Effects of Make in India on the Indian Manufacturing Sector

By Vaishnavi Shukla

During the past two decades, the Indian economy has witnessed a transformation to emerge as one of the fastest growing economies in the world. Economic reforms unveiled in 1991 have brought about a structural shift enabling the private sector to assume a much bigger role. GDP growth has largely been enabled by growth of the services sector. During the last few months, the Indian economy has been witnessing positive sentiments.

Make in India is an ambitious initiative, launched by the Government of India in September 2014, with a mission to transform India into a global design and manufacturing hub. India believes it has a lot of untapped potential in terms of human resource and infrastructure development which, when properly utilized, will propel India into an industrial hub.

The main and prime motive of Make in India campaign is to strengthen the manufacturing sector. This campaign mainly focuses on this sector just because there is a lot of scope of growth, employment, and contribution in the economy from this sector.

The main initiative is to make India, a global manufacturing hub. The main thrust of this campaign would be on reducing waiting period of clearance for the manufacturing projects, create requisite infrastructure, and encourage an easy way for the corporate firms to do business in India.

The aim was to increase the contribution of the manufacturing sector up to 25% in the Gross Domestic Product of the country’s economy. Earlier, the contribution was limited up to 15% but the impact of Make in India has increased the contribution by 7.6% in 2015-16. In the last several years, this was the fastest change in the sector.

·    Indian manufacturing sector’s gross value added at basic price based on 2011-12 price series was US$ 311.6 billion in 2016-17, as per the second advance estimates of Central Statistics Office.

·    Manufacturing sector grew at a CAGR(Compound Annual Growth Rate) of 7.32 per cent between FY12 and FY17.

·    The sector grew 7.7 per cent in FY17.

·    The wholesale price index, in respect of manufactured goods grew 2.4 per cent      between April 2016 and January 2017.

Another aim of the campaign was to increase the employment in this sector. Since manufacturing is to be increased, then the employment opportunities will automatically rise. The poor and the unemployed will get a chance to get involved in this sector. The employment will generate income, and that, in turn, will increase the purchasing power of the people.

To promote entrepreneurship and encourage IT enabled start-ups and create additional funding avenues for small firms, and in turn generate more employment, the Government announced a 1000 crores in The Union Budget of 2015.

The declaration has opened a window of opportunities for start-ups to boost their ambitions and reach out to global consumers. And while the slogan is for the start-ups creating hardware products, a wide market awaits those in the digital sector as well. Indian technology product start-ups like InMobi, Zoho, FreshDesk, Pubmatic, FusionCharts etc.  Have already established themselves globally, and there is scope for others as well.

As stated in the Economic Survey 2015-2016 by Arun Jaitley (Minister of Finance, Defence and Corporate Affairs), "Indian start-ups raised $3.5 billion in funding in the first half of 2015, and the number of active investors in India increased from 220 in 2014 to 490 in 2015. As of December 2015, eight Indian start-ups belonged to the 'Unicorn' club (ventures that are valued at $1 billion and upwards).".

The domestic and manufacturing market in India is expected to be worth $400 billion by 2020. Make in India is not restricted solely to the manufacturing sector/hardware, but also encompasses software to be made in India.

According to a report by DIPP, India elevates its position to No. 2 in the “Tech Start-ups” category and these start-ups need equal attention in terms of finance. The Government of India therefore launched the Electronics Development Fund to support these start-ups.

However, it goes without saying that there is still a lot of scope for improvement. Make in India has now become a calling card for investors to come and invest in the Indian growth story. To further the Indian manufacturing capabilities, the government is focusing on the development of sectors that are going to be the key focus in the coming years. By introduction of new reforms in policies along with a positive economic atmosphere, it has created a fertile ground for start-ups to thrive in India and the manufacturing sector with it.