A study by International Monetary Fund reveals that there is a very close association between rising policy uncertainty and infrastructure investment in a state. The unpredictability of a country’s policies keeps investors confused. They then become very reluctant to invest in the economy. Investment stagnation withholds economic expansion, which ultimately leads to the creeping developmental growth of a country.
A similar thing happened to India before 2014, during the rule of Congress. The constant revelation of corruption scandals against the government created a fearful environment in the executive and they were unable to plan for future growth. Confusion over policies governing land, infrastructure, mining, power, tax, business and other key projects led to a backlog of delayed approvals and stalled projects. This ultimately led to the shelving of new investments in the nation.
This policy paralysis projected a looming picture of India’s development and posed a very big question over future prospects. But, the leadership change after the 2014 general elections completely reversed the situation and brought the nation on an exponential growth trajectory.
The Make in India scheme of the new government played an instrumental role in the 180-degree reversal of India’s growth prospects. Under the umbrella scheme, a complete overhaul reform was brought in almost every domain of the government and investors’ confidence was installed in the future of India. This policy certainly created a business-friendly sentiment in the nation. Not only foreign but domestic enterprises also contributed immensely to economic expansion.
Make In India Turned The Tables In 8 Years
On 25th September 2022, Make in India, the flagship program of the Modi government completed 8 years of path-breaking reforms.
On the 8th anniversary of the scheme, the Ministry of Commerce and Industry said that liberal and transparent FDI policy opened the route for automatic investment across various sectors and enhanced the numbers. Comparing the FDI data, the report said that FDI inflows in India stood at USD 45.15 billion in 2014-15, which reached a record USD 83.6 billion in 2021-22.
The whopping FDI has come from 101 countries and invested across 21 states and 57 sectors. It is also stated that due to the reforms in Ease of Doing Business (EODB) in recent years, India is on track to attract USD 100 billion FDI in the current financial year.
The formidable success of the scheme is attributed to the government’s actions on policy restructuring. Since taking charge, the centre has taken several measures to strengthen the Make in India initiative.
To reduce unnecessary compliance burdens, bring down costs and enhance the ease of doing business, India made amendments to laws, liberalized business guidelines and eased regulations. The complicated compliances, rules and regulations have been curtailed by simplification, rationalisation, decriminalisation and digitisation.
Reports suggest that due to discrimination against minor procedural and technical faults, the number of prosecutions has taken a significant drop. In the last three financial years, more than 1,000 company law cases have been disposed of by the In-House Adjudication Mechanism. This process not only unburdened the criminal courts but also boosted the companies to do business fearlessly.
Additionally, to enhance the industry’s business efficiency, an overhaul of labour laws has been adopted. The government sublimated the 29 labour laws into four labour codes – the code on Wages, Industrial Relations Code, Social Security Code and the Occupational Safety, Health and Working Conditions Code. The code is envisaged to bring flexibility in hiring and retrenchment.
Quality control orders have been introduced to ensure quality in local manufacturing. Further, transformative steps like reduction in corporate taxes, public procurement norms and phased manufacturing programs have been adopted to promote manufacturing and investment.
One of the biggest reforms that the government launched was the introduction of the Insolvency and Bankruptcy Code (IBC) in 2016 and the Goods and Services Tax (GST) in 2017. On one hand, the GST helped in the formalisation of the economy. On the other hand, IBC reform brought instrumental changes in the resolution of business conflict. In a way, the fair and transparent system boosted the confidence of businesses and created wealth in the economy.
In 2019-20, the government announced to reduce corporate tax rate from 30% to 22% for established companies and 15% for newly incorporated domestic companies. This not only provided space for domestic companies to enlarge their investment base but also worked as a catalyst to attract foreign companies.
The Public Procurement (Preference to Make in India) Order 2017 was issued to promote local industry by providing them preference in public procurement of goods, works and services. The policy aimed to encourage domestic manufacturers’ participation in public procurement activities over entities merely importing to trade or assemble items. It not only created a market for domestic producers but also helped the economy in creating recurring wealth.
Further, the National Single Window System (NSWS) was launched in September 2021. It was done to improve the ease of doing business by providing a single digital platform to investors for approvals and clearances. This portal has integrated multiple existing clearance systems of the various Ministries, Departments of Government of India as well as States to enhance the investor experience.
The Government has also launched a programme for multimodal connectivity to manufacturing zones in the country, called the Prime Minister’s Gatishakti programme. It will ensure logistical efficiency in business operations through the creation of infrastructure that improves connectivity. This will enable faster movement of goods and people, enhance access to markets, hubs, and opportunities, and reduce logistics costs.
To boost the Make in India initiative, a comprehensive Production Linked Incentive (PLI) scheme was launched in 2020-21 for 14 key manufacturing sectors. The PLI Scheme incentivises domestic production in strategic growth sectors where India has a comparative advantage. This includes strengthening of domestic manufacturing, forming resilient supply chains, making Indian industries more competitive and boosting the export potential. The PLI Scheme is expected to generate significant gains for production and employment, with benefits extending to the MSME eco-system.
Recognising the importance of semiconductors in the world economy, the Government of India has launched a USD 10 billion incentive scheme to build a semiconductor, display and design ecosystem in India. As the future industrial growth subsumes the digital presence, the investment will prove to be the key driver of development.
The success of the scheme can be calculated in comparative ways. From the time when India was struggling with policy paralysis due to the constant unfolding of corruption to the time when India has become the fastest growing economy, we have come a long way. In 2014, Make India envisaged: –
To increase the manufacturing sector’s growth rate to 12-14% per annum
To create 100 million additional manufacturing jobs in the economy by 2022
If we analyse the success of the scheme in numbers, then the picture seems very clear. The scheme and associated reforms have catalysed development in almost every sector. From traditional industries like chemical, steel, cement, automobiles, or petrochemicals to new-age industries like mobile phones, electronics, defence and others, the numbers speak volumes about the success of Make in India.
For example: –
Exports of Indian chemicals registered a growth of 106% in 2021-22 over 2013-14
The processed vegetable export grew from $213 million in 2013-14 to $426 million in 2021-22, an absolute increase of 100 per cent.
After analysing the key data, it can be said that created with a vision to facilitate investment, foster innovation, enhance skill development, and build best-in-class manufacturing infrastructure, Make in India has proven to be one of the perfect execution of PM Modi’s administrative skills. Spread across 27 sectors of the economy, Make In India is an open invitation to potential investors and partners across the globe to participate in the growth story of ‘New India’. It is astonishing that from License-quota-permit raj to policy paralysis to the world’s fastest growing economy, India has come a long way.
Once PM Modi stated that the government has no business to do business. This was not only a statement but an indication that he is willing to give private businesses sufficient space to create wealth. It is his firm belief and vision that not only envisaged the goal but brought these things into execution. The success of foundational reform helped the economy to give a V-shape recovery in the post-Covid scenario. And now, India wishes to see itself as a developed nation by 2047.
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