With last September’s ‘Make In India’ campaign, Prime Minister Narendra Modi’s government wants to increase the share of manufacturing in India’s GDP from 15% now to around 25%, a proportion that is lower than China’s 32% but similar to that in other emerging economies such as Brazil and Russia. But making India a powerhouse of manufacturing won’t be easy. The many hurdles are huge and they include energy shortages; land acquisition complexities; ambiguous tax regimes; and restrictive labour rules. Yet there’s too much at stake for the government not to address these. Creating jobs is big among them. Around 100 million young Indians will be seeking jobs over the next 10 years and India can hardly afford to repeat the abysmal record of 2005-12 during which just 15 million jobs were added. In a country where 60% of the population is of the working age, widespread joblessness or underemployment can quickly turn into civil strife.
But as India prepares to charge into manufacturing-led growth, it could learn from the mistakes that the developed western economies made and how the world is paying dear for those today. Industrialisation of the kind that has taken place in the developed world has followed a linear system: extraction industries dig, cut or drill out natural resources; manufacturers process these resources into products and packaging; retailers sell these products; consumers buy them; and at the end of the lifecycle of the products, they are trashed. It’s what Annie Leonard, an American crusader for sustainability, calls the “Take, Make, Waste” economy and it is, as the world is finding out the hard way (rapid depletion of natural resources such as fossil fuels and other minerals; adverse effects of toxic waste; and high volumes of effluents and emission), just not sustainable.
China, which adopted the West’s manufacturing model and emerged as the factory of the world, has long overshadowed India in manufacturing but has also emerged as the world’s second biggest polluter. Last year, as a thick blanket of smog descended on Beijing, the so-called ‘airocalypse’ forced China to consider reforms in restricting emissions and spend US$275 billion over five years on an effort to clean up.
There is no reason why India should follow blindly in the footsteps of the centuries-old linear model of the west or the several decades-old similar strategies that China has followed. In fact, with the earth’s natural resources dwindling and pollution and emission levels rising to levels that are already adversely impacting the world’s climate, adopting a more sustainable model for manufacturing could be sensible.
The real reshaping of India could begin with a determined shift to renewable energy such as solar power, which doesn’t depend on depleting reserves of fossil fuels and minimises environment-harming effects. While talking about his ‘Make in India’ campaign, Mr. Modi mentioned the mantra of “zero defect, zero effect” manufacturing. Adopting renewable energy on a massive scale would fit in well with that. As would a move to evolve a circular economy where manufacturing follows a sustainable process of “Take, Make, Recycle and Re-use” rather than the linear approach that “Takes, Makes and Wastes.”
The third approach for India’s new manufacturing strategy lies in its vibrant yet often overlooked small and medium enterprises. These SMEs are largely unorganised but they contribute to half of India’s factory output, 45% of its exports and employ more than 60 million of its workforce. And they potentially have the competitive edge of being able to operate with low overheads. India’s SMEs need a fillip — access to funds, resource-efficient technologies such as 3D manufacturing, and managerial expertise — with which they could emerge at the forefront of the Make in India campaign. In his maiden budget, finance minister Arun Jaitley proposed a Rs10,000-crore venture capital fund for SMEs, which could be a good beginning to boost the sector.
For the ‘Make in India’ movement to really work, India must take advantage of coming late to the manufacturing party. And instead of blindly following the world’s powerhouses such as China, it should create its own new manufacturing mantra.