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'Buy India' - a new initiative to boost make in India

By Subrata Majumder. Dated: 5/29/2017 2:28:31 PM

Modi's flagship project has failed to make impact

In presenting three years' report card of NDA government (Times of India, dated May 17) NITI Aayog Vice Chairman Arvind Panagarya was euphoric on Modi's dynamic challenges to reinvigorate the economy. But, he was suspiciously silent on Make in India- the flagship project of Modi's new India vision. Presenting successes in coping with the challenges to decision making paralysis, slow progress of infrastructure projects, decimating corruption and ensuring no return of retrospective tax terrorism, Dr. Panagarya endeavored to paint a success story of the Modi government. But nowhere did Make in India figure. Has Make in India failed to achieve the goal?
If statistics is the true reflection, Make in India failed to make any headway in the country's manufacturing growth, which continued to be crippled by slow pace, hovering around 2 percent - though later perked up to 5 per cent growth based on new index. Even then, the growth was much below the GDP growth of 7 percent. New employment opportunities - the direct benefit of manufacturing growth - continued to be in slumber. Private investments were at gridlock; export growth was flat.
In other words, against the hope of Make in India, which warranted a significant growth in manufacturing, the initiative belied with poor performance. The main reason for the lackluster performance was the policy framework, which was not amenable to the Make in India initiative. Given the world market reeling under recession and the domestic market crippled by inflation, marketability lost its vitality - even though the domestic market is buoyed by demography. In these perspectives, "Buy India" initiative will give a new lease of life to Make in India.
'Buy India' is predicated on an initiative to boost domestic market, which is enforced by regulatory measures. Two components of Buy India concept - government procurement and import substitution -play important role in triggering domestic market. Government procurement is one of the biggest markets in a developing economy like India. Yearly, Rs. 12 to 15 lakh crore (about US dollar 230 billion) purchases are made by the government, autonomous bodies and public sector organizations, according to an estimate of Planning Commission. The big buyers are Defence, Railways, Telecom and Healthcare. Defence, Railway and Telecom devote about 50 percent and Healthcare devotes 26 percent of their budget expenditure on purchases.
The recent policy of government procurement, which was framed to give preference to Make in India, acknowledges the new initiative to resurrect the programme. It provides ample room to suggest that marketing challenges, spearheaded by domestic demand, are imperative for Make in India a success.
Under the policy of government procurement, preference will be given to local manufacturers. Any purchases above Rs. 5 lakh will prefer local manufacturers.
Similarly, the government initiated the return of import substitution as another important marketing challenge to reinvigorate the Make in India initiative.
As per a press note issued by Ministry of Urban Development, the government made it mandatory to procure railway equipment for metro projects from domestic sources. According to the policy, a minimum of 75 percent of metro coaches and critical signaling equipment are to be procured from domestic sources by the Central and State level metro project authorities.
It said that the country would require 1,600 coaches over the three years period, in addition to 1,400 coaches, which are under different stages of procurement. Nine types of signaling equipment were identified for 75 percent mandatory procurement from domestic sources. Besides, indigenization of several metro functions has been prescribed, relating to communication system, operational and disturbances, time table preparation, control traction power and others.
Currently, there are 8 metro rail transport systems under operation. The country is on a metro rail service binge for rapid and environment friendly transport services. About 27 more metro services are under implementation and planning stages, which are to be launched by 2028.
At present, there are three companies which manufacture metro coaches in the country. A fourth Chinese company is setting up plant in Nagpur.
Make in India initiative comprised both traditional and modern industries. The challenges and approaches to develop modern and traditional industries are different. While the development of modern industries includes assembly operations and supporting industries such as components and parts, the traditional industries warrant refurbishment of manufacturing process with new machineries to cope with the changing pattern of demand. For example, challenges for development of modern industries like electronics, automobile, telecommunication are different from the development of traditional industries like textiles, agro-based and handicraft industries.
Make in India initiative was silent on different approaches and policy drives required for the development of modern and traditional industries enlisted in the campaign. While the development of traditional industries requires refurbishment as a first step, such as replacement of old machineries with new machineries, development of modern industry requires creation of technically updated SMEs (small and medium enterprises). To this end, development of traditional industries requires policy support, including fiscal incentives and marketing support and modern industries require policy support for R&D and development of contract manufacturing.
Make in India initiative was made based on the existing policies. The lapses were acknowledged by a Parliamentary panel, which assessed the impact of the initiative on SMEs. It said that appropriate approaches should be made for the revival of capital goods industry, which is the main pillar for the growth of manufacturing. It recommended suitable subsidy to be given for the growth of the capital goods industry.
—(IPA Service)