[Answered] Analyze the reasons behind the slow growth of the manufacturing sector in India despite policy initiatives like ‘Make in India’ and Production-Linked Incentive schemes.

 Make in India is an initiative of the government of India launched in 2014 to encourage companies to invest, develop, manufacture, and assemble products made in India. Production-Linked Incentive scheme on the other hand aims to subsidise companies making products manufactured in India. While the focus of Make in India is centred around foreign companies investing in India, the PLI scheme focuses on the expansion of manufactured units by domestic companies.

What are the reasons for the slow growth of manufacturing

• Demonetization: Demonetisation impacted the manufacturing industry by reducing the cash supply from the economy, impacting small manufacturers, and reducing disposable income in the hands of people.
• Necessities: India is currently reeling under demand and supply side imbalance where the government has focussed on the supply side while ignoring the demand side. The necessities of life food, housing, health, and education take precedence against the demand for goods.
• Infrastructure: Poor infrastructure in terms of roads and long distances to reach ports constrict the movement of goods and raise production and logistics costs.
• Lack of skilled workforce: it is estimated that only 4.7% of the total workforce in India has undergone formal skill training as compared to 52% in the US, 80% in Japan, and 96% in South Korea. Skill training impacts the type of product which a country produces which impacts per capita income and foreign exchange of the country.
• Poor educational outcomes: Various reports of Pratham Ngo and the ranking of India in the PISA test highlights poor reading ability and numeracy of Indian children making them globally uncompetitive.
• Complex labour laws: The complicated labour laws makes it harder for investor to invest in India as it leads to red tape.
• Chinese imports: The surge and scale of Chinese imports have led to the flooding of the Indian market with Chinese goods and negatively impacting Indian manufacturers, particularly MSMEs.
• Global Issues: certain geopolitical issues like the USA-Iran tension, and Ukraine-Russia conflict have negatively affected the supply chain, increase in oil prices thereby increasing the cost of manufacturing.

Conclusion:

India’s manufacturing sector is in constant need of reforms to make the manufacturing sector globally competitive. The government needs to focus on the demand side of the economy by taking measures to raise the income of individuals which would lead to a cycle of production, consumption, and economic growth of the country. The government needs to address the concerns regarding the programs like Make in India and PLI schemes to enhance manufacturing share in India’s GDP and achieve the target of 5 trillion by 2025.