What is Make in India? Is it a scheme, a slogan or a campaign?
It is none of that. It is an initiative. What India has done in last 60 years is confining manufacturing largely to the public sector. I would not say deliberately but as a result of a socialist school of thought that was nurtured by the government of India. Private entrepreneurship was never given encouragement. So, you had a public sector as a major investor and manufacturer, while the big private sector companies, whoever have been there since the British days, they continued. The small enterprise that prevailed all over India was never given its due share.
Second Five-Year Plan, of course, spoke of manufacturing, but that looked at large-scale investment in manufacturing… looking at encouraging entrepreneurship, giving them space to grow in manufacturing did not happen in a concerted way. What was needed as a result is to remove the approach that had almost stifled individual entrepreneurship, remove the role of the government as a regulator, remove the need for constantly asking for certification, inspection, licences. We are saying none of that should happen. You self-certify and if there is minimum requirement, then you do it online.
Do we have an estimate as to how many new companies have actually set up shop in India after Make In India was launched and how many additional jobs have been created?
No, not yet. I don’t think we have even started looking at it from that angle.
What is the idea behind the Make In India celebration?
The momentum was never lost since it was launched. That’s why ease of doing business was possible at the initial stages with the state governments participating with us. Now, more such issues have been identified and those issues have already been shared with the state governments. They are working on it to remove hurdles to make it possible.
Now that more than a year has been completed, we wanted to make sure that everything which is under Make in India is being showcased. Remember, we had identified 25 sectors for focus and have opened up newer areas (for foreign investment) such as railways and some parts of defence, all these will find a place in the Make in India Week where 18 states and more than 65 countries are participating. So, it will be a major event and the scale of it and the way in which we are presenting it will make India proud and show what India is capable of.
With large-scale automation happening in manufacturing, some experts say using manufacturing to create large-scale jobs may be an outdated concept. Do you agree?
Large-scale automation may happen in very large industries which need robotics for precision. But in India, it has not reached that level, which should worry us.
If anything, the government’s focus is on small and medium enterprises and all enterprises that create more jobs than what is scalable for their size and the capital investment they bring in. So, that does not worry me at all. Let automation happen, but it is not happening at the cost of workers.
Experts say India cannot boost its manufacturing without being part of a global value chain. What are the efforts being made towards that direction?
I agree on that aspect and we are working to make sure that linkages as a part of global value chain, which have to be made by Indian manufacturer, is being made. We have opened up a lot of sectors in such a way that the global value chain idea is not lost. Those who are in manufacturing have to see how their focus will have to be for linking with the global value chain. Government can only be a facilitator. We will certainly do that.
Many claim that by focusing excessively on manufacturing, the government may be neglecting the services sector where India has a natural advantage. Do you agree?
In fact, I have just been asked the opposite—that we are over-emphasizing on services and ignoring manufacturing. We recognize that services contribute more than 50% to the Indian economy. We also recognize the fact that the national manufacturing policy wanted to increase the contribution of manufacturing from where it is today to 25% by 2022. So, there has to be focus on product manufacturing both for India and for exports, otherwise we will not be able to meet the target set by the manufacturing policy.
One example often cited is your policy towards the retail sector where many claim the current foreign direct investment (FDI) policy hinders growth of the sector by limiting its potential for job creation. Is there a rethink on the FDI policy in retail?
Retail sector already provides a lot of jobs and that is one of the reasons why in order to understand how that will be affected if you open the windows without even preparing that sector, we took a decision that multi-brand retail should be kept aside from FDI (reforms).
Is there any thought of changing that policy?
At the moment, there is not any. If there is any, I will let you know.
In e-commerce also, the same issue is raised that because the FDI policy is not clear, it fails to create large-scale jobs.
I am not sure it is the case. E-commerce is already happening in the country… we will come out with something on it in terms of defining e-commerce because every state has taken its own approach. But to say that will have an impact on job creation, I don’t believe that is true.
So, we are working on definitional issues, not on FDI issues in e-commerce, because there were some reports suggesting government will allow 100% FDI in marketplace e-commerce?
That’s right. We are talking about definitional issues. I don’t respond to reports.
You recently said India may require to undertake structural reforms like it did in the early 1990s to respond to the Trans-Pacific Partnership (TPP). What are these reforms we would need?
The question about the value chains you raised is a very important thing and a lot of activity needs to happen on that front. Second, you have to beat the rules of origin argument. We will now need to see whether we can establish manufacturing facilities in areas where we have a global recognition in countries which are part of the TPP. So, sectors who otherwise think they may lose out their market because of TPP can now hopefully set up units in such countries and manufacture so that they can gain from the rules of origin restrictions. Third, all said and done, we have to work on standards. Once India’s own standards of goods, some of which have global recognition, are able to match up with markets that are now having their pluriliteral understandings, you can reach out to these markets which are otherwise not covered (by our trade deals). So, standards are very demanding, but necessary work.
You have said at the Partnership Summit in Visakhapatnam that India will renegotiate some of the free trade agreements (FTAs) to address the concerns of the industry. How exactly will you do this, given the complications involved?
Well, I am not going to start renegotiating them now; there is always a time for it. Some of them are negotiated for a certain period and when they come for a negotiation or renewal, that is the time when we have to look at it again. Because the experience of a lot of manufacturers and exporters are reaching us. We will have to see how best they have understood the FTAs or is it that many of our exporters fully not utilizing the provisions which are available under the FTAs. So, it’s a constant exercise of looking at how best we can help the situation. I certainly did say that if at all when an FTA comes for review, we will certainly look at it.
After the Nairobi ministerial meeting of the World Trade Organization (WTO), what will be India’s approach at the WTO?
Post-Nairobi, we will have to see those commitments, reiterations which have been made there are carried forward. We ensured that we just didn’t get a reiteration but also a commitment for a work programme for each of them, whether it is for food security or it is for special safeguard mechanism (SSM). So, our first effort will be to get a work plan out. We will also make sure that many of the other unfinished agenda of the Doha round also start getting traction before the next ministerial happens in two years.
But for us, is the Doha round alive or dead, because there was no consensus on it at Nairobi
There is no consensus means status quo continues.
Editorial
Make in India:-
- A Major National Initiative.
- Designed To Facilitate Investment.
- Foster Innovation.
- Enhance Skill Development.
- Protect Intellectual Property.
- And Build Best-In-Class Manufacturing Infrastructure.
Make in India was launched by Prime Minister against the backdrop of this crisis, and quickly became a rallying cry for India’s innumerable stakeholders and partners. It was a powerful, galvanising call to action to India’s citizens and business leaders, and an invitation to potential partners and investors around the world. But, Make in India is much more than an inspiring slogan. It represents a comprehensive and unprecedented overhaul of out-dated processes and policies. Most importantly, it represents a complete change of the Government’s mindset – a shift from issuing authority to business partner, in keeping with Prime Minister’s tenet of ‘Minimum Government, Maximum Governance’.
The government launched “Make In India” initiative which aims at promoting India as an investment destination and to establish India as a global hub for manufacturing, design and innovation. The initiative aims to provide favorable environment to the business community so that they can devote their resources, efforts and energy in productive work. A number of steps have been taken by the government to improve the ease of doing business in the country. Rules and procedures have been simplified and a number of products have been taken off licensing requirements.
Government has opened up a number of sectors for FDI. The Policy in defence sector has been liberalized and FDI cap has been raised from 26% to 49%.
100% FDI has been allowed in defence sector for modern & state of the art technology on case to case basis. 100% FDI under automatic route has been permitted in construction, operation and maintenance in Rail Infrastructure projects.
Further, liberalization norms for Insurance and Medical Devices has been done. ‘Make in India’ program represents an attitudinal shift in how India relates to investors; not as a permit-issuing authority, but as a true business partner. An Investor Facilitation Cell has been created in ‘Invest India’. A dedicated team of the Investor Facilitation Cell is there to guide and assist first-time investors.
It is time for India to focus on building competitive advantage on global scale in sectors where we have a large domestic market and certain inherent capabilities. Strategy is all about making choices. The top five priority industries are- Defence, electronics hardware, construction, health care and agro-industries.
However, for India to become a manufacturing nation, it has to quickly move beyond rhetoric to create a clear strategy and favourable policy environment for manufacturing to take off. The government has chosen to quietly dismantle the sclerotic National Manufacturing Competitiveness Council (NMCC) but it needs to foster a more vibrant think tank in its place.
A close dialogue and partnership between government and the private sector, both domestic and foreign, is critical. Indian companies along with Chinese, Japanese, German, American and Swedish companies are all vital partners and we must create an environment that is open and welcoming.
In many of the Indian industries, people insist for manual skill because they apprehend that adoption of advanced technology will result in redundancy of human resource, which is abundantly available in India. As such they resist the change and introduction of new technology.
However, technology driven processes with minimum human intervention will guarantee manufacturing excellence. From technological point of view India is lagging behind the western world, as far as manufacturing is concerned.
Experts say, India is still about a decade behind advanced countries, when it comes to usage of technology and manufacturing excellence. But this situation can be turned to our advantage. The country can learn from the mistakes of the western world and try to adopt the best ever technology in the years to come.
Make in India necessarily involves the drive to boost the manufacturing sector. However, the investors are wary of prevalent labor laws and bureaucratic hassles in India and as such, unless conducive atmosphere is created on these fronts the investments will not come as expected and Make in India drive will not accomplish desired results.
In order to make this initiative a great success, we need to be at par with the advanced world as far as usage of modern technology is concerned and we need to have more clarity, maturity and intensity on quality aspects of our products.
Creating healthy business environment will be possible only when the administrative machinery is efficient. India has been very stringent when it comes to procedural and regulatory clearances. A business-friendly environment will only be created if India can signal easier approval of projects and set up hasstle-free clearance mechanism. India should also be ready to tackle elements that adversely affect competitiveness of manufacturing. To make the country a manufacturing hub the unfavorable factors must be removed. India should also be ready to give tax concessions to companies who come and set up unit in the country. India’s small and medium-sized industries can play a big role in making the country take the next big leap in manufacturing. India should be more focused towards novelty and innovation for these sectors. The government has to chart out plans to give special sops and privileges to these sectors.
India must also encourage high-tech imports, research and development (R&D) to upgrade ‘Make in India’ give edge-to-edge competition to the Chinese counterpart’s campaign. To do so, India has to be better prepared and motivated to do world class R&D. The government must ensure that it provides platform for such research and development.
India is ranked 132nd out of 185 economies in Doing Business 2013 by the World Bank. India’s restrictions on foreign equity ownership are greater than the average of the countries covered by the Investing Across Sectors indicators in the South Asia region and of the BRIC (Brazil, Russian Federation, India, and China) countries.
India imposes restrictions on foreign equity ownership in many sectors, and in particular in the service industries. Sectors such as railway freight transportation and forestry are dominated by public monopolies and are closed to foreign equity participation. With the exception of certain activities specified by law, foreign ownership in the agriculture sector is also not allowed. These restrictions need to be eased for making India better place for doing business.
Infrastructure tops the list of most surveys on doing business in India. In particular, chronic deficiencies in transportation and power impose prohibitive costs and lower business competitiveness.
Multiple enterprise surveys have identified electricity as the biggest constraint. Further, India lags behind on every measure of transport connectivity. Though there have been considerable recent successes spurred by private participation, much needs to be done. However, introduction of UDAY scheme is a good step in this regard.
Sound macroeconomic policies are necessary to create a low-inflation, low-interest rate and high-growth environment that is essential for the country’s global manufacturing competitiveness. Given the huge size and vast diversity of the country, a diagnostic for each state may be a more prudent strategy.
In any case, instead of big-bang reforms, sustained efforts in multiple directions, which cumulatively generate large effects, are required to relax these constraints so that we can realise the goal of making in India.
In Sum Challenges to Make in India can be described in the following heads:-
- Skill-employment gap
- Shrinking global economy and negative investor sentiments
- Even after the big push , the program is yet to show turn around results due to the aforementioned factor
- Land acquisition problems and environmental impact assessment issues
- Automation vis-a-vis employment
- Challenges before small and medium scale industry is unique as they don;t have the competitive advantage to compete in global scale
- Few industries such as solar manufacturing are at their nascent stage requiring protection and challenges of geopolitics emanating from protectionism.
- Policy and statutory challenges
Recent Posts
The United Nations has shaped so much of global co-operation and regulation that we wouldn’t recognise our world today without the UN’s pervasive role in it. So many small details of our lives – such as postage and copyright laws – are subject to international co-operation nurtured by the UN.
In its 75th year, however, the UN is in a difficult moment as the world faces climate crisis, a global pandemic, great power competition, trade wars, economic depression and a wider breakdown in international co-operation.
Still, the UN has faced tough times before – over many decades during the Cold War, the Security Council was crippled by deep tensions between the US and the Soviet Union. The UN is not as sidelined or divided today as it was then. However, as the relationship between China and the US sours, the achievements of global co-operation are being eroded.
The way in which people speak about the UN often implies a level of coherence and bureaucratic independence that the UN rarely possesses. A failure of the UN is normally better understood as a failure of international co-operation.
We see this recently in the UN’s inability to deal with crises from the ethnic cleansing of the Rohingya Muslims in Myanmar, to civil conflict in Syria, and the failure of the Security Council to adopt a COVID-19 resolution calling for ceasefires in conflict zones and a co-operative international response to the pandemic.
The UN administration is not primarily to blame for these failures; rather, the problem is the great powers – in the case of COVID-19, China and the US – refusing to co-operate.
Where states fail to agree, the UN is powerless to act.
Marking the 75th anniversary of the official formation of the UN, when 50 founding nations signed the UN Charter on June 26, 1945, we look at some of its key triumphs and resounding failures.
Five successes
1. Peacekeeping
The United Nations was created with the goal of being a collective security organisation. The UN Charter establishes that the use of force is only lawful either in self-defence or if authorised by the UN Security Council. The Security Council’s five permanent members, being China, US, UK, Russia and France, can veto any such resolution.
The UN’s consistent role in seeking to manage conflict is one of its greatest successes.
A key component of this role is peacekeeping. The UN under its second secretary-general, the Swedish statesman Dag Hammarskjöld – who was posthumously awarded the Nobel Peace prize after he died in a suspicious plane crash – created the concept of peacekeeping. Hammarskjöld was responding to the 1956 Suez Crisis, in which the US opposed the invasion of Egypt by its allies Israel, France and the UK.
UN peacekeeping missions involve the use of impartial and armed UN forces, drawn from member states, to stabilise fragile situations. “The essence of peacekeeping is the use of soldiers as a catalyst for peace rather than as the instruments of war,” said then UN Secretary-General Javier Pérez de Cuéllar, when the forces won the 1988 Nobel Peace Prize following missions in conflict zones in the Middle East, Africa, Asia, Central America and Europe.
However, peacekeeping also counts among the UN’s major failures.
2. Law of the Sea
Negotiated between 1973 and 1982, the UN Convention on the Law of the Sea (UNCLOS) set up the current international law of the seas. It defines states’ rights and creates concepts such as exclusive economic zones, as well as procedures for the settling of disputes, new arrangements for governing deep sea bed mining, and importantly, new provisions for the protection of marine resources and ocean conservation.
Mostly, countries have abided by the convention. There are various disputes that China has over the East and South China Seas which present a conflict between power and law, in that although UNCLOS creates mechanisms for resolving disputes, a powerful state isn’t necessarily going to submit to those mechanisms.
Secondly, on the conservation front, although UNCLOS is a huge step forward, it has failed to adequately protect oceans that are outside any state’s control. Ocean ecosystems have been dramatically transformed through overfishing. This is an ecological catastrophe that UNCLOS has slowed, but failed to address comprehensively.
3. Decolonisation
The idea of racial equality and of a people’s right to self-determination was discussed in the wake of World War I and rejected. After World War II, however, those principles were endorsed within the UN system, and the Trusteeship Council, which monitored the process of decolonisation, was one of the initial bodies of the UN.
Although many national independence movements only won liberation through bloody conflicts, the UN has overseen a process of decolonisation that has transformed international politics. In 1945, around one third of the world’s population lived under colonial rule. Today, there are less than 2 million people living in colonies.
When it comes to the world’s First Nations, however, the UN generally has done little to address their concerns, aside from the non-binding UN Declaration on the Rights of Indigenous Peoples of 2007.
4. Human rights
The Human Rights Declaration of 1948 for the first time set out fundamental human rights to be universally protected, recognising that the “inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world”.
Since 1948, 10 human rights treaties have been adopted – including conventions on the rights of children and migrant workers, and against torture and discrimination based on gender and race – each monitored by its own committee of independent experts.
The language of human rights has created a new framework for thinking about the relationship between the individual, the state and the international system. Although some people would prefer that political movements focus on ‘liberation’ rather than ‘rights’, the idea of human rights has made the individual person a focus of national and international attention.
5. Free trade
Depending on your politics, you might view the World Trade Organisation as a huge success, or a huge failure.
The WTO creates a near-binding system of international trade law with a clear and efficient dispute resolution process.
The majority Australian consensus is that the WTO is a success because it has been good for Australian famers especially, through its winding back of subsidies and tariffs.
However, the WTO enabled an era of globalisation which is now politically controversial.
Recently, the US has sought to disrupt the system. In addition to the trade war with China, the Trump Administration has also refused to appoint tribunal members to the WTO’s Appellate Body, so it has crippled the dispute resolution process. Of course, the Trump Administration is not the first to take issue with China’s trade strategies, which include subsidises for ‘State Owned Enterprises’ and demands that foreign firms transfer intellectual property in exchange for market access.
The existence of the UN has created a forum where nations can discuss new problems, and climate change is one of them. The Intergovernmental Panel on Climate Change (IPCC) was set up in 1988 to assess climate science and provide policymakers with assessments and options. In 1992, the UN Framework Convention on Climate Change created a permanent forum for negotiations.
However, despite an international scientific body in the IPCC, and 165 signatory nations to the climate treaty, global greenhouse gas emissions have continued to increase.
Under the Paris Agreement, even if every country meets its greenhouse gas emission targets we are still on track for ‘dangerous warming’. Yet, no major country is even on track to meet its targets; while emissions will probably decline this year as a result of COVID-19, atmospheric concentrations of greenhouse gases will still increase.
This illustrates a core conundrum of the UN in that it opens the possibility of global cooperation, but is unable to constrain states from pursuing their narrowly conceived self-interests. Deep co-operation remains challenging.
Five failures of the UN
1. Peacekeeping
During the Bosnian War, Dutch peacekeeping forces stationed in the town of Srebrenica, declared a ‘safe area’ by the UN in 1993, failed in 1995 to stop the massacre of more than 8000 Muslim men and boys by Bosnian Serb forces. This is one of the most widely discussed examples of the failures of international peacekeeping operations.
On the massacre’s 10th anniversary, then UN Secretary General Kofi Annan wrote that the UN had “made serious errors of judgement, rooted in a philosophy of impartiality”, contributing to a mass murder that would “haunt our history forever”.
If you look at some of the other infamous failures of peacekeeping missions – in places such as Rwanda, Somalia and Angola – it is the limited powers given to peacekeeping operations that have resulted in those failures.
2. The invasion of Iraq
The invasion of Iraq by the US in 2003, which was unlawful and without Security Council authorisation, reflects the fact that the UN is has very limited capacity to constrain the actions of great powers.
The Security Council designers created the veto power so that any of the five permanent members could reject a Council resolution, so in that way it is programmed to fail when a great power really wants to do something that the international community generally condemns.
In the case of the Iraq invasion, the US didn’t veto a resolution, but rather sought authorisation that it did not get. The UN, if you go by the idea of collective security, should have responded by defending Iraq against this unlawful use of force.
The invasion proved a humanitarian disaster with the loss of more than 400,000 lives, and many believe that it led to the emergence of the terrorist Islamic State.
3. Refugee crises
The UN brokered the 1951 Refugee Convention to address the plight of people displaced in Europe due to World War II; years later, the 1967 Protocol removed time and geographical restrictions so that the Convention can now apply universally (although many countries in Asia have refused to sign it, owing in part to its Eurocentric origins).
Despite these treaties, and the work of the UN High Commission for Refugees, there is somewhere between 30 and 40 million refugees, many of them, such as many Palestinians, living for decades outside their homelands. This is in addition to more than 40 million people displaced within their own countries.
While for a long time refugee numbers were reducing, in recent years, particularly driven by the Syrian conflict, there have been increases in the number of people being displaced.
During the COVID-19 crisis, boatloads of Rohingya refugees were turned away by port after port. This tragedy has echoes of pre-World War II when ships of Jewish refugees fleeing Nazi Germany were refused entry by multiple countries.
And as a catastrophe of a different kind looms, there is no international framework in place for responding to people who will be displaced by rising seas and other effects of climate change.
4. Conflicts without end
Across the world, there is a shopping list of unresolved civil conflicts and disputed territories.
Palestine and Kashmir are two of the longest-running failures of the UN to resolve disputed lands. More recent, ongoing conflicts include the civil wars in Syria and Yemen.
The common denominator of unresolved conflicts is either division among the great powers, or a lack of international interest due to the geopolitical stakes not being sufficiently high. For instance, the inaction during the Rwandan civil war in the 1990s was not due to a division among great powers, but rather a lack of political will to engage.
In Syria, by contrast, Russia and the US have opposing interests and back opposing sides: Russia backs the government of the Syrian dictator Bashar al-Assad, whereas the US does not.
5. Acting like it’s 1945
The UN is increasingly out of step with the reality of geopolitics today.
The permanent members of the Security Council reflect the division of power internationally at the end of World War II. The continuing exclusion of Germany, Japan, and rising powers such as India and Indonesia, reflects the failure to reflect the changing balance of power.
Also, bodies such as the IMF and the World Bank, which are part of the UN system, continue to be dominated by the West. In response, China has created potential rival institutions such as the Asian Infrastructure Investment Bank.
Western domination of UN institutions undermines their credibility. However, a more fundamental problem is that institutions designed in 1945 are a poor fit with the systemic global challenges – of which climate change is foremost – that we face today.