Is “Make in India” A Failed Product That Is Merely Being Rebranded?

Posted on October 10, 2014 in Politics

By Sabarathinam Selvaraj:

Hard selling throughout the PM’s US visit, an op-ed in the Wall Street Journal and a glitzy launch event, ‘Make in India’ campaign has made the right noises so far. The launch of the campaign to position India as a manufacturing and export hub was a huge success. It had catchphrases from the Prime Minister in “FDI – First Develop India” and “Look East and Link West”; business leaders and ministers talked up labour-intensive manufacturing; brochures and a website with a lion made up of cog-wheels were released. Make in India is an unapologetic PR campaign with the PM as its Chief Marketing Officer.

make in india

What really to make of ‘Make in India’? It is an old product which hit rock bottom in sales due to product failures in the last 10 years that is being rebranded and sold again. The company’s new CEO who was rather popular given his management of a similar medium scale company as the Chief Minister of Gujarat has now been promoted by the country’s voters. It is this credibility that he capitalises on to promise quality to potential customers. The product’s inherent design flaws still remain. An unfair land acquisition act, a complex taxation regime, under developed infrastructure to support manufacturing, electricity shortage and shortage of fresh water resources for industries have contributed to our 134th position in the ease of doing business survey.

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act- which is UPA’s landmark land acquisition act, mandates payment of four times the market value in rural areas, and twice the price for land close to urban settlements. Land prices have soared up since, and a Business Line report on 4th August indicates that the “cost of land now accounts for 20-25 percent of project cost.” The report also echoes problems such as long delays and hurdles in acquiring land in India. While Minister Nitin Gadkari has spoken of the NDA’s intentions to amend the act, it may face the same roadblocks as the Insurance Laws amendment bill in the Rajya Sabha with significant opposition from the Congress.

High direct and indirect taxes and myriad local taxes add to the cost of doing business in India. For example, there is a central tax on manufacturing, state level tax on sales with some states imposing VAT and an additional OCTROI levied by local municipal corporations. The implementation of GST is still being negotiated with the states.

The product has not gone through any effective updates yet either. Very little has been achieved on the FDI front- FDI in insurance has been sent to the select committee and 49% in defence without control is not incentive enough for anyone to set shop. Single window clearance still remains ‘soon to be launched’. While it is too early to be critical and patience needs to be exercised, it is the government’s impatience to launch the campaign that mandates this criticism.

India’s economy has seen a remarkable turnaround since the new regime assumed power and the markets have been bullish. Positive sentiment has contributed largely to these developments; little has changed on the policy front. Modi, as the chief minister of Gujarat might have been able to see investments through to the last mile and clear of red tape. One cannot be sure that he will be able to do the same at a national level, with the NDA in power only in 7 states and given the adversarial centre- state dynamic.

Would it have been wiser to push the campaign after removing the impediments or at least after adding the necessary updates to the failed product? Will strong leadership and positive sentiment, the only significant changes, be enough to woo investments into manufacturing? While cronyism eroded trust in the system at various levels and affected investor confidence in the last ten years, is a mere trust building exercise enough now? Verdict remains on ‘Make in India’.

Among various other reasons, it is the promise to create jobs in an economy that will grow again that gave Mr. Modi the huge mandate in the first place. This vote bank with over 70% of its population under 45 is set to grow, with around 20% of the population between the age group 11-19 (2011 census) soon to become voters. An astute politician, Mr. Modi is likely to have realised that he needs to deliver on this count if he is to stay in power until 2024, a desire he has spoken of time and again. It is in this context that the recent ‘Make in India’ campaign garners more importance. The collective hope of more than half a billion young people rests on it.

‘Make in India’ is a necessary push to revitalize a long ignored sector, but it is not adequate yet. When history looks back at Modi’s report card as the Prime Minister of India, ‘Make in India’ will certainly be an important cog. Whether it will be one as majestic and powerful as the lion that is its mascot, only time will tell.