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Why “Make in India” Vs “Make for India” Is The Wrong Debate

[Guest article by Raghunandan G., CEO of TaxiForSure]

When the Narendra Modi led BJP rode to power in an unprecedented electoral victory, it was largely on the back of the twin promises of “development” and “minimum governance”. Following government formation, the “Make in India” became a catch phrase to capture the imagination of investors and global manufacturers.

MakeInIndia
MakeInIndia

This slogan was soon contested by none other than Raghuram Rajan, the man who saw the future, when he predicted an imminent melt down of the global financial system much before the Lehman Brothers collapse. He has questioned the wisdom of the “Make in India” approach and suggested that a “Make for India” could be a better alternative.

My view is that the “Make in India” versus the “Make for India” debate is irrelevant, or even incorrect.

Both “Make in India” and “Make for India” are outcomes– outcomes that generally bode well for India. When I was at school, my dad never told me if I should be a lawyer or a doctor. He ensured that he inculcated the right climate at home where I could easily figure out for myself what I loved to do, along with the freedom to pursue it. The climate was crucial. The outcome wasn’t. I chose to be neither a lawyer nor a doctor. Both “Make in India” and “Make for India” need an underlying climate that is crucial for success. Without the right climate, neither is going to succeed. With the right climate, it does not matter which succeeds. It may actually be a third alternative which is neither Made in India nor Made for India.

Creating the right climate

  • The number one climate change imperative is moving India up the “ease of doing business” list from number 134 to being in the top 100 within 6 months and being in the top 50 in 12 months.

This is not easy – therefore insufficient attention is paid to this. Take the telecom spectrum and coal block allocations. As a fallout of corruption charges and subsequent investigations, all allocations were cancelled. No one thought what it would do to businesses that had invested based on these allocations, and the impact it would have on countless people whose lives depended on these businesses. The government bravely resorted to the ordnance route to address the coal block allocation issue, but that is just not sufficient to put either industry or investors at ease. Cyrus Mistry was vocal in his support for the Make in India initiative, but when it came to the Tata Motors owned JLR setting up a plant, it chose Changshu in China over India. Therefore, the sooner the government injects confidence through changes in climate, the sooner will such decisions swing in India’s favor. When this happens, it does not matter whether a Tata Motors could potentially use the factory in India to produce cars for the world market or for the Indian market.

  • Two of the biggest obstacles in the rapid industrialization of India in the last couple of decades have been land acquisition and environmental clearances. It will be helpful to see some concrete indications that there is change of both mindset and will in pushing through the necessary changes.
  • In the last two decades, India’s growth has been despite a lack of public infrastructure like power and transport. Gaps in public policy were partially filled up by enterprising companies, and by an effective public-private-partnership – in the last 30 years India’s PPP market is the world’s biggest. Infrastructure has been the dominant area of PPP. Healthcare and education have also seen moderate success. In the last 5 years, the share of private universities has gone up from 10% to 42%. However, after the initial euphoria, there have been some setbacks to the PPP model – Overbidding, faulty pricing mechanisms and delayed clearances have led to investor losses. Financing and the absence of a liquid corporate bond market has also been a problem. But there is hope that these can be overcome. If power, water and other infrastructure is made available to industry it does not matter whether these inputs are used to make in India or make for India. Let the global marketplace and the entrepreneurs decide on a case by case basis.
  • The average Indian is 17 years younger than the average Japanese and 14 years younger than the average American This demographic advantage gave us an edge when the global services industry was growing. India managed to get the lion’s share of the services that the developed world decided to outsource. India’s youth bulge is both a promise and a peril. To accommodate the 300million people that will join India’s workforce between 2010 and 2040, each year India needs to create,roughly 10m jobs and a new city like Bangalore along with the commensurate real estate space and investment in infrastructure. This workforce couldn’t care less if they were employed making in India or making for India! They just need to be gainfully employed. Without the required labor reforms, industry would rather not take the risk of employing this workforce.

TO SUMMARIZE:

There is hope.

Most countries in the world, including China, are rapidly aging while India will continue to remain young and youthful for the next twenty years and more. An aging world cannot do without a young India. We need to quickly create a climate where this youth power is harnessed effectively. I feel very confident that if there is one government that could make this happen, it is this government, under the leadership of the current prime minister.

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