth.
- Defence and Pharmaceuticals: The defence sector saw FDI limits raised from 49% to 74% in 2020, attracting $612 million by February 2024. The pharmaceutical sector has also benefited, with increased domestic production reducing import dependency, though exact figures vary.
Despite these successes, challenges persist:
- Skill Shortages: Bajaj Finance highlights mismatches in technical and managerial roles, affecting productivity. Skill development programs are crucial, but implementation lags in some regions.
- Infrastructure Gaps: While industrial corridors are being developed, existing infrastructure in many areas needs upgrading to support large-scale manufacturing.
- Global Competition: Competition from China and Southeast Asia, with lower costs and developed infrastructure, poses a challenge. Geopolitical tensions and global economic uncertainties further impact investment flows.
Policy and Future Prospects
Recent policy adjustments, such as the 2024 liberalization of FDI in the space sector, indicate ongoing efforts to adapt. The PLI scheme, introduced to incentivize domestic production, has shown promise in electronics and pharmaceuticals. McKinsey suggests specializing in high-potential value chains could double manufacturing GDP, emphasizing the need for strategic focus.
The initiative’s future depends on addressing skill shortages, enhancing infrastructure, and navigating global competition. Continued government support, public-private partnerships, and innovation will be key to realizing India’s manufacturing potential.
Tables for Clarity
Below is a table summarizing key economic indicators:
| Indicator | 2013-14 | 2022-23 | 2023-24 | Target (2025) |
|---|---|---|---|---|
| Manufacturing GDP Share (%) | 16.7 | 13.6 | 15.9 | 25 |
| Employment (Million) | 51 | 18.5 | – | 100 (by 2022) |
| FDI Inflows (US$ Billion) | – | 70.9 | – | – |
Note: Employment figures vary by source; 2022-23 employment from ASI, earlier figures from Business Standard.
Another table for sectoral impacts:
| Sector | Impact Example | Challenges |
|---|---|---|
| Automotive | Kia $1.1B plant, Maruti Suzuki exports to Japan | Skill shortages, competition |
| Electronics | Google Pixel manufacturing, PLI scheme benefits | Infrastructure gaps |
| Defence | FDI limit raised to 74%, $612M by Feb 2024 | Technology transfer issues |
Conclusion
“Make in India” has had a mixed impact on the manufacturing sector, with successes in attracting FDI and boosting specific sectors like automotive and electronics, but falling short of GDP and employment targets. Its legacy lies in laying the groundwork for future growth, with policy adjustments and sectoral focus offering hope for achieving long-term goals.