Decoding Budget 2022-23: Make in India Roadmap | Gist of Rajya Sabha TV / RSTV (now Sansad TV) - UPSC PDF Download

Introduction

• Roadmap for Make in India. India's growth depends heavily on manufacturing and MSME, and this year's budget includes a number of initiatives to promote India as a manufacturing powerhouse for clean-tech manufacturing and self-reliance in certain industries. 
• Included in this are the continuation of efforts to manufacture high-efficiency modules through the PLI scheme allocation of 19,500 crore rupees, replacement of the current Special Economic Zone (SEZ) policy with a new regulation, promotion of Private sector investments in the battery or energy-as-a-service concept for improving the grid, and extension of the concessional tax regime of 15% tax for newly incorporated domestic manufacturing companies until 31 March 2024.
• With 68% of the capital procurement budget designated for domestic industry in the upcoming fiscal year, the defence manufacturing sector is another important beneficiary of this year's budget. 
• This should encourage investments in domestic manufacture in this important area.
•  The elimination of import incentives for capital goods for some products where adequate domestic manufacturing capacity is available has given the Aatmanirbhar Bharat Abhiyan and Make in India initiatives further impetus.
• With 68% of the capital procurement budget designated for domestic industry in the upcoming fiscal year, the defence manufacturing sector is another important beneficiary of this year's budget.
•  This should encourage investments in domestic manufacture in this important area. 
• The elimination of import incentives for capital goods for some products where adequate domestic manufacturing capacity is available has given the Aatmanirbhar Bharat Abhiyan and Make in India initiatives further impetus.

Aatmanirbhar Bharat Abhiyan: the right impetus

• India could be their destination of choice, provided we offer a conducive environment.
• A conducive business climate with better infrastructure and logistics, simplified land and labour laws and single window clearances can enable India to develop a robust manufacturing ecosystem.
• This will help attract foreign capital, latest technology, create jobs and boost our exports.
• We must also focus on Skill and Scale to be both quality and cost competitive and serve a global customer base.
• Huge scope exists in sectors such as pharma, electronics, automobiles and defence machinery, not only to be self-reliant but also capture a decent slice of the global supply chain.

Reasons for slow growth in Make in India

• Ambitious targets: It set out too ambitious growth rates for the manufacturing sector to achieve. An annual growth rate of 12-14% is well beyond the capacity of the industrial sector.
• Multiple targets: The initiative brought in too many sectors into its fold. This led to a loss of policy focus. Further, it was seen as a policy devoid of any understanding of the comparative advantages of the domestic economy.
• Excessive dependence on foreign capital: The policy relied too much on foreign capital for investment. Thus in the uncertainties of the global economy and ever-rising trade protectionism, the initiative was spectacularly ill-timed.
• Low Productivity: Productivity of Indian factories is low and workers have insufficient skills. McKinsey report states that Indian workers in the manufacturing sector are, on average, almost four and five times less productive than their counterparts in Thailand and China.
• Complex Labour Laws: One of the major reasons behind small companies is the complicated labour regulations for plants with more than 100 employees. Government approval is required under the Industrial Disputes Act of 1947 before laying off any employees and the Contract Labour Act of 1970 requires government and employee approval for simple changes in an employee’s job description or duties.

Way Forward

• Investor’s confidence must be improved.
• Improving physical infrastructure from transport systems to the power sector is essential.
• Importance should be given to electronic sector.
• Improve access to finance for smaller enterprises.
• Making firm entry and exit easier.
• Inverted duty structure.
• Enhancing the flexibility of labour regulations.
• Low-cost manufacturing is important for India.

Conclusion

• The Make in India initiative and the changes that followed have improved the ranking for "Ease of Doing Business." Investments have not yet materialised, though.
• The "Make in India" initiative may have the potential to turn India into a manufacturing hub, but for that to happen, the government would need to go beyond rhetoric and put its proclaimed plans into practise.