The Lion’s Meow: a closer look at Make in India

The logic behind the government’s Make in India initiative is clear. As Prime Minister Narendra Modi stated in his speech at the launch of “Make in India Week” in Mumbai on 13 Feb 2016:

We launched the Make in India campaign to create employment and self-employment opportunities for our youth. We are working aggressively towards making India a Global Manufacturing Hub. We want the share of manufacturing in our GDP to go up to 25 per cent in the near future.

The specific goal is to increase the share of manufacturing in India’s Gross Domestic Product to 25% by 2022, which is expected to generate approximately 100 million jobs for Indian workers (see Ab ki baar, cut-and-paste sarkar for Make in India’s similarities with the UPA’s 2011 National Manufacturing Policy).

So how are we doing so far? If you believe the headlines, pretty well. Responding to the lifting of foreign direct investment (FDI) caps in several sectors, efforts to improve the Ease of Doing Business and of course Prime Minister Modi’s frenetic wooing of investment in foreign travels, gross FDI flows to India jumped 27% to $45 billion in 2015-16, an all-time high. Even the Finance Ministry’s usually measured 2015-16 Economic Survey touted the FDI increase as a success for Make in India.  With our social media feeds full of stories about this or that investment, clearly the #MakeInIndia lion is roaring.

But the closer you get to the lion, the more the roar sounds like a meow.

Consider the most recent FDI data from the Reserve Bank of India (RBI), broken up by sector, since Make in India specifically concerns manufacturing. After an encouraging jump to a record $9.6 billion in 2014-15, FDI in manufacturing actually fell to $8.4 billion in 2015-16 (below the $9.3 billion it had reached in 2011-12).

Screen Shot 2016-08-30 at 5.06.00 PM.png

Note that these numbers cover inflows approved by the RBI and other agencies, and exclude share purchases, reinvested earnings and so on. This pattern is consistent with data from the Department of Industrial Policy and Promotion, analysed here.

Furthermore, the percentage of FDI flowing to manufacturing, which has been in the range of 35-40% for the past four years, dropped to 23% in 2015-16. Rather than manufacturing, services — think e-commerce providers like Amazon, Snapdeal and Flipkart, ride-sharing services like Uber and Ola — seem to be drawing a greater share of investment.

Screen Shot 2016-08-30 at 5.10.49 PM.png

What about the broader economy? After all, Make in India’s main objective is to raise the share of manufacturing in the economy as a means of generating jobs.

Screen Shot 2016-08-30 at 5.08.34 PM.png

Sadly, no meaningful change yet: the share of manufacturing has been flat for the past decade, with a slight downward trend (data here and here).

Here’s the rub: there is no doubt that building infrastructure, liberalising land and labour laws and improving the ease of doing business is difficult and time-consuming, and will take time to play out. But the Modi government needs to convince voters that change is happening, and fast.

Which is the genius of the Make in India campaign: it is essentially a branding exercise under which the government claims credit for pretty much everything and yet nothing. Every factory inaugurated, every defence deal signed, every shovel stuck into the ground will now be accompanied by the hashtag #MakeInIndia, even if the percentage of GDP arising from manufacturing stays exactly where it’s been for the past decade.

Consider this recent tweet from the official Make in India handle:

The Tejas is an Indian fighter plane that has been in development for more than two decades and first flew in 2001, but let’s label it #MakeInIndia. The BrahMos is a modified Russian cruise missile with Indian software that entered service with the Indian Navy in 2005, but, hey, why not #MakeInIndia.

6 thoughts on “The Lion’s Meow: a closer look at Make in India

  1. Srihari srinivasan

    This is a great site.. Very well compiled info, rationally, logically & brilliant presented! Kudos..
    But there is one HUGE shortcoming, could the references/data also be included? The graphs/figures clearly show hyperlinks to the data/pdfs of reports but they seem to be webpage screenshots!! Why not include the links to this data in the text with hyperlinks? Just to be 100% rigorous !

    1. Thanks very much. You’re right, all data sources should have links. I get around the difficulty of putting hyperlinked charts on WordPress by placing them in the text, as I have done here in the text above for the first two charts (see the link titled “FDI data”). And thanks to your suggestion I have also added two links in the text for the third chart.

      1. Srihari srinivasan

        Wonderful! If at any stage you would require any help searching & sifting through govt departmental reports for busting the lies being spread around, I would gladly be of help.. I had to enter my mail ID to be able to comment, so you have my email!

  2. subbu

    I am mostly like you, so let me say a few words.

    Expecting to hold a politician to his/her word is a futile exercise. They promise the moon on amavasya, if they think that will get them votes.

    Think about this : once you cast your vote, and the politician gets elected, is there any way that the citizens can recall that politician if his/her promises prove false?

    The clever ones never put a date on when their promise will be delivered, and the most clever ones will always keep their delivery time just beyond the next election, thus ensuring their survival. Some will declare themselves ‘visionaries’, and draw up plans that will include their grandkids being in power.

    Your effort to do a data analysis and hold their feet to the fire is talking to empty auditoriums. The nation’s majority has decided that the events that are happening are acceptable to them, and if they are not, what avenues of protest do they really have?

    Consider the proposal of “conduct all elections at one go”.

    currently, if you are dissatisfied with the present government at the centre, you could forcefully vote against them in the local elections. With this proposal, that option is also going to be taken away. You have to wait for five years before you can vote against them, and who knows what will happen in those five years.

    Indian citizens may be shrewd, but their politicians are wily as well. They have set up a system where the ones that win are themselves, with some crumbs thrown along the way.

    Politics as a ‘service’ has now become extinct, it is become a business much like many other things.

    Appreciate things that you do, not sure of the benefits of your work.

  3. kamalndra singh

    I have been a MLA in Rajasthan for three terms. Then the demise of the Janta Dal/ Party left me without a platform.I decided not to contest anymore. I am looking for a place where we could check on Roumours that are spread, with impunity. Hope you are the hope.

  4. Mahendra Shah

    Great job. Sifting through the propaganda is very important. It is very unfortunate that the people like everything as either black or white and they generally avoid the serious and studious examination of the issue. I am surprised why the traditional media are not doing this type of research.

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