Make in India: Story of Success and Challenges

The “Make in India” initiative was launched by Prime Minister Narendra Modi on September 25, 2014, with the aim of transforming India into a global manufacturing hub. As the program marks its 10th anniversary this year, it is crucial to assess both the achievements and challenges that have emerged over the past decade.

Objectives of Make in India

• Boost Manufacturing: The initiative aims to increase manufacturing sector growth to 12-14% per year, create 100 million additional jobs by 2022, and raise the sector’s contribution to GDP to 25% by 2025.
• Global Competitiveness: It seeks to enhance India’s global competitiveness by attracting foreign direct investment (FDI), modernizing infrastructure, and streamlining bureaucratic procedures.
• Focus Sectors: Initially targeting 25 sectors, including automobiles, textiles, electronics, pharmaceuticals, defense manufacturing, and renewable energy, the program now covers 27 sectors under the “Make in India 2.0” phase, driving significant progress with renewed focus.
• The initiative is designed to reshape India’s economic trajectory and create employment opportunities for the country’s vast young workforce.

Main components  of ‘Make in India’

• New Processes: The initiative emphasized ‘Ease of Doing Business’ as vital for fostering entrepreneurship. It introduced streamlined procedures, simplified regulations, and minimized bureaucratic hurdles to improve the business environment for both startups and established enterprises.
• New Infrastructure: The government focused on developing industrial corridors and smart cities, equipped with advanced technology, high-speed communication, and world-class infrastructure to support industrial growth. It also worked to strengthen intellectual property rights (IPR) infrastructure.
• New Sectors: The program opened various sectors to Foreign Direct Investment (FDI), encouraging greater participation from global investors.
• New Mindset: The government adopted a facilitator role rather than a regulator, forming partnerships with industry to accelerate the country’s economic development.

key Initiatives taken under 10 Years of Make in India

• Production Linked Incentive (PLI) Scheme:
  The PLI scheme was introduced to boost domestic manufacturing and reduce reliance on imports, aligning with India’s vision of becoming ‘Atmanirbhar’ (self-reliant). Its primary objectives are to attract significant investments, integrate advanced technology, and enhance operational efficiency.
  Covering 14 sectors, including electronics, solar panels, and pharmaceuticals, it aims to create large-scale manufacturing ecosystems. The scheme was launched with an incentive outlay of ₹1.97 lakh crore, with ₹1.23 lakh crore in investments realized by March 2024.
• PM Gati Shakti:
  Launched in October 2021, PM Gati Shakti aims to build multimodal and last-mile connectivity infrastructure, supporting India’s goal of becoming a US$5 trillion economy by 2025. It is driven by seven key sectors: Railways, Roads, Ports, Waterways, Airports, Mass Transport, and Logistics Infrastructure. The government has also focused on developing industrial corridors such as the Delhi-Mumbai Industrial Corridor (DMIC) and the Bengaluru-Mumbai Economic Corridor (BMEC).
• Semiconductor Ecosystem Development:
  The Semicon India Programme, with an outlay of ₹76,000 crore, was launched to develop a sustainable semiconductor and display ecosystem. Notable projects, like Tata’s joint venture with Taiwan’s Powerchip in Dholera, have emerged from this initiative.
• National Logistics Policy:
  Launched in September 2022, this policy aims to improve logistics efficiency and cut costs, with the goal of placing India among the top 25 in the Logistics Performance Index by 2030.
• Boost in FDI:
  Numerous reforms have been made to facilitate Foreign Direct Investment (FDI), including raising the FDI cap in crucial sectors like defense (from 26% to 74%), insurance, and railways. These reforms have led to a steady increase in FDI, with $84 billion received in 2021-22, making India a leading global FDI destination.
• Skill Development Initiatives:
  To meet the growing demand for skilled labor, the government launched programs like Skill India and the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), training millions of youths across the country.
• Startup India:
  Launched to foster a thriving startup ecosystem, Startup India aims to transform India from a nation of job seekers into a nation of job creators. As of September 25, 2024, India boasts the world’s third-largest startup ecosystem, with 148,931 DPIIT-recognized startups creating over 15.5 lakh direct jobs.
• Tax Reforms:
  The implementation of the Goods and Services Tax (GST) on July 1, 2017, simplified the tax system, reducing production costs and enhancing the competitiveness of local manufacturing.
• Unified Payments Interface (UPI):
  India’s UPI has become a global leader in digital payments, processing transactions worth nearly ₹81 lakh crore between April and July 2024 alone.

Major achievements

• Vaccines: India produces nearly 60% of the world’s vaccines, meaning that one in every two vaccines globally is proudly manufactured in the country. India not only achieved COVID-19 vaccination coverage in record time but also emerged as a key exporter of essential life-saving vaccines.
• Rise in Mobile Manufacturing: India has become the second-largest mobile phone manufacturer in the world. The number of mobile manufacturing units in the country has grown from just two in 2014 to over 200 today, producing 99% of the mobile phones used domestically. Mobile exports surged from ₹1,556 crore to ₹1.2 lakh crore in 2024.
• Defence Manufacturing: India has made significant advancements in defence production, particularly in decreasing imports. For instance, Hindustan Aeronautics Limited (HAL) and other domestic manufacturers are now producing vital military equipment such as fighter jets and submarines. In 2023-24, defence production reached ₹1.27 lakh crore, with exports going to over 90 countries, demonstrating India’s growing capabilities in this crucial sector.
• Semiconductor and Chip Manufacturing: The semiconductor industry, which was previously underdeveloped, has attracted investments totaling ₹1.5 lakh crore, with five semiconductor fabrication plants planned. These facilities are expected to have a combined daily capacity of 7 crore chips.
• Railway Infrastructure: The Vande Bharat Trains, India’s first indigenous semi-high-speed trains, exemplify the success of the ‘Make in India’ initiative. These trains feature state-of-the-art coaches, providing passengers with a modern and enhanced travel experience.
• Renewable Energy Growth: India has become the fourth-largest producer of renewable energy in the world. The country’s capacity has surged from 76.38 gigawatts (GW) in 2014 to an impressive 203.1 GW in 2024.
• Steel Production: India has transitioned to being a net exporter of finished steel, with production increasing by 50%. This growth is a direct result of policy efforts aimed at building domestic capacity.
• Automobile Industry Growth: India has established itself as a global leader in automotive manufacturing, particularly in two-wheelers and electric vehicles (EVs). The EV market, valued at $3 billion, has experienced substantial growth since 2014, contributing to the country’s sustainable mobility objectives.

Challenges faced by Make in India program during last 10 years

• Slowing Growth Rate: According to the National Accounts Statistics (NAS), the growth rate of real gross value added (GVA) in manufacturing has decreased from 8.1% during 2001-12 to 5.5% during 2012-23.
• Lagging Manufacturing Share in GDP: The manufacturing sector’s share of GDP has remained stagnant at 17%-18% over the past three decades, though it is slightly higher in the latest GDP figures due to methodological changes. This is still far from the target of 25%.
• Limited Job Creation: The increase in output has not been accompanied by a corresponding rise in employment. According to the NSSO sample surveys, manufacturing employment dropped from 12.6% in 2011-12 to 11.4% in 2022-23. Meanwhile, agriculture’s share of the workforce rose from 42.5% in 2018-19 to 45.8% in 2022-23. Surveys of unincorporated sector enterprises reveal that employment in the unorganized or informal sector manufacturing still constitutes the majority of jobs, although it decreased from 38.8 million in 2015-16 to 30.6 million by 2022-23.
• Exports: India’s exports as a percentage of GDP have declined from 25.2% in 2013-14 to 22.7% in 2022-23. Although India’s contribution to global exports has increased, it has done so at a sluggish pace. In 2005-06, India accounted for 1% of global exports, which rose to 1.6% by 2015-16. However, by 2022-23, this figure only reached 1.8%, indicating a significantly modest increase.

Reason behind challanges

• Supply Chain and Infrastructure Bottlenecks: Despite advancements in industrial corridors and infrastructure projects, certain regions continue to face challenges such as inadequate logistics, poor connectivity, and inefficient supply chains.
• Complexity in the Regulatory Environment: Although some reforms have simplified processes, bureaucratic obstacles and delays in approvals persist in specific sectors, creating difficulties for businesses.
• Overdependence on Imports: Many critical components, particularly in high-tech industries like electronics and semiconductors, remain heavily reliant on imports, hindering India’s self-sufficiency in key areas. Additionally, the trade imbalance has been increasing from 2020-21 to 2023-24.
• High Logistics Costs: The logistics costs in India are significantly higher, accounting for 13% to 14% of GDP, compared to 8% to 9% in developed economies like the USA. These elevated logistics costs diminish the competitiveness of “Made in India” products in global markets.
• Research and Development (R&D): The India Innovation Index 2021 indicates that overall spending on R&D in India is relatively low, accounting for less than 1% of GDP. Moreover, there are no additional provisions for R&D in emerging sectors. The best talent in the country often migrates abroad, contributing to a brain drain.

What can be done?

• Research and Development (R&D): India should focus on investment-driven growth and technological advancement. This effort must be supported by domestic R&D to encourage adaptive research and the localization of imported technology.
• Finance: There is a need for publicly funded development finance institutions, or “policy banks,” to provide affordable long-term credit. This approach will help mitigate the risks associated with learning and advancing toward the technological frontier.
• Deepening Domestic Value Chains: India should establish backward linkages in manufacturing sectors such as electronics and automotive by fostering the domestic production of essential components and raw materials.
• Enhancing Innovation and R&D: A stronger emphasis on research and development (R&D) is crucial, particularly in fields like semiconductors, electric vehicles, and clean energy. Establishing R&D hubs and offering increased tax incentives for innovation will be beneficial.

Strengthening Skill Development: Expanding the range and depth of skill development programs, particularly in digital and high-tech skills, will better equip India’s workforce to meet the demands of modern industries.

The End of the Blog: Make in India: Story of Success and Challenges