The contribution of the primary sector towards the
GDP is only 14-16%, while three-fourth of our population depends on it. Due to
this reason India faces grave unemployment. Subsequently the government had to
rely upon programs like MGNREGA and DBT to tackle the unemployment menace.
These programs do not add any skill sets to these people. The repercussions of
such policies of the government are far reaching, since it brought the national
exchequers to their knees. Also it led to huge fiscal deficit. Hence to address
the twin issue of growth and unemployment, India had to rely upon the
manufacturing sector. The advantage India has vis-a-vis China is its
demographic profile. The young population cannot be satiated by providing them
employment in the primary sector. So our Prime Minister, in his pursuit to
augment industrial growth in this country coined the term ‘Make in India’ on
September 25 of this year. Not only this, in his foreign visits to countries
likes USA and Australia, he marketed this concept, giving a positive signal to
the investors to invest in India. The business sentiments had received a big
jolt in the previous UPA reign, the government being rigged by a number of
corruption scandals and policy paralysis.
MAKE
IN INDIA
The government has the aim of making more in India.
This implies improving the infrastructure and efficiency of producing in India.
When you are talking of producing, it can be agricultural commodities, mining,
manufacturing or services. To achieve this goal, the government needs the
support of the private sector and the foreign sector in the form of FDI, to
build the requisite infrastructure.
Apart from infrastructure, it basically aims at
making India a manufacturing hub by eliminating the unwanted laws and
regulations, eliminating red tapism, eradicating bureaucratic hindrances and
making the clearance process less cumbersome, since the petty bureaucrat
empowered by these regulations can become a tyrant.
The other important aspect is the time bound
clearances of projects trough a single window. The basic obstacle is to get the
environmental clearances, which the government has taken into consideration and
plans to act swiftly in this regard. The motive of the government is to help
the business and not hinder it. For that, the government plans to have a single
window clearance system in place to help the businesses and make them more
competitive.
The campaign also aims at providing employment and
invests in human capital. This requires enhancing the quality and spread of
healthcare, nutrition and sanitation. Apart from these basic needs, appropriate
education, vocational training and imparting skill sets in the labour market
are the various objectives of this campaign.
And last, the ‘Make in India’ campaign wants to
revive the business sentiments of foreign investors and make the ease of doing
business in the country more competitive.
MAKE
FOR INDIA
Showing yet again his proclivity to diverge from
government’s views if required, RBI governor Raghuram Rajan recently redefined
the definition of ‘Make in India’ and came up with the concept of ‘Make for
India’. When ‘Make in India’ is looking to attract foreign investment, Rajan
has suggested budgetary incentives for household savings to ensure that the
country’s investment is highly financed by the domestic savings. These so
called connotations largely reflect the government policies and the stance
taken by the central bank. It is a positive sign since it reflects the
independent functioning of the RBI in the FinMin-RBI nexus. The RBI governor
has accentuated various aspects which forms the core of ‘Make for India’
campaign.
Firstly, while ‘Make in India’ focuses on export led
growth, (since the IIP has been negative, WPI has reached zero) ‘Make for India’
addresses the objectives should be achieved through domestic sources. This can
be achieved through a progressive taxation policy that would encourage domestic
savings. The world cannot accommodate another China at this junction. Also
there is a huge difference between the emerging countries and the industrial
nations. Secondly, the manufacturing sector in industrial countries is capital
intensive in nature as compared to the labour intensive in India. Thirdly, when India is going to compete with
China in terms of exports, it won’t be easy since China has already got a head
start and have a significant advantage over India. Fourthly, the repercussions
of such export led growth are multifold- subsidizing exporters with cheap
inputs, undervalued exchange rate, negotiating with environmental norms, etc.
Another discrepancy regarding ‘Make in India’ is a
strategy of import substitution through tariff barriers. This would be highly
detrimental since it would curb domestic competition and make our producers inefficient.
‘Make for India’ envisages creation of an environment through SEZs, industrial
corridors, etc where our producers can compete with the global ones. Hence by
doing this, not only do we attract FDI, we also encourage the Indian
entrepreneurs.
‘Make for India’ also aims at creating a
sustainable, unified market that would ultimately lead to lower transaction
cost across the country. This can be achieved if the GST bill is passed in the
Parliament. Not only monetary policy, sound fiscal policy is the need of the
hour since domestic demand is generally over stimulated.
CONCLUSION
The whole purpose of ‘Make in India’ campaign was to
send a positive signal to the world that India has come of age with the arrival
of the new dynamic leader and ready to assimilate the global world. It was a
novel concept to attract foreign investors especially the FDI to usher a new
era of manufacturing led growth. The image of the country had taken a big toll
due to the umpteen corruption scandals associated with the previous government
and lack of competitiveness. Hence the Prime Minister should be given credit
for his vision and proactiveness. The announcement itself has raised the market
sentiments to a new level, setting new records at SENSEX. The FDI inflow has increased and there have
been continuous trade engagements with other countries.
On the other hand, the brave call by our RBI
governor, indicating the nuances as well as the loopholes of ‘Make in India’,
has made all of us contemplate regarding the real scenario. Now it is
imperative for both the FinMin and the central bank to work in tandem, evaluate
the options available, complementing each other and come up with a prudent
fiscal and monetary policy, to redefine the image of new India.
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