Make In India Explained, With Questions It Raises

Make In India is, and has been for a while now, the buzzword and the favourite of the Media and the educated public alike; little space has been shared for the realities, or what precisely MII entails. It almost sounds like a new dawn of manufacturing, with   the excitement and the euphoria this slogan has generated. That by itself is most welcome; if people in India are gung-ho about manufacturing, that is indeed welcome, and helps to seed entrepreneurial spirit. The problem is the word Euphoria; excitement is needed, and a catalyst, and perhaps what the Government desires.

The difficulty is the needless Euphoria around this term, which is almost a halo now. It almost sounds as if we have no manufacturing at all! We are ALREADY making in India, thank you very much. The challenge isnt Make In India : it is Create The Proper Conditions For Make Much More In India!

Take the Auto Compenents Sector, for example. It is dominated by the Small and Medium Companies, some - indeed most - hiring unskilled or semi-skilled labour of upto 10-20 people, producing end-products for some defined customers in a symbiotic relationship not only with other manufacturers, but also with traders and suppliers. In Mumbai alone I alone managed to find 1077 companies spanning auto components, springs, steel traders, kitchen appliances, bolts, nuts etc. More than 90% of these were small outfits, Isnt this Make in India?

In the Delhi - Ludhiana - Chandigarh - Haryana - Gurgaon corridoor I managed to locate some 736 companies making the above items. Ditto Hyderabad, Nashik, Chennai, Coimbatore, Pune, Nagpur. Most of them - nearly all - small companies. I visited one personally - a small company, well managed, but with less than 50 employees doing brisk business. Isnt this Make In India?

Make what In India, pray tell? Nuts? Bolts? Springs? Rack-and-Pinion arrangements? Wheels? Gears? Cars? ACs? Soaps? Biscuits? Curtains? Cloth? Shirts? Shoes? Motorcycles? Furniture? Make what? Dont we manufacture all these and more? And what happens to the current spring manufacturers and gear manufacturers, to take a small example? Not your large companies - I am referring to the multitude of small players that exist in the economy, in just about every industry – even soaps {Sanatan Soaps, for example}. And what of the current overcapacity? What happens to their product lines? Where are the specifics? Make in India for whom and which market?

Make In India wont just happen; you will have to deal with the issues. Companies are facing a credit crunch, with working capital loans hard to come by. There order books are ether stretched due to lack of timely raw material, as old outstanding to suppliers are not coming through due to supply chain issues further down the chain. Or their order books are vacant, as companies close down.

I myself have talked to several promoters who have closed their units, There are massive infrastructure issues, skill issues, access problems, market access issues, raw material issues, productivity and work habit issues that need sorting, to say nothing of the market and economic structure related points that we have inherited!

Where are the changes that enable lending to companies, for another small examples? Why is the credit offtake on a decline from the banks? Where are the measures dealing with these systemic challenges that will have to dealt with? Like the challenge at our filled-to-capacity container terminals at various ports? The roads and rail infrastructure that will carry the goods from one place to another? Make In India, when it takes days just to send material from one state to another, requiring documentation across states? When the vehicle takes 3 days just to traverse 400 kilometers, sometimes even lesser distances? These matters, and more, are known factors; that begets the question, what then, is Make In India about? When we have extensive manufacturing industrial units in India in every industry, what is this Make In India?

Primarily, MII is targeted at the Western Audience, not an internal audience, with two clear purposes in mind :

* Attraction of Foreign Direct Investment, as opposed to portfolio investments or Financial Institutional Investors. The budget does not have much fiscal space which can give the Government room to manoeuvre; so they seem to feel that this is an easy way out of the quandary. Every step the Government has taken is in line with this objective in mind. Whether or not this is actually the case : fiscal room - is another matter, and opens up a pandora's box; one which we will perforce have to open if we are to really understand the MII plan in its entirety.

* Build India as a major stop on the Global Supply Chain,with a secondary target of Job Creation, spurring investments and building economic growth

There it is, in a nutshell. If and when it succeeds – it has the potential to turn Indian fortunes.

The target of the Global Stop for India might be laudable - but is premature in the extreme, as Arvind Kejriwal has rightly been at pains to point out, as also any number of other critics of this plan. This cannot happen without giving proper education, and proper health facilities - for who will work in those nice new swank factories? Large numbers of the population automatically stand excluded due to this problem. I pointed this out last year in 3 separate articles, and am certainly not the only one to do so. What is being done to address the other, and far more important point of this MII Plan?

For the plan to spread inclusive growth, employment opportunities have to be shared by all sections of the population – and that can only happen with a focus on education. Do we have such a focus? Far too obviously, we don’t have even a tiny fraction of the focus on education on a national level {I am talking of you and me, not the government}. That is actually not in argument. There is no focus on Education  - not in our minds, not in our Media, which goes gaga over the smallest development related to Make in India, summarily ignoring the questions that emanate from this plan!

Point to be noted is that expenditure on education remains abysmally low; funds have been marked to the states, with increased devolution of central revenue. This has apparently happened without a clearly elucidated guideline to the states for proper utilization of these excess funds. Read the RBI status report on the finances of the states for more, both the good and the bad. If there is a guideline, it is not in my notice.

In the absence of such a guideline, there is no guarantee that these excess funds will go towards education and health, which are a pre-requisite for manufacturing. You need humans to work in your factories - and you need to ensure that benefits from industrialisation flow to the local population, so that resistance to other moves comes down. This is manifest in its absence, as is evident from the nationwide strident objection to the Land Bill.

You also need infrastructure - which means Land again. This wont happen fully without the above, and a reduction of corruption and increase in governance efficiency. The list of sordid tales arising out of Land Acquisition in India is long; and in vivid public memory. Unless these reforms are initiated, MII wont take off. Not for a long time. And, if it does, {which is quite possible, frankly} – the rate of spread of its benefits to all economic classes of society will be very slow, leading to further income disparities, increasing inequality in income alongwith all it entails.

And therein lies the problem.

This isn’t all; there is far more to it than meets the eye. Stop for a moment and think : you are introducing {or trying to} large facilities by directed planning, into an economy populated by Small and Marginal Manufacturers with distributed manufacturing facilities on a micro, small and medium scale, characterised by exceedingly complex holding patterns and ownerships meant to circumnavigate the complex historical laws governing the industrial sector.

Any industry requires ancillaries.This means investments by second and third tier manufacturers, who have serious issues accessing institutional credit, and do not have either the experience or the cash to do it on their own, or indeed the knowledge. Those who do have scale and money, cannot take advantage due to distributed ownership patterns and other reasons. The mode of large numbers of transactions remains cash. This also raises issues for security for employees, as one of the entry strategies is far too obviously JVs or take-overs of existing facilities.

Again, lack of clarity governs. This highlights the attendant reforms that are needed : corruption on a war footing, reform of the banking system. To be completely fair, some of these steps are either being contemplated, or are being started by Dr Rajan and the RBI. But that is limited to the Banking System, not corruption. Further, credit delivery and other things need both, not just one aspect.

Thus, in conclusion, while MII is an excellent plan, our India needs answers to the many questions it raises : namely Infrastructure, Corruption, Systemic Reform, Education, Health, Environment. While we Indians are euphoric about the the possibilities of this plan, the tragically comic aspect of this euphoria is the complete and utter neglect of the need for systemic reform required in the aspects noted above in the public imagination. The Government may or may not be doing anything : that is immaterial.

We, the people, just don’t seem to care about these basics. Quite frankly, we just don’t care. If we did, we would not be euphoric, but only cautiously optimistic, and be asking the Government to give more attention to Education, Health, Corruption Eradication, Environment etc. Judging from the amount of media and social media hype around MII, it seems a fair conclusion : we just don’t care...