Can “Make In India” Make India?


Under various nation-building initiatives undertaken by the new government in India, the “Make In India” campaign has hogged limelight and there is a sense of optimism that it can trigger manufacturing driven growth.

However, I am sceptical about the impact the manufacturing sector can have on the country’s exports and GDP growth. This article explains the reason for my scepticism in one chart.

The chart below gives the share of India and China in world manufacturing exports. China’s global market share in manufacturing exports has been plotted beginning in 1991 and juxtaposed on it is India’s global market share beginning in 2003 when the shares were roughly similar.

While China’s share of manufacturing exports surged in 25 years, India’s share of manufacturing and services exports still remains insignificant as compared to China.

The reason for focusing in this chart is to explain that China is a global leader in manufacturing exports and the country already has excesses in manufacturing after the financial crisis of 2008-09. In a scenario where global manufacturing excesses exist, it is difficult to focus on the manufacturing sector and expect manufacturing exports to drive GDP growth.

In my view, India’s services sector export, which is currently at around 3%, has more potential to trigger overall GDP growth than the manufacturing sector. It is also important to note here that during the period when China’s manufacturing exports was surging, GDP growth in US and Europe was robust. However, in the coming decade, I expect GDP growth in advanced economies to remain sluggish and that will have implications on the potential for manufacturing sector driven growth.

The economic survey report 2015-16, from where the chart has been sourced, also explains that in order that the services sector share of global exports increases, a major effort is needed on the competitiveness front. Therefore, there are big challenges ahead and I doubt that the “Make In India” campaign can achieve anything substantial in the next 5-years. While the intentions are genuine, the timing is wrong from a global perspective.

Reviews

  • Total Score 0%
User rating: 0.00% ( 0
votes )



Leave a Reply

Your email address will not be published. Required fields are marked *