Make in India or Make for India?

Make in India or Make for India?

Introduction:

Just in time when people are growing restless of the “only talks and no action” strategy of the BJP government led by Modi who promised “acche din” for people along with bringing back of black money within 100 days, questions have been raised on his “make in India” policy. Reserve Bank of India governor Raghuram Rajan, who also happens to be a former chief economist at International Monetary Fund raised concern over the manufacturing centered policy of the government. He also criticized that the focus should be on “make for India” instead of “make in India.” Should government take Rajan’s advice seriously or continue with its own plans?

Drawbacks of the “make in India” policy:

1. The policy of ‘make in India’ is simply a replication of the Chinese policy. Following this policy might not work the same way as it did for China. India has a different kind of economy and is developing at a different time, and we should be wise while framing policies about what will work for us.

2. This campaign is focused only on the manufacturing sector. As pointed out by Rajan there is “danger when we discuss Make in India as something which is focused on manufacturing, an attempt to follow the export-led growth path that China followed.”

3. If India pushes manufacturing exports, it will have to compete with China which is the leading player in the international market and an export-led growth will not be the same as it was for the Asian economies that followed the strategy before.

4. An export led strategy would involve subsidizing exporters with cheap inputs as well as an undervalued exchange rate, and this would simply be ineffective at this juncture. India, at the verge of development needs policies that would ensure growth for its people.

5. According to Rajan, ‘this strategy has been tried and it has not worked because it ended up reducing domestic competition, making producers inefficient, and increasing costs to consumers.’ Why is the government bent on repeating the same mistake twice?

6. Instead of export, India needs to focus on domestic demand and create an integrated market with a view to reduce transactions cost. The policy lacks this point of view which is essential for the internal growth of India and the policies meant for development must be framed keeping these in mind.

Advantages of “make for India” policy:

1. Improvements in the physical transportation network will help and internal growth will be seen for the people of our country.

2. A well designed GST bill should be introduced by reducing state border taxes. This will reap the much needed consequence of creating a truly national market for goods and services, which will be significant for our growth in years to come.

3. Government needs to valve the domestic demand strength instead of investing in a duplicate China-like export-led policy in a slowing and uncertain world. This policy might prove to be beneficial when implemented a few years from now but currently the call is for internal growth.

4. The country needs to pay attention to regional and domestic demand for our growth. When the entire country is malnourished and poverty ridden, there cannot be growth via export sector. To make in India, it is essential that steps be taken in favor of internal growth.

5. Government should work on creating the strongest sustainable unified market that can be created, which requires a reduction in the transactions costs of buying and selling throughout the country. The promise of ‘acche din’ was addressed for the common people of India too and not just for industrialists in India.

6. Instead of subsidizing inputs to specific industries because they are deemed important or labor intensive, a strategy that has not really paid off for the country over the years, the government must try to figure out the public goods each sector needs, and strive to provide them.

Conclusion:

The ‘make in India’ policy might be a smart move towards making India a developed nation in every field of development but that can only be possible if the internal demands of people are met as per the promises made by the government before coming to power. We do understand that it is not a matter of few days to bring good times in a nation facing so many challenges but every policy designed towards the betterment of the nation should also include areas of benefit for the common people of the country. A balanced mix of ‘make in India’ and ‘make for India’ would be ideal for a developing nation as ours.