What must India do to succeed in Its Make in India initiative by Vikram Anand

PGFX19050, Great Lakes Institute of Management

Dear Professor -Note: Please excuse the exceeded word limit, 1000 words could not do justice for this
expansive topic. I have written about 1500 words.

Make in India is an initiative to transform India from the current agriculture based local economy into an
industry based exporter. The premise of the plan was to model our growth plan based on the rapid
industrialisation and growth of China using the export based strategy. This initiative was announced by the
BJP government shortly after their election victory in 2014. However, 6 years later it can be said that this
initiative is largely unsuccessful. This is primarily because in-spite of the Prime minister’s vision the country
has not been able to rise up to the challenge due to structural barriers present in India which prevents the
scaling up of production to approach the levels of China.

The WEF white paper discusses the factors of production through several drivers in detail and creates an
overall measurement metric which predicts the production readiness of a country for the fourth Industrial
revolution- the blurring of lines between the physical and the digital worlds through technologies such as

IOT, Blockchain, artificial intelligence, robotics and wireless technologies.

The factors of production which drive the future of production are detailed below-
India’s current position with respect to each of these drivers will be determined and a roadmap will be given
for the improvement of scores on each of these drivers.

Technology and Innovation drivers:

Technology drivers
The fourth industrial revolution is primarily driven by ICT technologies at its technology driver therefore
the sub-drivers under technology is -

Availability and use of ICT technology- India already scores high in cellphone ownership and use even in
pre-JIO days. After the advent of JIO in 2015 adoption of cellular internet has reached upto tier-2 and tier-3
towns and villages this is evident by the rise in dominance of Indian social media in recent years.Indian
YouTube content is now regularly beating the views of American content and Indian YouTube channels are
now the highest subscribed content on the platform. India has one of the cheapest sources of mobile internet
in the world currently.No intervention is needed here to improve the situation.

The next important technology driver is digital security and data privacy- This metric measures the cyber-
security laws and enforcement in the country. These laws are important to protect the innovating firm’s IP
and ensure a secure environment needed to boost innovation. India’s has had a weak legal legal system and it
is yet to pass the long pending data protection bill in the Lok Sabha. There is concerns by activists that the
proposed bill in the current form is weak and will not soothe the concerns of innovative companies.

Innovation Drivers

Metric Current state of India

State of cluster development India is trying to develop smart cities as innovation
clusters however these have not been planned well. We
should work hard to bring innovative foreign companies
to these clusters to spur innovation.

Companies investing in emerging technology India is currently a technology follower. The buyers are
sceptical of new technologies unless proven in the
western spheres. This results in companies playing the
wait and watch game in new technology investment.

Government procurement of advanced technology
Limited to Aerospace and Defence. To the government’s
credit they are trying to indigenise several components
every year. Several SME companies are growing the
defence production business model successfully.However
other sectors such as agriculture, food production need
advanced technology.

Companies embracing disruptive ideas
Multi-stakeholder collaboration
R&D Expenditure
Publications and patent applications
Currently limited to IT and App start-ups. There needs to
be percolation of disruptive ideas to other sectors
however these will be highly risky and more expensive to
execute than App ideas.
Poor. As an example Indian universities are simply
education factories and not innovation drivers such as
universities in western countries. There needs to be a
strong university-industry partnership to seed long lead
and capital intensive ideas.
R&D expenditure goes primarily into cost reduction to be
competitive in the highly price sensitive market. This cost
effective innovation has a term which has become
popular- “Jugaad”
Barring the top IIT’s the rest of the universities fare quite
poorly in this metric. IIT’s should be made to mentor
state universities to bring them up to the same level.
 Venture capital availability
Human Capital and Skills
Driver
Manufacturing employment
Knowledge intensive employment
Female labor participation
Mean years of education
Quality of universities
Critical thinking in universities
Global economy , trade and investment
Driver
Trade open-ness (sum of imports and exports)
Trade tariffs
Nearly non-existent outside the IT sector. However this
could be due to the lack of innovative entrepreneurs in
other domains. The few non-IT ideas which have
succeeded to get venture capital investment are electric
bikes.
Current state of India
Poor. India has investment, scale barriers in
manufacturing. The manufacturing sector’s contribution
as function of GDP has not grown in the last 20 years. It
has been the services sector that has been driving the
GDP growth. India needs to move away from its romance
of agriculture.
Limited to IT sector needs percolation into automobile,
Very poor due to Indian culture. However trees in cities
are changing
Steadily improving over the years. In developed states
such as TN, Kerala, Maharashtra graduate studies have
become the new normal.
Poor when compared to global standards. IIT’ must
mentor state universities to improve their performance
Indian schools focus on rote learning to bridge the gap
between privileged city students and rural students
without the access to good coaching. However this results
in exams being memory tests rather than tests of
understanding.
Current state of India
India actively promotes exports by incentives and
avoiding sales taxes on exports. India has a generally
good tariff structure for imports except for perceived
luxury goods which are taxed as high as 200%. This
policy has to be revisited as the demand for luxury
products rise with the growth in affluent class.
India has strong bilateral trade agreements with most
countries and tariffs are kept low to prevent retaliatory
tariffs by others.
 FDI Inflows
Domestic credit availability
Electricity
Transport infrastructure
Regulation and governance
Driver
Corruption perception
Future orientation of government
Rule of law
Natural resources and environment
Driver
Renewable and Nuclear Energy use
This is where the key problem is. India has a strong local
lobby which does not allow industrial giants from other
countries to enter fearing disruption of local businesses.
Case in-point Tamilnadu’s rejection of Walmart.
Further the barriers for foreign inflows are very high
which has stagnated the growth of FDI from Year 2016
onwards.
Due to high profile scandals of Vijay Mallya and Nirav
modi, the banks have tightened the nooses against small
borrowers demanding for high collaterals to offer loans.
This has reduced the credit availability and hampered
industrial growth , a balanced approach is needed.
Good progress in the national solar mission has reduced
electricity scarcity considerably. Recently due to power
excess new coal power projects have been stalled until
power demand increases.
Golden quadrilateral, north south corridor and state
highways improvement programs have made transport of
goods between major cities better. However further
improvement is required to reach last mile connectivity.
Current state of India
Corruption perception is high with no improvement in
sight. Government has resorted to eye wash policies like
demonetisation to tackle corruption, however the issue is
deep and overnight policies will not have effect. A strong
whistle-blower protection and encouragement is required
for victims to come out. For instance government
suppliers are afraid of exposing corruption fearing future
contracts.
The current government is quite futuristic at least in their
inititatives and marketing . The effectiveness is to be seen
Weak legal system where civil cases can take 10+ years
for judgement. Business environment is ripe with
exploitation of suppliers by the buyers due to the barriers
and long road to justice.
Current state of India
Strong push to renewables through national solar mission,
Nuclear energy partnerships with Russia and France. The
initiatives and results are good.
 Emissions level Bharat 5 has been introduced irrespective of petitions of
automobile industry showing commitment to emissions
reductions. However Industrial emissions are poorly
controlled due to corruption of pollution control boards
and lack of cost effective pollution control solutions by
Indian companies.

Water stress Several urban areas such as Chennai are in severe water
stress. One failed monsoon is sufficient to deplete the
water table resulting in chaos in the summer months.

Size of domestic market

The growing middle class is bringing massive opportunities and a rapidly growing market. The
attractiveness of India as a consumer destination is among the highest in the world.