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Make in India – A critical examination of an economic strategy

This is a guest post by LEILA GAUTHAM ‘Make in India’ is now an all-pervasive catchphrase – every newspaper and television channel trumpeting the Modi’s ‘clarion call’ to investors – but surprisingly empty in terms of substance. The website is flashy and vastly different from the run-of-the-mill government-of-India websites one is used to – but one has a hard time imagining the ‘captains of industry’ who attended the Make in India launch on September 25th finding any use for it. One begins to wonder, who exactly is the campaign aimed at? Is it the Indian public? An impressive farce, an ad campaign, the neoliberal dream of the efficient state come true – Make in India is not some brilliant brainwave of Modi’s: it is the culmination of very intensive campaign of worldwide propaganda that has been launched by global corporate capital.I tried to probe deeper, to tease out concrete details if any – and the following article reflects my understanding, incomplete though it may be.Firstly, I encountered some very puzzling things: for example, no one seemed to be sure about what precisely the objective of Make in India is. The BBC report claims that aim of Make in India is to increase the share of manufacturing from 15% to 25% – an increase of 10 points (no time period specified), the source for this being ‘authorities’ in the government. But the Hindu report claims that “officials” have said that the aim is to bring the manufacturing sector into a sustained growth rate of 10%. 

Two explanations come to mind: deliberate vagueness is very useful because it can be easily woven into a certain rhetoric about delicensing and deregulation and efficiency. Everyone, from Arnab Goswami to the man beside you on the metro know (or think they know) what ‘Make in India’ is about, and can impose their own particular utopia into Modi’s vision without any bothersome facts entering into it. Which further reinforces my conviction that the aggressive coverage on Make in India is aimed at convincing people that the government is taking some real ‘solid’ measures to create jobs and remove ‘roadblocks’ to development.

So, what is Make in India?

I’ll briefly pick up some of the measures as they appear on the website and the launch:

Deregulation and delicensing of the manufacturing sector

  1. Introducing self-certification or third-party certification for safety standards; for activities classified as non-risk or non-hazardous it’s to be entirely self-certified (seeming to render the very act of ‘certification’ a misnomer)
  2. The process of applying for industrial licenses is to be made through an online portal
  3. The validity of industrial licenses is extended from two to three years
  4. A number of sectors such as defence and construction have been opened up entirely – (a further dwindling of the number of licensed industries – at the end of the deregulation phase in 1997–98, only nine industries had some regulations in terms of entry by private investors)

New Infrastructure

  1. building industrial corridors and smart cities
  2. strengthening intellectual property regime – compliance with global standards
  3. skill development

Opening up India’s ‘high-value’ industrial sectors

Defence, construction and railways are open to private investment; in defence the FDI cap has been doubled, and on a case-to-case basis, 100% FDI may be permitted; 100% FDI in rail projects and in construction

Specific targeting of twenty-five sectors

These include automobiles, auto components, aviation, biotechnology, chemicals, defence manufacturing, electrical machinery, IT, pharmaceuticals, roads and highways, food processing, mining, oil and gas, and thermal power. Largely, these are capital-intensive and require highly skilled labour; even if in themselves they are not capital-intensive, the idea is clear that you’re going to use imported technology which as I will argue later on is inherently biased against employing a lot of labour.

And finally, and most importantly, our new government apparently has a ‘new mindset,’ as it claims with such fresh-faced Pollyanna-esque innocence: “an attitudinal shift in how India relates to investors: not as a permit-issuing authority, but as a true business partner.”

Roundup

The changes are in perfect continuity with reforms introduced by Congress-led government in the early 90s. The rhetoric of delicensing and deregulation and decrying the ‘inspector and license raj’ is no new innovation of Modi’s. However, there are a couple of things to be noted:

  • The new industrial corridors will cover vast tracts of land, and will likely result in a large number of social struggles against the acquisiton of this land, particularly damaging to tenants
  • Complying with global intellectual property rights regime has some very problematic consequences, particularly on the availability drugs and medicines
  • Lack of attention paid to ‘skill development’: the constant harping on the benefits ‘India’s youth’ is puzzling because the only provision that seems to have been made is an ‘Indian Leather Development Programme.’ It is supposed to train a lakh of young people, which is terribly inadequate, given the extent of unemployment existing now, and expected in the future. This is important, given the next point, which is:
  • The sectors being concentrated on are largely capital-intensive: IT, aviation, automobiles. They do not employ large amounts of labour, and whatever labour they employ is highly skilled labour. Without adequate education or training, only a miniscule fraction of the ‘youth’ are likely to benefit.

Evaluating Make in India

To make sense of the strategy and critique it in any real way one needs to know what the stated objectives are, figure out how successful it is likely to be in achieving this, and finally to question the objectives and the strategy itself.

The objective is a bit confusing. Says Modi, “India must increase manufacturing and at the same time ensure that the benefits reach the youth of our nation.” (But isn’t the former a means to achieving the latter and not an end in itself?) But let’s give him the benefit of the doubt and assume that his objective is this: to increase opportunities productive employment for a wide subset of the population via the means of growth in private manufacturing. The method being pursued is to integrate India into global manufacturing value chains as a way of driving export-led industrial growth.

This leads us naturally to the next part of the exercise: namely, what are the effects of such a process, how does it proceed, who does it benefit – in other words, what is the political economy of Make in India?

The political economy of Make in India

At a fundamental level Make in India is an attempt to alter the production structure of the economy. A shift from agriculture to manufacturing, is what is being drummed into our heads. But the important question to ask is this: what sort of industry are we promoting?

Producing goods for export and having these goods produced by multinational companies have very specific implications, and this requires consideration. The demand for these commodities come from export markets abroad and from the urban/metropolitan middle classes, and richer sections of the rural classes. In other words, domestic markets are extremely narrow – Ford and Honda aren’t producing for the typical rural agricultural worker or urban casual labourer.

The other important consideration is that these industries are capital-intensive and/or employ largely skilled labour (employment growth is therefore likely to be minimal, especially since domestic industry will undergo considerable upheaval and displacement). The reason why the incoming investment won’t generate employment is simply this: manufacturers producing abroad are likely to have developed processes that reflect the capital-labour ratios that are prevalent in advanced capitalist countries. And because this sort of investment makes use of highly-skilled highly-paid workers, the income distribution will get even further skewed.

What we have is this mutually-reinforcing cycle where the entire economy is restructured and reoriented to cater to the consumption of certain classes in the economy. Add to this the fact the BJP-regime is systematically dismantling all forms of social support – from labour laws to the MNREGA – and you not only have an absence of growth-benefits accruing to the poor: one is likely to see income being transferred away from them. The much-lamented reserves of labour will be left unemployed in agriculture but and you will have a set of urban casual labourers and contract workers who are kept at the periphery of this economy – marginalized, even as their labour is exploited.

Support for Modi and Make in India

This is a description of an economic process that is no doubt crude and simplified, and reflective of my own inadequate knowledge of the processes that the Indian economy has been undergoing since the last two decades. But I found it useful for two reasons: the first is a personal one in that it helped me form a convincing narrative of the transformation in my own city: Hyderabad. The IT industry in Hyderabad was the product of the 90s reforms and a certain policy followed by the erstwhile Andhra Pradesh state under Chandrababu Naidu, whose policy, insofar as it deviated from ‘deregulation’ emphasized urban infrastructure. It no doubt generated a great deal of indirect employment but the lion’s share of wages went to IT professionals – highly skilled, highly educated, and almost uniformly drawn from privileged class and caste backgrounds (by virtue of which they were given access to the aforementioned skills and education). What was remarkable was how rapidly the entire city changed, and centered around this new modern cosmopolitan young class of consumers. The Old City of the Charminar, of bangles and biryani, and the nizams is now merely another item up for consumption on tourist brochures – the city is peculiarly desolate: highways, malls, and franchise outlets dominate the urban landscape, and are all eerily empty precisely because only a tiny fraction of the city’s population can afford to frequent them. Using highways require cars, and most malls are situated on highways and inaccessible to those without such transport, and franchise outlets are priced so as to exclude consumption of most but a tiny few – are we not talking of a city structured to cater only to the richest?

In other words, those not belonging to the ‘middle-class’ have no spaces to call their own. In fact, this is not just a problem for the poor. I feel that the restructuring of the city in this fashion is impoverishing everybody, not just those on the margins of the economy. When consumption is individualised and commoditised, and when any recreational activity to be undertaken is premised on spending money, the concept of communal or public spaces disappears entirely, and if this is not impoverishment, what is?

The second reason such a narrative was useful in that it helped think of reasons why such a campaign could generate objective material interests in its support. The standard narrative of how the ‘toiling masses’ have been hoodwinked by Modi’s well-funded campaigning is only partly true as there are many groups who stand to gain, and not just global or domestic capital. One group is the urban middle classes and the rural rich who stand to gain in two obvious ways: the economy is being restructured to produce the sort of commodities they demand and they may also avail of lucrative employment opportunities. A greater demand for skilled labour would drive up wages (subject, of course, to constraints that I will outline next).

Constraints and limits to export-led narrow-based growth

Now we that we’ve seen how Make in India, and strategies running parallel to Make in India, could benefit the upper sections of society while marginalizing those already poor and vulnerable, we must recognize that such a strategy could fail:

  1. Internal/domestic demand is necessarily constrained (and is bound to remain constrained over the entire course of the strategy as I have just sought to argue simply because it entails no transfers of income to a large majority of the Indian population). Demand from the developed world for Indian exports is likely to be low as well, particularly in the context of a global recessionary climate, which I think, is the point being made by our RBI governor.
  1. Lack of infrastructure: a bid to build infrastructure via the thoroughly discredited PPP model is unlikely to solve the very real problem India faces in terms of infrastructure
  1. In order to attract global capital the Indian state needs to undertake certain measures that ensure the cheap manufacturing costs: giving capital access to cheap labour and natural resources – as has already manifested itself in recent changes in the labour laws, in the land acquisition act, and in the flexibility of environmental clearances. Social resistance to such measures is inevitable, I think.
  1. Other developing economies are also competing to be low-cost manufacturing locations, and the state will have to work doubly hard to ensure a favourable investment climate, and having to suppress resistance and social struggles as and when they arise.

To sum up: Make in India is not a novel or radical turn-about for the Indian economy, the way it is made out to be – it is merely an intensification (more blatant, more brazen, and more assertive) of the policy stance that has dominated discourse since the nineties. It represents a significant worsening of the economic marginalization of the poor and the vulnerable – both if it succeeds, and if it doesn’t.

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