There’s no substitute for an Industrial Policy

There’s no substitute for an Industrial Policy

Context: This editorial is based on a topic recently covered in The Indian Express which talks about Make in India, it talks about potential of Industrial policy, it advocates for labour-intensive manufacturing to address jobless growth in India.

What is Make in India?
• The Make in India campaign was launched in 2014. It aims to transform the country into a leading global manufacturing and investment destination.
• It is being led by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, Government of India.
• It has four pillars - New Processes, New Infrastructure, New Sectors and New Mindsets.

Objectives of Make in India
• Target of an increase in manufacturing sector growth to 12-14% per annum over the medium term
• To increase the share of manufacturing sector in the country’s Gross Domestic Product from 16% to 25% by 2022
• To create 100 million additional jobs by 2022.

How is different from previous policy?
• It is different 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.
• 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.
• Make in India is not seen as a protectionist policy even though it has some protective measures like raising tariffs. For example, a mobile phone made in India typically has 80-85% imported content, indicating the importance of keeping trade somewhat open.

Challenges:
• Fears have been raised about the manner in which MII is being implemented in some sectors particularly by raising tariff duties to provide protection to encourage the setting up of domestic industry.
• Concerns have been raised that Make in India might unintentionally bring back elements of the License Raj era, characterized by shortages, black markets, and rampant rent-seeking.
• Make in India is no substitute for an Industry policy which has better prospect to address the issue of Jobless growth seen in India.

Way Forward
• Focus on policies that promote Labour-intensive manufacturing.
• A large home market is not a substitute for being competitive in exports. Every country that has “taken off” before us has been export competitive.
• Made in India is a branding strategy to promote manufacturers born out of Indian factors of production — land, labor, capital, entrepreneurship, technology, etc. It can only succeed on the back of an effective MII operation.
• An Industrial policy in a country that has abundant labour resources with mediocre educational attainments is the need of the hour. Job creation for our abundant factor, especially women, is key, and that is only possible with labor-intensive manufacturing.
• Over 99 percent of India’s 63 million MSMEs are in the unorganized sector with very little flexibility for productive job creation. Their hand-to-mouth existence is not a recipe for jobs or scale. China’s example suggests the influence of scale in manufacturing for more and more.