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How ‘Make in India’ initiative is accelerating FDI investment in India and helping India emerge as the fastest growing economy

Government has recently launched Make in India 2.0 with a renewed focus on 10 sectors, including capital goods, auto, defence, pharma and renewable energy to push growth in manufacturing and generate job opportunities.

‘Make in India’ initiative launched in 2014 by the Modi Government has revitalised the country’s manufacturing sector. Many foreign-based companies are entering the Indian market through this initiative. Foray of foreign entities is promoting the manufacturing sector in India, generating employment and motivating new investors to participate in the Indian growth story. 

About Make in India

Make in India Initiative was launched by the NDA Government led by PM Narendra Modi in 2014 as a part renewed focus on revitalising the country’s manufacturing sector. The initiative increased the inflow of funds within India significantly. An estimated 46% growth occurred in Foreign Direct Investment (FDI) equity inflows and highest ever FDI inflow of US$ 55.5 billion was recorded during 2015-16. Since the launch of this initiative, India has emerged as the fastest growing major economy with GDP growth rate above 7.6% in 2015-16 and projected to grow above 7% till 2020 as per International Monitory Fund (IMF).

Key Milestones of Make in India

Since the election of the NDA government in 2014, the business climate of the country has improved phenomenally, pushing it towards the trajectory of high and sustainable growth. From a call-to-action to becoming a platform for national development, ‘Make in India’ has made its presence felt across the globe. 

Here are some of the key milestones since the implementation of the initiative in 2014:

    • September 2014

Department of Industrial Policies and Promotion (DIPP) of the Ministry of Commerce and Industry instilled series of measures to improve the Ease of Doing Business (EODB) rankings and simplify some of the existing rules for entrepreneurs.

    • January 2015

Spice Group announced an investment of US$ 75.16 million to set up a manufacturing unit for budget smartphones in Uttar Pradesh.

    • February 2015

Huawei made a huge investment of US$ 170 million to set up a new Research and Development (R&D) campus in Bengaluru sprawling across 20 acres, and accommodating 5,000 engineers.

    • March 2015

Magneti Marelli, Fiat’s component manufacturing arm, started operations for manufacturing of Electronic Fuel Injection (EFI) in a joint venture with leading two-wheeler maker Hero MotoCorp in Manesar.

    • May 2015

Hyundai Heavy Industries partnered with Hindustan Shipyard Limited, Visakhapatnam to help build naval ships in India.

Daimler India Commercial Vehicles Pvt. Ltd. (DICV), a 100% wholly owned subsidiary of Daimler AG, Stuttgart, Germany, announced the inauguration of its new bus manufacturing facility in Tamil Nadu and unveiled its second wave of products – BharatBenz and Mercedes-Benz buses as well as a new range of new BharatBenz high-power engine trucks and BharatBenz heavy-duty tractors.

    • June 2015

French aircraft manufacturing company LH Aviation signed a Memorandum of Understanding (MoU) with Indian OIS Advanced Technologies (OIS-AT) for manufacturing of tactical drones in India.

    • July 2015

Mercedes Benz India inaugurated its second manufacturing facility in Chakan, which shall double the plant capacity to 20,000 units per annum. 

    • August 2015

Foxconn, the world’s largest contract electronics manufacturer, signed a pact with Maharashtra to invest US$ 5 billion over five years in a semiconductor manufacturing facility.

The electronics manufacturing sector received a further boost, with Lenovo and Motorola announcing their plans to manufacture smartphones in India in a 40,000 square feet factory in Sriperumbudur near Chennai. The facility currently can create 6 million smartphone units per year.

Xiaomi launched local manufacturing in Visakhapatnam in August 2015 under the Make in India program. 

    • September 2015

Mittelstand initiative was launched in partnership with the Indian embassy in Berlin, Germany for providing Market Entry Support Services like strategic consulting, tax & legal support, project financing, technology collaboration and facilitation of approvals to German Mittelstand organizations.

Japanese electronics giant Sony got on to the ‘Make in India’ bandwagon with plans confirmed to manufacture two models of its television brand Bravia, in the nation.

Amazon opened a warehouse in Pune in September 2015 taking the total count to over 21 with a cumulative storage capacity of over 5 million cubic feet.

    • November 2015

India attracted over US$ 18 billion worth of investments since September 2014 from companies viewing the country as a potential electronics manufacturing powerhouses including Samsung, Bosch, Phillips, LG and Flextronics.

International Tractors Ltd invested US$ 75 million for setting up its new Hoshiarpur plant in Punjab with the capacity to manufacture 0.2 million tractors per annum. 

    • December 2015

General Electric Transport and Alstom won contracts worth a combined US$ 5.6 billion to supply India’s railways with new locomotives. 

The Japanese Government announced setting up a US$ 12 billion fund for ‘Make in India’ related projects. 

    • February 2015

The multi-sectoral Make in India Week (MIIW), a mega event held in Mumbai, was a platform to showcase the nation’s focus towards design, innovation and sustainability. MIIW was a resounding success which was attended by over 0.9 million visitors from 102 countries and over 8000 B2B/B2G/G2G meetings were conducted over the course of the week.

    • March 2016

Japanese technology giant Hitachi announced its plans to roll out ATMs in India – one of Asia’s largest ATM markets – with the investment capital of US$ 15 million.

    • April 2016

US chipmaker Qualcomm plans to establish an innovation lab in Bangalore to provide technical and engineering assistance to the selected companies. It has launched ‘Design in India’ initiative with the aim to mentor up to 10 Indian hardware companies who have the potential to come up with innovative solutions.

    • June 2016

In a sweeping overhaul of FDI norms, the government radically liberalized key sectors like defence manufacturing, civil aviation, pharmaceutical and food processing, making India as one of the ‘most open economies’ in the world. India jumped 13 positions and was placed second in retail potential in the 2016 Global Retail Development Index (GRDI). India was rated 15 in the 2015 Global Retail Development Index.

    • July 2016

Actual work on the ground has started on 25% of investments commitments signed during the Make in India week.

    • August 2016

India improved its performance on the Logistics Performance Index by 19 positions when compared with its ranking in 2014. India’s ranking has jumped from 54 in 2014 to 35 in 2016.

    • October 2016

Schneider Electric is preparing to make India its export hub on the back of government’s policies such as Make in India, Digital India and Smart City Mission. Schneider Electric to have 28 factories, R&D centres and further plans to invest around US$ 110 million in the coming five years and will keep investing in skill development.

Make in India initiative has been responsible for garnering increased flow of FDI within the nation, resulting in increased EODB ranking for India. As evident from the graph above, reforms introduced by the NDA Government has resulted in a consistent increase in India’s rankings in Ease of Doing Business ratings. From 142nd rank in 2014, India has now risen to 77th place in 2018.

Ikea’s story of establishing in India

Sensing the winds of change in India, Ikea the Swedish manufacturing and retailing giant announced its plans to launch in India 6 years ago. It faced challenges due to the requirement of sourcing 30% of its products from within India. This requirement was introduced in an effort to support the country’s manufacturing sector. While it has caused a certain amount of discomfort for the retailing outlet, it will no doubt help the company in maximising profitability in the long run. In the long term, the goal for Ikea is to maximize sourcing from India. 

Such initiatives serve as win-win for the companies involved and development of the region in which the company operates. By encouraging Indian and foreign companies to manufacture in the country, the national GDP is given a boost and millions of jobs are also being created. Make in India is there precisely to improve the competitiveness and encourage the growth of manufacturing in a big way.

Challenges faced by Make in India initiative

India, Asia’s third-biggest economy, has lagged behind China, the world’s second largest economic powerhouse when it comes to manufacturing. China has bigger factories and superior trade infrastructure such as large ports that are essential for a global manufacturing hub. The Indian government plans to boost the manufacturing sector to 25 per cent of the economy by 2020 and is banking on Make in India to play its part in achieving this goal.

In order to strengthen the manufacturing sector in India, the core issues such as lack of infrastructure, high interest lending rates and high logistics costs need to be addressed. Such core issues cannot be tackled instantaneously. They require careful planning and support across all verticals. Initiatives such as Mudra Yojana are helping entrepreneurs start businesses. Make in India initiative is boosting local manufacturing and infrastructure, which in turn will create employment opportunities. Development is being done on all fronts, to ensure holistic and sustainable development across sectors. A series of announcements for manufacturing plans have been made in the defence sector. 

The success of Make in India so far

As a direct result of the Make in India initiatives, India has become the World’s 2nd largest mobile phone producer in three years. According to data shared by ICA, India accounted for 11 % of global mobile production in 2017 compared to 3 per cent in 2014, second only to China. India replaced Vietnam to become the second largest producer of mobile phones in 2017. With the rise in mobile phone production, imports of the devices in the country also reduced to less than half in 2017-18. The fast track task force, a body under Ministry of Electronics and IT, has set a target to achieve around 500 million mobile phone production in India by 2019, with a value estimated to be around USD 46 billion.

The FTTF, which has members from industry and government, has set a target to create USD 8 billion component manufacturing as a result of growth in mobile phone production and create 1.5 million direct and indirect jobs by 2019. The body has set the target to export 120 million mobile phone units with an estimated value of USD 1.5 million by the end of next year. 

The Future of Make in India  

Make in India has now become a calling card for investors to come and invest in the Indian growth story. To further the Indian manufacturing capabilities, the government is focusing on the development of sectors that are going to be the key focus in the coming years. By the introduction of new reforms in policies along with a positive economic atmosphere, it has created a fertile ground for businesses to thrive in India.

Even as government charts out a roadmap to give a significant push to its flagship programme Make in India, country’s top bureaucrats and multi-national companies feel a lot needs to be done still to make it a success such that more and more companies are willing to set up manufacturing base here. 

Issues such as the enforcement of contracts, improving the quality of education and establishing research facilities are paramount to make this initiative a success. Sustained investment is required from within the country as well as beyond to enable a higher growth rate of development. The roadmap created by the Indian Government addresses aggregate demand sourcing challenges to help create scalability of initiatives. 

Government has recently launched Make in India 2.0 with a renewed focus on 10 sectors, including capital goods, auto, defence, pharma and renewable energy to push growth in manufacturing and generate job opportunities.

The NDA government is striving to make India a better place to do business with an aim to be in the top 50 nations in the World Bank’s ease of doing business report. For the first time in 2017, India gained 30 positions to be among top 100 nations after persistent efforts over the last three years to improve upon ease of doing business parameters. 

The strategies placed to increase the manufacturing sector, are bearing and will continue to bear fruit. The GDP growth and consistent increase in Ease of Doing Business rankings prove beyond any reasonable doubt that PM Modi’s Make in India scheme has been an outright success. 

The World, as of now is heavily dependent on China for its production prowess. The increased trade wars are indications that the World needs another country capable of manufacturing at economies of scale. India has access to a reserve of skilled and highly educated talent. In comparison to the USA and other developed nations, labour is available at cheaper rates. Combining this untapped resource with the manufacturing sector can be key in increasing production capacity which can propel India towards becoming an economic Super Power. 

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Dhairya Roy
Head - Project Management Office (Projects, Corporate Relations and Media), for Minister of Finance & Planning, Forests - Government of Maharashtra.

 

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