Don't dismiss Make in India just yet
This flagship scheme will bear fruits by 2018, asserts Subrata Majumder.
Media and political analysts are blaming Modi's Make in India for turning out to be a jobless initiative. His several schemes to generate employment opportunities were mocked. They argued that his Make in India – committed for job creation through manufacturing – has failed. It failed to stimulate domestic investors. Foreign investment boomed. But foreign investment was not the prime target to expand job opportunities.
Under the Make in India initiative, Modi administration acted swiftly to ensure "Ease of Doing Business", cutting down several procedural hassles, curbing bureaucracy and red tape by enlarging E-systems. Several-growth oriented schemes, such as Start-up India, Digital India and Smart City concepts, were introduced. But, all failed to impact and show the desired results and employment generation, according to media analysts. During July 2014 to December 2016, only 641,000 jobs were created. In comparison, 1,280,000 jobs were created during July 2011 – December 2013, during UPA region.
Why didn't domestic investors respond to Make in India initiative, while the foreign investors were upbeat? Despite the big flow of foreign investment during Modi regime, why did it fail to generate more employment? Why did the schemes for development and modernisation not catalyse more employment? These are the some of the questions which were thrown up for public debate to figure out Modi's leadership in the job sector and employment generation. Modi had committed to creating one crore jobs a year.
India achieved a sustainable and highest global growth in GDP during Modi regime. But it succumbed to the catchphrase of "jobless growth". Why have all the development schemes proved to be a dud in case of employment generation?
During the three-year period of Modi administration, India witnessed a gushing flow of foreign direct investment. It boomed to US$113.8 billion over the period of three years. On a single year basis – India received foreign direct investment of US $46 billion in 2016 and US $39 billion in 2015 – a whopping leap by about 18 per cent. The growth reflects foreign investors' assertiveness in the growth trajectory of India.
In contrast, the domestic investors were shying away. Registering a spur in investment in 2014-15, a growth by 71 per cent, domestic investment in new projects dipped to almost zero growth in 2016-17.
Given the spurt in foreign direct investment, which represents investment in manufacturing and allied services mainly, the critics raised eyebrows, asking questions as to why they haven't increased job opportunities.
The moot point for the lackluster growth in employment opportunities was the time period taken to assess the impact. The first three years of Modi administration was not enough to generate more employment opportunities, even though large foreign direct investment flowed into the country. About 85 per cent of the foreign direct investment is in the greenfield areas. It takes about 2 to 3 years or more as gestation period for the new factories to commence production. Employment is generated in the post-manufacturing phase. Resultantly, the green shoots of employment generation in the foreign invested plants will be visible only after 3 to 4 years. Hence, the rise in the employment generation in foreign invested firms will be visible from 2018-19 onwards.
Start-up is not the major creator of mass employment generation. Digital India and Smart Cities are the long-term projects of generating employment opportunities. All these schemes are at the native stages in terms of policy formations and implementations. Under the Smart City initiatives, so far 60 out 100 cities could determine the projects costs. Of these, only 16 projects are in the implementations and the remaining 44 are at various stages of tendering.
Digitisation is not the springboard for volume employment opportunities. It is the turf for opportunity for IT sectors and the process for modernisation to keep every citizen, especially in urban areas, in the loop through internet-enabled services.
The year 2018 will be the turning point of Indian manufacturing sector under Make in India initiative. With BJP and its allies making a big inroad in Rajya Sabha after one-third of the members retire, the two major pending reforms, amenable to trigger manufacturing, will find easy access for Parliamentary approval. They are land acquisition Bill and labour reform. Pending land acquisition amendment Bill has become the major obstacle for land availability and gear up the new investment in manufacturing. The new land acquisition bill under Modi administration, which overturned the mandatory obligations of farmers' consent of 80 per cent and Social Impact Assessment (SIA), will now find passage for Parliamentary approval to become the Act. Till now, few State governments have enacted their own land acquisition laws, which are effective within the periphery their own state boundaries. These restricted the new investors to invest in the state of their own preferences.
Labour reform is a long pending issue since it was pondered in the first term of NDA at the Centre in between 1999 to 2004. Labour reform in the form of "hire and fire" is a long pending demand of investors. Under the Industrial Disputes Act, a company employing more than 100 workers, is not free to adopt 'hire and fire' system. With the fast growth in industrialisation and greater participation of bigger houses, this law has become obsolete. A new thinking was brewed to relax the workers' cap and provide more power to the investors for industrial harmony and growth.
With sustainable growth in the economy, which waned supply constraint, the country has entered into a comfortable zone of inflation. Resultantly, RBI relaxed its tight monetary policy. More easing in the rate of interests are in the offing. These will have positive impact on the domestic investors, who have long been out crying for easing of monetary policies.
Many new challenges are afoot to generate employment opportunities. One such is setting up of Coastal Employment Zone (CEZs), proposed in Three Year Action Agenda by NITI Aayog. It is a first-time challenge to generate more employment in the coastal areas. Presumably, the main motto is to link employment with global growth, based on the Chinese model. Hitherto, coastal areas were neglected because of their peripheral nature to play role in the economy. A large part of these areas is occupied by traditional industries like fisheries and cottage industries.
Therefore, the time is not ripe to assess the impact of Make in India on job opportunities. Will Modi have the last laugh?
(Views expressed are personal.)