Judgement on ‘Make in India’

Subrata Majumder

Debaters wade in row over Indian economic growth and its impact on employment generation, after GDP growth slashed to 5.7 percent in the first quarter of 2017-18. Before election, Prime Minister Narendra Modi committed one crore (10 million) jobs a year. Despite economic growth in full strength during the forty month period of Modi regime, green shoots of job opportunities are not visible.   According to Labour Bureau statistics, job creation for 2015 and 2016 (April-December) were at much lower level than committed - 15.5 million and 23.1 million respectively.
Paradoxically, while Indian analysts held NDA responsible for mishandling the economy and cursed the government for faulty manufacturing policy, multinational institutions like IMF and Morgan Stanley were upbeat on the India growth trajectory, considering that the downturn in the first quarter was a temporary hiccup. Though IMF lowered growth prospect to 6.7 percent in 2017-18, it reposed high hope for recovery because of its strong economic parameters. IMF Managing Director said “We have slightly downgraded India. However, we believe that India is in the growth track for the medium and long term, that is much more solid as a result of structural reforms”
IMF, in its recent report on World Economic Outlook, forecasted a strong recovery in the Indian economy in 2018-19 with 7.4 percent growth. Morgan Stanley pitched for ever-lasting growth, ranking up India to be 3rd biggest economy in the world in 2026-27. At present, India is the 6th biggest economy in the world in terms of nominal GDP. Both IMF and Morgan Stanley presumed continuance of strong economic parameters, considering that the jerk in the first quarter of growth was transient. BSE Sensex was mute to the jerk, despite the fact that Sensex is the first to be responsive to any upheaval in the growth, short or long term. Sensex continued to surge and was expected to exceed 1,00,000 by 2026-27, according to Morgan Stanley report.
If statistics is any indicator to map out the impact of Modl’s policies on job creations, they decipher that several schemes of Make in India failed to unleash desired results for job creations. Start-up, digitization, Smart-city programme lagged behind in creating jobs
Various reasons were focused for the failure of Make in India, the main source for job creations. One of them was lag in domestic investment in Modi regime. What led the domestic investors shy away, when the foreign investors were upbeat to invest in Modi regime? Foreign direct investment doubled to US $ 47 billion in 2016, from US $ 22 billion in 2013. BSE Sensex, which is driven by FIIs (Foreign Institutional Investors), surged despite the GDP conundrum.
The moot point in the lackluster domestic investment was the uncertainty over Modi’s business friendly outlook after demonetization and GST. The sudden announcement of demonetization against the background of an economy which runs third with the black money and the GST warranting several procedural compliances created big hassles for informal sectors. Besides, reforms in policy regulatory measures, such as Land acquisition regulations and labour laws, were put in the backburner.
Also, even though foreign investment surged, but it failed to create more jobs opportunities, the crux of the situation was that the three years period was too short to reflect the green shoots of employment generation. This was because more than 85 percent of foreign direct investment was in the greenfield areas. Generally, a green field project in manufacturing requires 2-3 three years gestation period to start the operation. Given these, yields of job creations from theses FDI projects will be visible only after 2018. Therefore, it is the medium time period which will decide the impact of foreign investment on employment opportunities
Indian economy is poised to witness a shift in the demand pattern. According to Morgan Stanley’s report, middle class will shift to upper middle class by 2026-27. Young India, digitization, wheel revolution (automobile) and surge in home purchases will be the main driving forces for new demand. India will be the youngest country in the world by 2020. With the median age 29, India will have 400 million young people.
Digitization will be the boost to growth, according to Morgan Stanley. Digital India and Smart cities are the long term projects to generate employment opportunities. They are at the nascent stages and take time to be in full operation. Under the Smart-city initiatives, so far 60 out 100 cities could determine the projects costs. Of these, only 16 projects are in the implementations stage and the remaining 45 are at various stages of tendering.
Considering vast changes in the technology and industrial structure since 1991, need for changes in the Industrial policy was felt imperative. A discussion paper was circulated for seeking different advises and opinions for a new shape to Industrial Policy with a focus on Reform, Perform and Transform. The paper asserted for global linkages, gave thrusts on new industries like automobiles, electronics, renewable energies, banking, software and tourism and warrant for land reforms. But, the discussion paper is yet to be acted upon.
The year 2018 will be the turning point for Indian manufacturing sector under Make in India initiative. With BJP and its allies making a big inroad in Rajya Sabha after one-third of the members retire, two major pending reforms, land acquisition bill and labour reform , may find access for Parliamentary approval..Much will depend on the firmness of the Modi regime in the area of implementation and speedy measures to ensure inflow of massive investments in the economy. (IPA)

Saturday, 21 October, 2017