When Prime Minister Narendra Modi announced the “Make in India” initiative in September 2014, the government envisioned a plan to transform India into a manufacturing juggernaut, propelling economic growth and job creation. This ambitious initiative aimed to elevate manufacturing’s share of India’s gross domestic product (GDP) to 25% by 2022 (revised to 2025 – and still likely to fail) and generate over 100 million new employment opportunities. 

However, the government has failed to meet that goal. It has been reported a loss of over 24 million jobs between 2016 and 2020, with Covid-19 exacerbating an already dire situation. Over 11 million positions had been cut before the pandemic, calling into question claims of ambitious job creation. 

As we stand at the cusp of 2023, it is clear that Make in India hasn’t yet fully realized its ambitious objectives. Despite facing multiple implementation hurdles, the program remains an essential long-term strategy for bolstering India’s manufacturing prowess. 

In the following article, The Vaiśeṣika Team analyzes the failure of India’s “Make in India” initiative.

 

Make in India’s Rocky Road to Success

 

Make in India aimed to transform India into a global manufacturing powerhouse. While targeting priority sectors and foreign investment in priority sectors like automobiles, automotive components, chemicals, IT & BPM, pharmaceuticals, textiles & garments, ports, aviation, leather, food processing, defense manufacturing, etc., the program overlooked entrenched difficulties in areas like bureaucratic red tape, poor infrastructure, and an uncompetitive business environment still deterring manufacturers.

Rather than achieving the ambitious goals of developing industrial corridors and smart cities or upgrading critical infrastructure, progress has been piecemeal, with the ground reality falling short of lofty promises. Simplifying processes and introducing new policies on paper did little to address deep-rooted impediments facing both domestic and international companies.

Shortcomings in implementing substantive reforms have limited Make in India’s ability to attract meaningful long-term investments and generate much-needed manufacturing growth.

 

Our analysis suggests rhetoric of developing a world-class manufacturing hub masked ongoing deficiencies discouraging production that still eludes resolution. 

With objectives yet to be realized, the program’s viability in reviving Indian industry through global partnerships remains uncertain.

Impact on Manufacturing Growth and Jobs: Make in India’s Mixed Report Card

 

While Make in India saw some early interest, significant obstacles have undermined more substantial success. Key issues include:

• • Bureaucratic inefficiencies and inconsistent policy enforcement resulted in lengthy approval delays, discouraging investors.
    

• • Inadequate infrastructure like unreliable power and insufficient transport links drove up costs, undermining India’s competitiveness.
    

• • A complex land acquisition system and local opposition made expanding production difficult and time-consuming.
    

• • Stiff competition emerged from Southeast Asian nations with superior infrastructure and business friendliness attracting manufacturers away from India.
    

• • The COVID-19 pandemic exposed underlying weaknesses, as supply chain disruptions and the health crisis magnified pre-existing challenges of red tape, poor logistics, and an uneven policy environment.

These deep-rooted difficulties suggest loftier objectives were not matched, with concrete actions to remedy long-standing deficiencies hindering India’s competitiveness in global manufacturing. 

While some progress was made, the program fell short of overcoming barriers limiting its success on a larger scale.

Impact on Manufacturing Growth and Jobs

Official data reveals that the manufacturing sector grew at an average annual rate of only 7.5% between 2014-15 and 2019-20, falling short of the target of 25% of GDP. (Source: Ministry of Statistics and Programme Implementation | mospi.gov.in) 

The pandemic-impacted years of 2020-21 and 2021-22 further slowed growth. In 2021, manufacturing accounted for only 15% of India’s GDP, much lower than countries like China (26%), South Korea (39%) and Germany (20%). (Source: World Bank)

In terms of job creation, the Indian government’s goal of producing 100 million new manufacturing opportunities by 2022 through the ‘Make in India’ initiative was overly ambitious. According to the Periodic Labour Force Survey data, only 11.8 million new manufacturing jobs were added between 2011-12 and 2017-18, falling significantly short of the target.

While the overall manufacturing sector growth has been sluggish, certain segments have exhibited positive developments. The automotive industry has been a standout performer, achieving its target of increasing production to 300 billion by 2026, five years ahead of schedule. The pharmaceuticals sector has also witnessed steady growth, registering a 14% increase during 2014-2020. Renewable energy has emerged as another bright spot, with India’s installed solar capacity ranking third globally.

Despite these successes, the overall performance of the manufacturing sector has been disappointing, failing to generate the massive employment opportunities that were initially envisioned. Several factors have contributed to this shortfall, including global economic slowdowns, domestic regulatory hurdles, and infrastructural constraints.

Policy Adjustments Needed

For Make in India to reach its full potential, some changes are needed to policies. The processes for getting environmental approvals, land, and construction permits need to be made easier with online single-window systems.

Focusing on developing industrial areas and smart cities can help fill infrastructure gaps. These areas will have reliable utilities through special townships.

The government’s Production Linked Incentive (PLI) schemes in key sectors are a step in the right direction. But they need faster application. Resolving issues around the availability of skilled workers through vocational training programs can help attract global manufacturers who need specialized talent. Offering incentives to make components locally rather than just complete assemblies can speed up domestic value addition.

Conclusion

While Make in India showed initial promise, it has ultimately failed to achieve its ambitious goals due to deep-rooted challenges in India’s business environment and manufacturing infrastructure. Several years since its launch, manufacturing as a share of GDP remains far below the target and new job creation has fallen woefully short.

However, it would be premature to declare Make in India a complete failure. Certain sectors like automobiles, pharmaceuticals, and renewable energy have seen success. This indicates India retains the potential to develop a vibrant manufacturing economy. However, substantive policy reforms are needed to address long-standing deficiencies deterring investment and growth at scale.

Streamlining regulations, developing industrial zones, and upgrading utilities must be accelerated to enhance competitiveness. Incentivizing local sourcing and expanding skills training can help boost domestic value addition. With adjustments to address its shortcomings, Make in India still holds promise for India’s economic transformation. But bold steps are required to realize this vision and strengthen India’s position as a global manufacturing powerhouse.