Re-Making Make in India
||19th April 2018
Data released by Ministry of Commerce shows a worsening of India’s trade deficit by almost 45%, rising from USD 106.2 billion in FY 17 to USD 156.83 billion in FY 18. While imports during the fiscal grew at around 19.59%, exports showed a muted growth rate of less than 10%. This slowdown in India’s foreign trade, especially after an 11% improvement in trade balance during FY16 and FY17, is worrying worrisome . If we dig a little deeper, we find that the sectors that bore the bulk of the blow is manufacturing and more specifically the labour-intensive units. This also comes at a time when the current Government’s singular focus is on its flagship scheme - Make in India which aims at making India a major manufacturing giant apart from promoting India’s exports. As per latest data, while exports of auto components increased by 21.72% during Apr-Jan 2017 and Apr-Jan 2018, imports went up by 25.7%. During the same time leather and leather product exports recorded a meagre increase of 2.10% and export growth for drugs and pharmaceuticals was restricted to only 1.21%. A major sector that has received a quantum of incentives from the government in the recent past, textiles and apparels, is also under stress. The apparel exports of India also witnessed a steep decline of around 4% during FY 17 and FY 18. According to Apparel Export Promotion Council (AEPC) Chairman HKL Magu, “… apparel exports are not only stagnating but are heading towards regression.”1 The above quoted instances provide us with three distinct reasons to believe that there is a need to overhaul the ambitious Make in India programme. First, there is a dire need to reform the rigid and multiple labour laws existing in the country. These laws force MSMEs to remain small which, in turn, doesn’t allow them to take advantage of economies of scale. While the government is already working on a uniform labour code on minimum wages, there is a dire need to expedite its implementation given the severity of unemployment problem. Second, calculations show that Department of Industrial Policy and Promotion (DIPP) rankings are positively correlated2 with the manufacturing growth rate rankings of states. A correlation rate of 37.5 per cent shows that there is a moderate linear relationship between DIPP rankings and manufacturing growth rankings. There is enough evidence to suggest that states would be better off if they could follow the guidelines provided by DIPP and implement the necessary reforms to ease of doing business. Third and last, the cumbersome process of land acquisition drives up costs of production significantly. Data shows that quantum of land with railways not under any operational use, is around 1.14 lakh acres3. Similarly, 2.35 lakh acres of non-productive land lies with Public Sector Undertakings (PSUs). Also, the Ministry of Defence and Airport Authority of India (AAI) have vast tracts of unused land lying in some of the most populous states4. It is time to set up a Land Bank Corporation of sorts that can conduct a detailed audit of government land available to begin with. Subsequently the Corporation could also draft a policy for the utilisation and financialisation of land. Doing this will open new means for industry to acquire land and that too at a cheaper rate than what is currently available.
If the above changes and reforms are incorporated in the currently functioning version of Make in India, we can expect that our exports rise and imports plummet in the next financial year.
Aakanksha Shrawan, Research Assistant, Pahle India Foundation
2Correlation is a statistical technique that can show whether and how strongly pairs of variables are related