MAKE IN INDIA -- by Bibek Debroy
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Earlier policy
Make in India deserves a proper assessment—not a mala fide attack based on unreliable IIP data. National Manufacturing Policy (2011) of UPA govt has proven to be a dud: Neither has manufacturing's share in GDP risen nor has its growth rate reached double digits in the medium term.

FY17 IIP (revised, manufacturing component) 4.9%
FY17 GVA (manufacturing growth rates) 7.9%
FY16 & FY15 GVA rates were 10.8% & 5.5%

KEY POINTS ✒
❡ 2014 Make in India has every ingredient of work in progress, unlike the 2011 NMP, which was work in promise ❡

NDA govt is tackling all the core issues identified by the National Strategy for Manufacturing in 2006:
✜ Infrastructure constraints ✅
✜ Taxation —both direct and indirect ✅
✜ Credit problems—both cost and availability ✅
✜ Labour laws
✜ Lack of skills
✜ Administrative laws and complicated procedures ✅
✜ Investment—both entry and exit problems ✅
✜ Deterrents against urbanisation
✜ Deterrents against formalisation ✅

Make in India — an assessment
❡ What are constraints to increasing manufacturing’s share to around 20% of GDP? The constraints themselves suggest solutions. Some constraints are generic, they cut across all manufacturing sectors. Others are more specific and pertain to specific sectors. I will focus on the generic and therefore also ignore several sector-specific initiatives under Make in India.

Apart from National Strategy, several studies exist on what determines, or constraints, investments in States and these too, endorse this list, with law and order thrown in. On infrastructure, the strategy document stated, “Power supply remains the main physical infrastructure bottleneck to industrial growth on account of chronic shortages, high cost and unreliability. The average manufacturer in India loses 8.4 per cent a year in sales on account of power outages as opposed to less than 2 per cent in China and Brazil. The adverse impact on similar units in the unorganized sector could be higher. It is estimated that the power shortage alone contributed to a production loss of at least one per cent of GDP.”

With this lens, consider what’s happened since 2014. There have been public investments in highways, railways, inland water transport, port and airports. There have been power sector (including renewable) reforms and discoms are in better shape. Bad infrastructure increases logistics costs. World Bank has a Logistics Performance Index, also disaggregated into international shipments, timelines, customs, logistics competence, infrastructure and tracking and tracing. In the 2016 report, across segments, and in the aggregate, scores have improved since 2014 and therefore, so has India’s cross-country rank. GST has begun the process of unifying indirect taxes.

Incidentally, this makes CVD (countervailing duty) determination easier and probably levels the playing field for domestic manufacturers. Small saving rates have been reduced, facilitating lower deposit and lending rates. For MSMEs, there is MUDRA and the Stand-up India window. Labour laws are being unified under four codes (wages, safety, social security, industrial relations). There is a Skill India programme. Many instances of inverted duty structure have been addressed. In addition to the World Bank’s “Doing Business” indicators, DIPP has triggered improvements in ease of doing business in States. Both entry (such as FDI) and exit (such as Insolvency and Bankruptcy Code) have been simplified. A public procurement policy has been announced. ❡

2011 National Manufacturing Policy was Work in Promise