Ashutosh Kumar, Economic Editor (Honorary)

Ashutosh Kumar  

A day after India's triumphant Mars mission and hours before he left for his first visit to the USA, prime minister, Narendra Modi launched the "Make in India" initiative. The initiative is meant to cut red tape, spur foreign investments and transform India into a manufacturing powerhouse, correcting the biggest weakness of Indian economy.   Reviving the manufacturing sector is good since its potential for providing growth and employment . At the launch of the 'Make in India' initiative, Commerce and Industry Minister, Nirmala Sitaraman said the Government would focus on 25 sectors to push manufacturing, including automobiles, textiles, leather, electronics, engineering and IT. She said the Government aims to raise the share of manufacturing to 25 per cent of GDP from 15 per cent.   While launching Make in India Campaign, P.M's speech was a very general one and did not get into specifics. Commerce and industry minister spoke about the various initiatives that have cut red tape and made it easy to do business in India. Government officials are only talking about manufacturing investment in vague and general terms and there doesn't appear to be any specific detail. However, the Central government's working style indicates that they will follow the lines of the "Gujarat model" while implementing this campaign. It is well documented the investment boom in Gujarat is the combined effect of tax concessions, investment subsidies, low-interest credit, cheap cost of land and a pro-business labour policy. Carefully reviewing the cardinal principles of the development experience in Gujarat through the analysis of data and information provided by official sources, the study tells us how goals like social equality, sustainable livelihoods, access to education and health, justice and peace have been abandoned in the race for growth in the high-speed lane. This concern should be taken care of while drafting the policy for implementing Make in India.   Another major concern is culture of innovation in India. Make in India will only be effective if India promotes culture of innovation. Government try to turn its attention toward innovation and hi-tech products. But the problem is that India lacks better scientific research institutions, and sufficient expenditure on R&D. In India, according to year 2013 data, total spending in R&D is around 1% of GDP, and also there is hardly any culture of private investment in R&D. Government's spending on R&D is 2 to 3 times more than that of Industry's. India's spending in innovation is least amongst developing and developed nations. Israel spends more than 4% of GDP in Research & Development (R&D). Japan, South Korea, Scandinavian countries spend more than 3%. US, France, Germany spend more than 2%. China spends more than 1.50%. But the most important point is, in all these countries, industry spends more than the Government in R&D - in some countries 3 times more than the Government spending. Thus to accomplish objectives of the said campaign, Government should first have a fully-evolved, well-developed culture of innovation. Creating a manufacturing hub is not solution for ailing India Economy. The value lies in design, IP and software, and not in manufacturing. For example, Apple manufactures almost all of its products outside the US, mostly in China. But its Taiwanese contract manufacturer makes 3 percent margin while Apple, in California, makes 30 percent margin. Value is where IP, design and software are developed, not where manufacturing happens.   In addition to above points, Make in India seems to be a pro rich project, not a pro poor. The increasing vulnerability of employment in the organised manufacturing sector, decreasing wage shares, reduced trade union participation and low coverage of workers under any form of social security benefits give clear indication that this new project will also be pro-capitalist and it may result in even greater economic inequality.