Why Make in India is Failure of Modi Government

When the Prime Minister Narendra Modi launched the “Make in India” initiative in 2014, it had promised to transform India into a global manufacturing hub and create 100 million manufacturing jobs by 2022 and increase the sector’s GDP share to 25% by 2025.

However, after nearly nine years, the initiative has largely failed to deliver on its ambitious promises, as indicated by various economic data, expert analyses, and comparative benchmarks with other nations.

Stagnation in the Share of Manufacturing in GDP

During the launch, manufacturing added 15% to India’s GDP. Instead of going up, this number had to decline to 14% in the following years, much lower than other countries like China at 29%, Vietnam at 16%, and Bangladesh at 18%.

These countries have witnessed more vigorous industrial growth over the same period. For instance, the share of manufacturing in GDP in Vietnam increased from 13% in 2014 to 16% by 2020, while in Bangladesh, it increased from 16% to 18%

Lack of Job Creation

The aim was to create 100 million manufacturing jobs, but employment trends tell a different story.

Manufacturing jobs have declined from 51 million in 2016-17 to 27.3 million in 2020-21, showing a drastic decline of 46%.

This decline points to an employment crisis in the sector and more so due to challenges like automation, lack of skills, and insufficient domestic demand​.

Investment and Output Challenges

One of the key objectives of “Make in India” was to attract foreign direct investment (FDI) and increase industrial production.

Although FDI did increase from $34 billion in 2014 to $64 billion in 2020, this investment did not result in commensurate growth in manufacturing output. GFCF in private manufacturing declined from 23.1% of GDP in 2014 to 21.8% in 2019, indicating a decrease in domestic investment.

India’s Index of Industrial Production (IIP) data shows that manufacturing grew mostly at less than 3% and even negative sometimes during the period of 2014-2019.

Such slow growth further points towards a lack of sustained momentum in the sector​

Policy Design and Implementation Defects

“Make in India” faced several structural as well as policy-related issues:

1. Unrealistic Goals and Overambitious Scope: The program targeted 25 sectors ranging from automobiles to biotechnology, diluting its focus and stretching resources thin.

2. Lack of Preparedness: Many initiatives under “Make in India” were poorly planned, leading to stalled projects and a failure to implement promised reforms.

3. Over-dependence on Foreign Investment: Such over-dependence on foreign capital and global markets created vulnerability for the initiative to global shocks in terms of trade wars and economic slowdown.

4. Infrastructure is lagging in India: Its infrastructure still lags compared to those of Vietnam or other such peers, which in turn deters manufacturing.

Comparative Analysis with Global Peers

India’s industrial policy differs sharply from that of the successful manufacturing countries. In China, extensive government investment in infrastructure, skill development, and incentives for domestic manufacturing facilitated rapid industrialization.

Similarly, Vietnam and Bangladesh used their comparative advantages of low-cost labor and export-oriented strategies to attract textiles and electronics industries.

For example, Bangladesh has emerged as a major garment exporter, with exports reaching $38 billion by 2020, while India’s garment exports have been declining from $18 billion to $16 billion in the same period​.

Reasons for Failure

There are several underlying reasons why “Make in India” failed:

1. Skill Deficit: India’s workforce lacks technical skills needed for modern manufacturing, making it less competitive globally.

2. Policy Volatility: Frequent changes in regulations and tax structures created uncertainty for investors.

3. Global Economic Headwinds: Rising protectionism and disruptions like the COVID-19 pandemic further hindered industrial growth.

4. Limited Domestic Demand: India’s domestic market did not grow sufficiently to absorb increased manufacturing output.

The “Make in India” initiative remains a missed opportunity for India to capitalize on its demographic dividend and become a global manufacturing powerhouse.

Despite ambitious targets, the program has faltered due to poor planning, lack of focus, and systemic economic issues.

In the future, India needs a more nuanced industrial policy that focuses on skill development, infrastructure, and targeted sectoral growth. Without such reforms, the dream of making India a manufacturing hub will remain unfulfilled.