Modelling the Wheel of Profitability Modelling the Wheel of Profitability
Modelling the Wheel of Profitability
         Date: 01-Aug-2018
Manufacturing process has been revolutionised in Bharat by the huge headway created by ‘Make in India’. Statistics demonstrate a ‘Great Leap Forward’ in manufacturing, however, politics of denial persists over it
 Bharat’s economic drivers have been essentially consumer based model that would help traders garner ‘margins and profitability’ but largely being dependent on foreign made products. Manufacturing was almost a vanishing thing. Prime Minister Narendra Modi came up with the vision of ‘Make in India’ to boost the possibility and prospects of manufacturing in the country.
 

 
(From Left) Kalraj Mishra, PM Narendra Modi, Nirmala Sitharaman and Ravishankar Prasad. Make in India programme taking off 
 
In retrospect, Narendra Modi first made the pitch for 'Make in India' during his maiden Independence Day speech from the ramparts of Red Fort on August 15, 2014—within months of taking over the reins of governance: “If we have to put in use the education, the capability of the youth, we will have to go for manufacturing sector and for this Hindustan also will have to lend its full strength, but we also invite world powers. Therefore I want to appeal the entire people world over, from the ramparts of the Red Fort, “Come, make in India”, “Come, manufacture in India”.
The speech was quickly followed by action as on September 25, 2014—a day less than four months of Modi Government taking over; the ‘Make in India’ campaign was launched.
 
That in effect was a “plunge into” a serious business but it was also punctuated with two inherent elements in any innovation—new avenues or tapping of opportunities and facing the challenges to keep the right balance.
Milestones
  • ‘Make in India’ vision pledges to increase the share of manufacturing in the country’s Gross Domestic Product to 25 per cent by the year 2022 and importantly to create 100 million additional jobs by the year 2022 in the manufacturing sector alone.
  • Indian manufacturing sector also faced some other hurdles. In some ‘original cottage industry and handicrafts’ hubs from Uttar Pradesh to West Bengal; the child labour laws and NGO-ism have ultimately only harmed these sectors.
  • And as there have been a vacuum; that has filled in that space, albeit money-spinning space: obviously the western corporate houses. So carpet is not a ‘quality product’ today in Bharat if it does not have a ‘phoren’ tag.
 
 
Highway of Economic Growth
 
Bharat started chasing some serious manufacturing dreams, looking to increase its share in the country’s GDP from 16 per cent to 25 per cent by the year 2025. In fact, according to a NITI Aayog paper, “As a large, labour-abundant economy, one would expect India to have a comparative advantage in large-scale, labour-intensive manufacturing.” Successful sectors in India have been either capital or skilled labour-intensive, and most prominently include auto, auto-parts, two-wheelers, automobiles and engineering goods.
 
True to the spirit of the visionary statement, the ‘Make in India’ policy programme also committed that the campaign “represents an attitudinal shift in how India relates to investors: not as a permit-issuing authority, but as a true business partner.”
 
 
“When NDA took over, with regard small entrepreneurs and manufacturing India actually needed something more than a good public relations campaign. Our focus was on action”
— Kalraj Mishra, Former Union Cabinet Minister of Micro, Small and Medium Enterprises
 
Now, that about four years have passed since then—how much of tangible results has come? Well, a safe response would be, there are miles to go—to take out the country’s economy from the stage when the then Prime Minister Dr Manmohan Singh was easily dubbed by international media as an ‘underachiever’.
 
Another macro analysis suggests, India’s growth has been “uneven and driven majorly by private consumption and public investment”. That means while consumerism flourished even after 1991 liberalisation unleashed by PV Narasimha Rao-Manmohan Singh duo; the manufacturing was hardly seen around.
 
Needless to add, it is an established economic wisdom that for robust and sustainable growth with jobs ensured, the private investment needs to grow northbound graph. There is need to enhance indigenous production and similarly, exports also need to increase. That means challenges were multiple and in the words of senior BJP leader Kalraj Mishra, who held the portfolio of Micro, Small and Medium Enterprises—“When NDA took over, with regard small entrepreneurs and manufacturing India actually needed something more than a good public relations campaign. Our focus was on action”.
 

 
Taste of Bharat: Modi looks on eagerly as German Chancellor Angela Merkel is given a taste of Bharat 
 
Truly, things were given major push. In 2016-17, the country attracted its highest ever FDI of US $ 60 billion. The overall manufacturing sector saw a 38 per cent increase in investment in fiscal 2016-17 and trusted friends—countries including Japan, South Korea, Sweden, and Germany pledged larger investments and technical support to India. According to a study, big business houses General Motors, Apple, and Foxconn and lately Korean-major Samsung announced big ticket manufacturing projects in the country.
 
In fact, according to Data published by DIPP (Department of Industrial Policy and Promotion) in December 2016 the industrial activity rose by 29 per cent during 2015-16 over the previous fiscal. The index of industrial production rose 7.1 per cent in December 2016 but by 2017—the growth was 8.8 per cent.
 
Such growth graph actually reflected a robust year on year growth but also a strong sequential improvement in the industrial activity, according to rating agency Crisil. It further had stated that, “The industry seems to be shedding away the weight of GST-related glitches behind and trying to get back lost momentum, as both domestic and global growth surge.”
 
Plain Speak of Statistics
 
The prophets of doom and Indian opposition parties certainly do not see these statistics and according to senior Bharatiya Janta Party (BJP) leader Vinay Sahasrabuddhe, they indulge them only in paranoia. In this context, his remarks actually try to sum up the big story from political perspective.
 
In fact, the success tale of ‘Make in India’ journey is also well reflected in government data that says among other things that—Seven Mega Food Parks were operationalised creating more than 36,000 jobs during 2014-17. About 100 Cold Chain Projects also were operationalised and 3.69 lakh tonnes of food processing capacity was created. By December 2017, in Gems and Jewellery sector, FDI grew 3.5 times—from $131 million (2011-14) to $463 million (2014-17), in IT and electronics, FDI grew 4.4 times from $2.77 billion (2011-14) to $12.24 billion (2014-17), 1.9 lakh crore of electronics products were manufactured indigenously in 2014-15.
 

 
“The ensuing general elections in 2019 will see a battle between politics of performance of the BJP versus politics of paranoia of the opposition. They are likely to fight next elections more fiercely as they are at the height of frustration. Unfortunately the debate today is less on the performance of the government and more on trivial issues - which the opposition wants to, blow up”
— Dr Vinay Sahasrabuddhe, President, ICCR
 
In Skill Development, 17.93 lakh people were trained under Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and Textiles and Apparel, FDI grew 2.2 times - from $467 million (2011-14) to $1047 million (2014-17).The India Handloom Brand was launched and 200 new production units have come up in existing textile parks generating jobs for 11,000 persons in two years. In this context, the words of a industry specialist and the president of FICCI Rashesh Shah are worth mentioning when he said “With the introduction of new reforms strategy with a tax and regulatory friendly environment, the ‘Make in India’ has able to create the necessary fertile ground to foster the growth of manufacturing sector”.
 
With regard to manufacturing and growth, however, some independent studies have shown that much of this growth graph trajectory has been concentrated in Gujarat. Karnataka, Madhya Pradesh, and Maharashtra—as these provinces already have established manufacturing bases.In north of Bharat, however, Noida has come as a big base. On this backdrop, one needs to talk about Prime Minister Modi and Korean President Moon Jae-in visiting and launching of a new Samsung unit. Under persistent attack for alleged charge of joblessness Prime Minister Modi and the visiting Korean President Moon Jae-in on July 9, 2018 inaugurated a new mobile manufacturing facility in Noida.
 
Modi described the occasion as a special one, in the journey to make India a global manufacturing hub. He said the investment of about Rs 5000 crore, would not only strengthen Samsung’s business links with India but the new unit will also generate at least 1000 jobs. “In last four years, we have seen emergence of 120 manufacturing units of mobile phones from two. In fact, out of this 50 per cent are in Noida and this has given jobs to four lakh people,” he said.
 
The new 35-acre Samsung Electronics facility will be able to manufacture nearly 120 million mobile phones. The company has recently announced the Rs 5,000 crore investment to expand its India operation and double its production and try to sell the products overseas including in European countries.
 
The fact that four lakh people have managed to get new jobs in Noida itself in last four years and number of mobile manufacturing unit has gone up to 120, answers the Modi critics who had unleashed attack on the NDA dispensation for alleged joblessness especially after ban on high value currency notes in 2016 and the implementation of Goods and Services Tax (GST) from July 1, 2017.
 
(The writer is a senior journalist)