The governor, Dr. Raghuram Rajan in one of his recent speeches has asked questions on the feasibility of the ‘Make in India’ campaign. Make in India which is Modi Government’s big moves for reforming the economy is supposed to bolster the Indian manufacturing sector to grow the Indian economy and also generate jobs for millions of low skilled labor. But the current statement by Dr. Rajan that considering the shrinking demand in developed countries, will the campaign be sustainable? Shouldn’t India focus on internal consumption rather than promoting exports? This has ignited a debate among the economic heavyweights as to what should be India’s strategy on the matter.
We have tried to capture the debate by citing excerpts from the opinions of different economists to bring our readers an unbiased view on the matter.
In an article from Mint, in support of Rajan’s views the writer says that
“What Rajan’s questions really expose is the fact that so far, Modi’s much-hyped campaign offers more rhetoric than substance. Even if one agrees with the goal of boosting manufacturing, the government has yet to offer any convincing strategies for achieving it.
Yet while businesses would happily embrace such changes, they’re unlikely to unleash a manufacturing revolution. Like China, India’s already tried to implement several of these reforms in special economic zones that advertise lower taxes and looser land and labour regulations. These efforts have yet to amount to much, at least partly for the reasons Rajan has laid out—weak demand in advanced countries. These policies focus too much on symptoms of India’s malaise. The real problem is that markets for four critical inputs for manufacturing, or indeed any business—land, labour, power and capital—are badly distorted. Until the government resolves those distortions, ‘Make in India’ will remain nothing but a slogan.”
He adds, “But only when India’s markets for land, labour, power and capital work efficiently will the foundations for a true cost-competitive manufacturing revolution exist. Rajan might then find himself a bit more optimistic: Indian companies shouldn’t need any special protections to compete with cheap Chinese goods at home. And when the advanced economies finally recover, there will be other markets to conquer.”
Arvind Praganiya, Proff. Of Economics at Columbia University
writes in an editorial for India Today raising doubts over Dr. Rajan’s argument by saying that “However, the critical question that Rajan does not address is how precisely a highly labour-abundant India can escape the path that every successful labour-abundant economy has followed to achieve economic transformation. India now has a 500 million-strong workforce, and it is growing by 12 million a year. Being still quite poor, the country has a limited stock of capital and the bulk of its workforce is, at best, low-skilled. Under these conditions, how do we provide good jobs to the masses? Today, half of the workforce depends on agriculture, which generates less than 15 per cent of the national GDP, while another 40 per cent or more toils in informal sector jobs.”
“Rajan is right in saying the world cannot accommodate two Chinas, but it does not have to in order for India to become a successful exporter. Today, China exports 12 per cent of the world’s merchandise and India less than 2 per cent. But given its massive labour force and considerably lower wages, why can’t India grab another two percentage points from China over the next five years? That alone could give a huge boost to the ‘Make in India for the global economy’ campaign.”
Financial express reported- “All of us must be absolutely clear that India can become a great manufacturing nation if exports grow and they must grow rapidly. Exports (will) grow if all of us realise the significance and importance of exports,” Secretary, Department of Industrial Policy and Promotion (DIPP), Amitabh Kant said.
“You never make goods only for domestic market. No manufacturer across the world does only for the domestic market. You do it initially but then you expand, you grow and penetrate global markets and thats what a true businessmen is supposed to do,” he added. India’s share is very low in the global trade, Kant said at a function organised by industry body Ficci that .
“…your share is so low, what we are talking about. 1.7 per cent and we are saying do not export. This is the time you must penetrate global markets with much greater vigour and energy,” he added.
We believe that Dr. Rajan is known for asking the right questions but does India really have an option of not manufacturing for export. While protagonists have their own story to tell, what we and you can do is hope for a Rising India! A Shining India!
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