On Make in India – There is no substitute for an industrial policy

Source: The post on Make in India has been created on the article “There is no substitute for an industrial policy” published in “Indian express” on 27th December 2023.

UPSC Syllabus Topic: GS Paper 3 Indian Economy – Changes in industrial policy and their effects on industrial growth.

News: The article discusses the Make in India initiative, contrasting it with past self-sufficiency policies. It explores the campaign’s focus on manufacturing and global competitiveness, concerns about protectionism, and the need for policies that support job creation.

What is Make in India (MII)?

Read here

How is it different from past policy?

Beyond Import Substitution: MII diverges from the past policy of self-sufficiency and import-substituting industrialization. It’s geared towards making India a global manufacturing hub, unlike the 1970s approach that led to inefficiencies and market distortions.

Not a Protectionist Policy: While MII is implementing some protective measures like raising tariffs, it’s not intended to be as pervasive or damaging as past policies. For example, a mobile phone made in India typically has 80-85% imported content, indicating the importance of keeping trade somewhat open.

Job Creation and Economic Growth: The National Manufacturing Policy (NMP, 2011) targeted raising manufacturing’s GDP contribution to 25% and creating 100 million additional jobs. MII aims to further these goals with a more outward-looking, competitive approach.

PLI Schemes for Modernization: The PLI scheme under MII aims to enhance manufacturing efficiency and global competitiveness in specific sectors, contrasting with the broad-brush protectionism of earlier times.

For more information on PLI schemes read here

What are the concerns related to MII?

Rising Protectionism: There’s concern that MII could lead to increased tariff duties, reminiscent of past protectionist policies, potentially hindering the competitive edge and increasing costs.

Legacy of Past Policies: Fears persist that MII might unintentionally bring back elements of the License Raj era, characterized by shortages, black markets, and rampant rent-seeking, despite its fundamentally different approach.

MII cannot be a substitute for an Industrial Policy: Industrial policy over and above MII is needed to address the issue of jobless growth. Mass job creation remains the need of the hour, given the large working population.

What should be done?

Balance Protectionism and Open Markets: While protecting nascent industries, India should avoid excessive tariffs that hinder competitiveness, focusing instead on strategic, sector-specific support.

Enhance Labor-Intensive Manufacturing: Given the emphasis on job creation, policies should focus more on labor-intensive manufacturing to provide employment, especially for women.

Ensure Data-Driven Policymaking: Frequent and reliable data collection is crucial for informed policymaking, avoiding the “shooting darts blindfolded” scenario and enabling responsive and effective strategies.

Question for practice:

Discuss the key differences between the Make in India initiative (MII) and past self-sufficiency policies.