Chandrayaan-3: 'Make in India's' moment of reckoning

India achieved a rare technological breakthrough in space science with the Chandrayaan-3 successfully landing near moon’s south pole on the August 23, 2023 – a culmination of exploration that, in a way, began with the Chandrayaan-1 (which orbited the moon in 2008) and Chandrayaan-2 (which crash landed on the moon’s surface in 2019).

The ISRO scientists may indeed "have taken Make in India to the Moon" but this is not an outcome of the flagship mission-mode programme launched in September 2014. The ISRO belongs to another era when the focus was on developing scientific temper and building institutions of excellence (along with IITs, IIMs and AIIMS and many others). The delink would be clear soon.

Has 'Make in India' achieved goals?

Such linkage is not surprising because many myths are associated with 'Make in India' – which need to be unraveled to make it achieve its stated goals. The first myth is that 'Make in India' is a programme with clear goals.

When it was launched on September 25, 2014, 'Make in India' was an idea with no goals, no policy frameworks and no planning or strategy. Revisit the statement issued on the occasion, "PM launches "Make in India" global initiative". It talks of pushing investment (particularly FDI), skilling and creating jobs but no roadmap, goal or strategy. Several months later, on March 18, 2015, the Ministry of Commerce and Ministry spelt out its twin goals: (I) "enhancing the share of manufacturing in GDP to 25%" and (ii) "creating 100 million jobs over a decade or so."

It was this statement which said that (a) the twin goals and (b) the "specific policy instruments" to achieve these goals were "conceptualised" under the National Manufacturing Policy "notified" on November 4, 2011 – nearly five years earlier. Those "specific policy instruments" were in "areas such as rationalisation and simplification of business regulations, financial and institutional mechanisms for technology development, incentives for SMEs, Special Focus Sectors, etc."

Revisit the 2011 National Manufacturing Policy – prepared and notified by the same Ministry of Commerce and Industry – to know why it said what. It said: "The share of manufacturing in India’s GDP has stagnated at 15-16% (of the GDP) since 1980 while the share in comparable economies in Asia is much higher at 25 to 34%." It didn't give the manufacturing’s job share but the Planning Commission regularly did– average of 10.5% during 2004-05 and 2009-10. This was down from 11.1% during 1999-2000 to 2004-05. The Planning Commission also said (for better comparison) the manufacturing's GVA share was 15.3% during 2004-05 and 2009-10 (down from 15.5% during 1999-2000 and 2004-05).

What is manufacturing share in GVA and employment now?

During the subsequent period covered by the 2011-12 GDP series, from FY12 to FY23, the manufacturing’s GVA share is (average) 17.8% (MoSPI). In FY23, it was 17.7%.

But wait, before assuming that this is a marked improvement (over 15.3% seen between 2004-05 and 2009-10), here is a caveat.

When the 2011-12 GDP series was introduced in January 2015, it statistically raised the manufacturing’s GVA share by an average of 3.86% for FY12, FY13 and FY14 – from (av) 13.9% under the 2004-05 series to (av) 17.76% under the 2011-12 series.

This happened because, for the first time, an MCA-21 database (self-populated by industry) of the Ministry of Corporate Affairs (MCA) was used for the manufacturing’s GVA share (and also that of services). This MCA-21 data base was exposed for 45% data flaw in 1999 by the NSSO and it remains flawed even in 2023.

Now consider manufacturing’s job share.

The annual PLFS reports show its job share is (average) 11.6% during 2017-18 and 2021-22. Manufacturing jobs have been falling from 12.1% in 2017-18 to 11.6% in 2021-22 (much lower in 2019-20 and 2020-21). Since it was 10.5% during 2004-5 and 2009-10, there is a marginal improvement (to 11.6%) more than a decade later. But here too, there is a caveat.

The PLFS data shows there was no job loss due to the GST of 2017 and the pandemic lockdowns of 2020 and 2021 – as all the relevant headline indicators, the WPR, LFPR and UR (unemployment rate), progressively improved during the period of 2017-18 to 2021-22. How is that even possible? Given this, the marginal improvement in manufacturing’s job share is questionable.

Besides, do you know the PLFS reports don't tell the total number of jobs in the economy or how many new jobs are created every year and in which sector? The Planning Commission used to do that by analysing the PLFS’s unit level data and other surveys and datasets. Its replacement, the NITI Aayog, doesn't.

The other measure of job creation is the payroll data, EPFO numbers.

The government cites this data. For example, Union Minister Ashwini Vaishnaw said on August 15, 2023 that 1.4 million new jobs were being created every month. A few months earlier, in December 2022, he said 1.5-1.6 million jobs were being created every month. On both occasions, he cited monthly EPFO data.

Since monthly EPFO data undergoes corrections every month (due to non-elimination of duplications and other reasons), it is better to look at the annual data.

The EPFO's annual reports provide that data and show:

· In FY16 (from when it was tracked), the number of "regular contributors" to the EPFO was 37.6 million.

· It went up to 46.3 million in FY22. The FY23 report is not available.

That is, 8.7 million jobs were added in six years or 8.7% of the 100 million jobs that 'Make in India' promised in March 2015 – nowhere closer to Vaishnaw’s two claims.

Arbitrary drivers of 'Make in India'

'Make in India' falls short on two counts: (i) well-defined policies, strategies and planning to push 'Make in India' and (ii) post facto studies and reviews to assess the impacts and lack of course corrections to 'Make in India' mission.

This would become clear from the five major discernible drivers of ‘Make in India’: (a) liberalisation of FDI to attract investment (b) ease of doing business, of which decriminalization of Companies Act of 2013 is one part (c) manufacturing incentives like the PLIs and DLIs (d) import substitution to promote domestic manufacturing and now (e) license to import manufacturing products.

Here is a brief sketch of how these drivers have played out.

FDI inflows: The DPIIT’s FDI inflow factsheet up to June 2023 shows, growth in FDI inflows is consistently slowing down from 25% in FY5 to 3% in FY23 and (-) 16% in FY24 (up to June 2023). Three questions arise: Why this slowdown? What is the FDI inflow doing to manufacturing? Is FDI achieving its goals of technology transfer, marketing expertise, modern managerial techniques and export boost?

None of these questions can be answered because there are no official studies or assessments. Private studies have shown, for a long time, that more than 85% FDI inflows and outflows are through shell companies and tax havens (involving round-tripping).

Ease of Doing Business 1.0 and 2.0: India did achieve remarkable success in improving in the World Bank’s Ease of Doing Business ranking – it jumped from 142 in 2014 to 63 in 2019. Thereafter, the World Bank’s DBI shut it down due to data manipulation allegations. Here is how this success was achieved.

In October 2017 – immediately after the twin shocks of demonetisation and GST that derailed the economy and after India’s rank jumped 130 to 100 – the World Bank’s Country Director in India Junaid Ahmad was questioned about this improvement. He told a national daily that its data didn’t capture demonetisation and GST. He said these impacts would be reflected in next year’s ranking. But the next year, in 2018, India’s rank jumped 23 places to 77 and in 2019 to 63 – while India’s growth slipped to 3.4% in FY20 (corresponding fiscal of 2019). What was the impact of Ease of Doing Business 1.0? Not known because there is no official study. Yet, India ventured into Ease of Doing Business 2.0 (budget 2023) – through more decriminalisation of Companies Act of 2013 and the Jan Vishwas Act of 2023 which amended 42 laws at one go a few days ago.

PLIs and DLIs: The impact of these incentives to push ‘Make in India’ are not known either. Many economists have questioned their efficacy and sought impact assessments before going further. But there is no sign of that happening – even when it is known that such incentives are ending up promoting assembling units (in the mobile phone sector, for example), and leading to higher imports and higher trade deficits (in the mobile phones case). The Micron’s chips project in Gujarat is also an assembling project, not 'Make in India.'

Import substitution policy: This was the first step to promote 'Make in India' and is in force since 2014 but its impact has not been studied. Trade data shows, it has led to fall in exports – disabling one of the four main growth drivers.

License to import: About a month ago, the DGFT imposed ban on import of laptops, PCs and tablets and proposed a licensing regime – even when 90% of all domestic sales are imported. It could inconvenience millions of Indians to pursue education, business, leisure, travel and virtually everything else. It has been put on hold for three months.

Since the Chandrayaan-3 has already been branded as ‘Make in India’ here are two inevitable comparisons – to make the delink obvious.

A recent CAG revealed that 'Make in India' roads cost a bomb. It flagged two arbitrariness: "Selection of ineligible bidders, award of works without approved detailed project reports or based on faulty detailed project reports." Such arbitrariness, it said, led to the Dwarka Expressway, being built under the Bharatmala Pariyojana (a PPP project), cost Rs 250.77 crore per km – as against the CCEA approved cost of R 18.2 crore per km – 13.8 times more. No probe has been announced. And the CAG’s findings have been dismissed.

The Micron’s chips assembling unit in Gujarat, mentioned earlier, comes with ₹16,000 crore of public money (70% of the total project cost of $2.75 billion) by way of the DLI.

Contrast these with the Chandrayaan-3 which landed on the moon (located at a distance of 3,84,400 km). It cost the ISRO, set up in a different era of 'Make in India', ₹615 crore.

Here is a larger perspective to all this.

India’s post-colonial re-industrialisation and manufacturing push began with the First Industrial Policy of 1948 (72 years ago) – assisted by the five-year plans and the Planning Commission. This was after then business tycoons expressed inability to invest and lead the re-industrialise drive through a document called "Bombay Plan of 1944" – which was authored by JRD Tata, GD Birla, Sir Ardeshir Dalal, Sri Ram, Kasturbhai Lalbhai, AD Shroff and John Mathai. India’s mid-1980s' reforms and 1991's liberalisation – which pulled India out of the 'Hindu rate of growth' – were also assisted by the five-year plans and the Planning Commission.

The point of all this perspective is: It needs sound policies, strategies, planning, reviews and course corrections to achieve goals, not arbitrariness.