Phuket, Thailand Conference Paper on Role of ‘Make in India’ Mission for Poverty Alleviation and Sustainable Development
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Role of ‘Make in India’
Mission for Poverty Alleviation and Sustainable Development
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Dr. Rajiv R.
Thakur and Mr. Jitender Sharma
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Abstract— All member countries of the United Nations are committed to achieve the
Millennium Development Goals (MDG) to eradicate poverty and then to achieve
sustainable development for all in the times to come. India has also been able
to progress significantly in its poverty eradication goals, however, as per
latest United Nations estimates, still over 30 million people live below
poverty line in the country. Checking at the magnanimity of the number, India needs to take
concrete steps to remove poverty and maintain sustainable development. ‘Make in
India’, initiative of the NDA Government after assuming power in 2014 has the
great potential of poverty alleviation through employment generation on a mass
scale. This initiative is about inviting and encouraging global companies to
establish their manufacturing base in India in order to boost its manufacturing
sector which shall generate large scale employment opportunity for
semi-literate and semi-skilled Indian youth that represent majority of rural
population of India. Manufacturing sector contribution in India has remained
comparatively much lower than the services sector so far. Recognizing the potential of manufacturing
sector for providing mass scale employment, growth of Indian economy and to
achieve sustainable growth, Government of India is putting all efforts by
forming new policies to boost manufacturing sector and generating investors’
confidence to invest in India. This paper discusses various initiatives taken
up by the Government of India and critically examines their contribution in
eradicating poverty and achieving sustainable development.
I.
INTRODUCTION
Over the last two decades, since
liberalization process started in India first time in 1990s, India has
undergone tremendous changes. Its’ absolute GDP value has reached to US$1876.8
billion from US$326.6 billion in 19901. According to Millennium
Growth Report, poverty rate will remain 22 per cent in 2015 from 51 per cent in
19902. Unemployment
Rate in India which averages to 7.32 per cent from 1983 to 2013 is also
decreasing and was about 4.90 percent in the beginning of 20143. India’s share of global gross domestic product (GDP) adjusted for
Purchasing Power Parity (PPP) is also consistently increasing and has reached
to 6.8 per cent from 4.85 per cent during last one decade4. India’s
knowledge and services sectors have proved their dominance throughout the world
during this period. India currently has the largest English speaking and
literate youth manpower, which is the backbone of the services industry.
Services sector contributed about 60 per cent to the Indian GDP in the
financial year 2013-14.
However, growth in a single sector alone is
not sufficient for taking India much ahead in the long run and helping in
generating enough employment for its large population. Services sector depends
upon a lot on performance of global economy and the downfall of the later as
witnessed in past can have huge impact on overall services sector. Hence, it is
necessary for India to look beyond services sector and identify the sectors
that have the potential of generating large scale employment for the literate
but low-skilled huge manpower of India.
Carrying a
population of over 1.25 billion, poverty eradication has always been a
challenging issue for India. Although India has initiated multipronged approach
and launched various schemes like Mahatama Gandhi National Rural Employment
Guarantee Act (MNREGA) for rural employment generation, however, it still lags
behind in achieving Millennium Development Goal as committed by all member
nations of the United Nations. As per
current statistics, over 30 million people in India still live below poverty
line. Such levels of poverty and inequality raise serious issues of
sustainability — of peace and security, of equity and solidarity, and of the
environment — at the national, regional and global levels.
In this backdrop, recognizing the urgent need
of employment generation and skills development for poverty alleviation and
hence leading to sustainable development, new NDA Government in India after
assuming power in 2014, has paid serious attention on basic problems hurting
our society like poverty, education, health, cleanliness and social inequality
issues.
Government has understood that our industries
and especially manufacturing sector has to substantially progress for attaining
sustainable and continuous growth of the country. Broadly speaking, it is
necessary for the manufacturing sector to grow at the rate of about 25 per cent
if a country aims for double-digit or minimum 10 per cent GDP growth rate. It
is necessary that manufacturing sector becomes the centre of development as
this sector has had the potential to generate and provide employment
opportunities to a larger section of society. Generation of employment
opportunities will provide a chance of increased income to all sections of the
society. It would result in increased income in individual hands and hence
result in increase in consumption demand in Indian markets. India will be able
to attract more investments from world over and economy will grow at a faster
rate resulting in poverty eradication.
II.
SUSTAINABLE DEVELOPMENT
Brundtland Commission Report (1987)5 defines Sustainable
Development in simplest terms as the human ability to meet the present needs
without affecting the future generations’ ability to meet their requirements.
Due to diversity in ecosystems, society and culture, sustainable development issues
and challenges are also complex and vary from city to city, country to country
and society to society.
The Rio Summit established
sustainable development as the guiding vision for the development efforts of
all countries. All countries undertook to establish and implement national
sustainable development strategies. These sustainable development strategies
are intended “to ensure socially responsible economic development while
protecting the resource base and the environment for the benefit of future
generations”.
III.
CURRENT STATUS OF
POVERTY IN INDIA
Poverty in crude form refers to the
condition when someone is not able to meet even the basic requirements of food,
clothing and shelter. It is also defined as the
insufficiency of the maximum income to meet the minimum expenses. Poverty may be absolute or relative. Absolute poverty
is the condition when people are unable to get adequate resources to maintain
even minimum physical health. Relative poverty is the condition when people do
not enjoy a certain minimum level of living standards as determined by the
government. Definition of relative poverty varies from country to country and
government to government.
According to
recent report ‘India and the MGDs: Completing the Task’ of United Nations
mentioned in February 4, 2015 issue of the national English daily, The Times of
India, out of total population of over 1.25 billion, about 30 million people
still live in extreme poverty in India even as the UN Millennium Development
Goal (MGD) program will expire in December 2015. These people live in extreme
poverty in India and face deprivation in terms of access to basic services,
including education, health, water, sanitation and electricity."6
India has an
opportunity to become a leader in sustainable development. It has achieved the
poverty reduction target, but the progress is uneven. India houses one-sixth of
the world population and sustainable
development goals (SDG) as agreed upon by all member countries of UN are not
achievable unless India does not achieve them, said the report.7
According to Expert
Group Report of Planning Commission (Rangarajan Committee) set up to review
measurement of poverty, growth is not the sole objective of economic policy. It
is necessary to ensure that the benefits of growth accrue to all sections of
the society. Eradication of poverty is thus an important objective. Human
beings need a certain minimum consumption of food and non-food items to
survive.8 The Expert Group estimated that the 30.9% of the rural
population and 26.4% of the urban population was below the poverty line in
2011-12. The all-India ratio was 29.5%9. It raised the daily per capita expenditure to Rs 32 from Rs 27 for the
rural poor and to Rs 47 from Rs 33 for the urban poor, thus raising the poverty
line based on the average monthly per capita expenditure to Rs 972 in rural
India and Rs 1,407 in urban India respectively.10
IV.
MANUFACTURING SECTOR IN INDIA – CURRENT
STATUS
According to
2013-14 statistics, in India manufacturing sector contributed only 15 per cent
whereas agriculture sector contribution was 14 per cent and services sector
contribution was the maximum with 60 per cent of overall GDP. Even in an export
oriented country like China, forty per cent of GDP comes from manufacturing
sector. India lags behind significantly among other nations in manufacturing
sector. Even in lower income category countries like Pakistan and Bangladesh,
manufacturing sector contributes 12 to 18 per cent respectively whereas middle
income category countries like Vietnam, Sri Lanka, Indonesia, Malaysia and
Brazil have contributed more than India. Malaysia’s manufacturing sector
contributed 24 per cent to its GDP, whereas Sri Lanka and Vietnam contribution
is about 17-18 per cent. Among rich countries like Russia, Japan, USA and
European Union manufacturing sector contribution is more than India.
It is a matter of surprise and worrying too.
India is natural resources rich country. It has advantage of plenty of low cost
labor. Still, lagging in manufacturing sector has not only impacted growth and
employment generation but also caused adversely on its market and demand. Not
only this, India exports are also lower resulting in trade deficit
significantly. Also, it has negative impact on conservation of its natural
resources impacting sustainable development as India has to export its raw
material to compensate for loss occurred due to low manufacturing output.
For a country like India where over 600
million people are educated only up to secondary level, labor intensive
manufacturing sector is the only sector that has capacity to provide employment
opportunity at such massive scale. But reality is different. In last twenty
years, only about 53 million job opportunities could be developed with a growth
rate of about 1.87 per cent per year in manufacturing sector, whereas, services
sector contribution during this period has remained about 150 million jobs
generation with a 6.5 per cent growth rate per year.
International Monetary Fund (IMF) in its
latest report has estimated India GDP growth rate to be about 7.2 per cent in
the financial year 2015 and about 7.5 per cent in financial year 2016.11
According to economic estimates, for India to achieve double digit growth,
manufacturing sector needs to contribute at least 25 per cent in overall GDP.
V.
‘MAKE IN INDIA’ MISSION
Under National
Manufacturing Policy12, targets of 25 per cent contribution to GDP
with about 100 million additional jobs creation by the year 2022 were fixed.
Contrary to targets, India has been able to reach only up to 15 per cent
contribution of manufacturing sector in total GDP and less than even 5 million
additional jobs creation by the year 2014. In the light of above facts, ‘Make
in India’ is the most ambitious mission of the Government of India, termed as
the engine of long term growth by Prime Minister Modi. Launched in September
2014, ‘Make in India’ is the initiative of inviting global companies to set up
their manufacturing base in India to boost its manufacturing sector and
generate large scale employment opportunity for Indian youth. Several sectors
of the economy have been identified for capacity enhancement under this mission
that will result in further job creation.
Government of India has already taken various
steps to help the industries and entrepreneurs to set up their manufacturing
base in India like de-licensing and de-regulation, launching of e-Biz platform
for single window clearance for new projects and provide Ease of Doing Business
environment. Thrust has been given on building proper infrastructure under the
current budget that will encourage global corporations to choose India as their
manufacturing hub. Government is committed to establish new industrial
clusters, industrial corridors, and smart cities, opening of critical sectors
like Defense, Construction and Railways for FDI.
‘Make in India’ mission’s stated purpose is
to establish India as a unique manufacturing hub at world level. As poverty,
lack of jobs and unemployment are major problems faced by India obstructing its
growth, Government of India has planned to generate more than 100 million
employment opportunities and to achieve 25 per cent contribution of
manufacturing sector to the country’s GDP in next decade. India can establish
itself as one of the largest markets in world if it is able to achieve above
targets.
VI.
INDIA’S INITIATIVES FOR SUCCESS OF ‘MAKE
IN INDIA’ MISSION
Government of India has eased procedures to establish
and do business in India and made rules simpler for investment in key sectors
of the economy under ‘Make in India’ mission. Prime Minister Modi has been able
to present good image of India as the only country in the world that offers the
unique combination of democracy, demography, and demand. Government has also
taken major steps towards skill development to ensure that skilled manpower was
available for manufacturing. It has also undertaken Digital India mission so as
to ensure that government processes remained in tune with corporate processes.
Government initiatives have opened up way to generate employment for the large
pool of young people joining the labor force every year. Under ‘Make in
India’ mission, Government has also tried to uplift Small and Medium Enterprise
sector by enhancing their scale, quality, branding and upgrading and
integrating them with large industries.
In the Union Budget 2015-16, the government
reiterated its commitment towards job creation and allocated 346.69 billion rupees
for MNREGA for rural employment generation with the objective of reducing
poverty and unemployment among rural population. To uplift socially backward
classes, it has been proposed to set up Mudra Bank for enterprises led by
Schedule Castes/Scheduled Tribes (ST/ST) with an initial allocation of 200
billion rupees. The government has asked public sector banks to lend
to each minority community in line with its share of the total minority
population within the 6% quota fixed for all minorities7for their integration and economic uplifting.
Government has planned to set up about 100
industrial cities and special economic zones (SEZ) for helping the global
corporations to set up their businesses and manufacturing plants. This will
create new job opportunities. To provide them skilled manpower, the government
had also announced 'Skill India' program and proposed to launch National skill
development mission under recent budget. It also proposed launching of National
Rural Internet and Technology Mission for services in villages and schools,
training in IT skills and E-Kranti for government service delivery with
resource allocation of 5 billion rupees. It has also enacted the Small
Factories (Regulation of Employment and Conditions of Services) Bill, 2014.
Government is also encouraging the banking sector to prioritize lending to
employment-generating sectors.
Infrastructure
building and development is essential to attract global corporations to set up
their businesses in India. Hence, in current budget Finance Minister has given
full attention to boost infrastructure. Setting up of National Investment and
Infrastructure Fund, Tax free infrastructure bonds for projects in the rail,
road and irrigation sectors, setting up a Public Debt Management Agency (PDMA)
to deepen the Indian Bond market to provide additional fund raising avenues for
infrastructure sector, taxation benefits in respect of Real Estate Investment
Trusts (REITs) are few such examples. These measures are expected to lead to
the success of the ‘Make in India’ mission and will help in poverty alleviation
from the society as millions of people will be absorbed in the jobs created due
to rise in manufacturing capacity.
Big industrial corporations and companies
continuously keep searching and changing their manufacturing places depending
upon various factors like labor-cost, energy price, productivity and
fluctuation in foreign currency markets among various countries. It has been
observed that due to changing environment, many corporations have shifted their
manufacturing locations over the years from the countries where they were in
profits in past years.
Current circumstances at global platform
offer possibilities for India. China is losing its advantageous position due to
increase in labor and production costs. Russia too is losing its shine due to
geo-political reasons and rise in labor and production costs. On the other
hand, countries like USA and Mexico are increasing their share in manufacturing
due to liberal economic and working environment. According to BCG Manufacturing
Index 2014, India stands second among top 25 exporter nations based upon low
manufacturing costs. In other countries labor and other costs have
comparatively increased more than India and hence currently India has got the
advantage. Mexico is successful due to low cost and better working environment
and is benefitted with foreign investment. America is successful in attracting
companies due to falling shale gas prices and technological development and
research. It has been able to attract technology centered manufacturing.
Industries like additive manufacturing, nano-technology, artificial
intelligence, and robotics etc. are mushrooming there.
From Indian perspective, it is a big
challenge. It is necessary for India that it takes concrete decisions and steps
about costs and other related issues like political, financial and Ease of
Doing Business policies in order to strengthen its position as a leading
manufacturing hub. For the success of “Make in India” mission, it will be
necessary to keep a close eye on all activities going on at the world level. In
addition to production cost, some more important issues need to be paid urgent
attention, viz. infrastructure especially highways, port and power sector,
reforms in labor-sector, simple tax system, easy capital sources and a better
worldwide image. Finally, it is essential to put right policies in place to
achieve leading position in the world. First of all it has to pledge for
resurgence of its industry and then establishing its quality standards it has
to establish itself among world’s leading countries in this highly competitive
world.
VII.
IMPACT OF ‘MAKE IN INDIA’ MISSION ON
POVERTY ALLEVIATION AND SUSTAINABLE DEVELOPMENT
Many leading
global corporations from all parts of the world have welcomed the India’s move
to make policies conducive for manufacturing sector under its ‘Make in India’
mission. Global corporations like Sony, Samsung, Spice Group, Lava, Toshiba,
Panasonic and many more have already started establishing and are further
extending their manufacturing units in India. All major industrialized nations
have expressed their intent to join hands in ‘Make in India’ mission.
According to a report by McKinsey and
Company, India’s manufacturing sector could leave behind services sector,
capturing more of global market and thereby touch US$ 1 trillion by 2025. There
is potential for the sector to account for 25-30 per cent of the country’s GDP
and create up to 90 million domestic jobs, by 202513. There
is sharp rise in domestic demand and due to attractive investment policies
under ‘Make in India’ mission by new government and availability of cheap labor,
global corporations want to establish their manufacturing set up in India. BCG
Manufacturing Index 2014 puts India at second position among top 25 exporter
nations based upon low manufacturing costs.14
In such a positive scenario, adopting skills
development as a national priority, formulation of National Skills Development
Policy and steps taken through budgetary provisions for skill development along
with ‘Make in India’ mission will not only develop highly skilled youth
manpower but simultaneously there will be equal chances for their absorption in
the industry. It will help in poverty eradication. Right education and
employment opportunities will develop and strengthen India’s population
abilities to make judgments and choices in favor of sustainable development.
Quality of people’s life will improve. Educated, skilled and employed citizens
will better understand the need and importance of sustainable development.
Setting up of smart cities under ‘Make in
India’ mission will offer a chance to make economic and social opportunity a
reality for the greatest number of people. With rise in manufacturing,
productivity and employment, various maladies currently grappling India like
caste and gender discrimination, poverty, mortality and crime will come down as
people will be meaningfully engaged.
VIII.
CONCLUSION
India, today, is
standing at a highly critical stage. On one side, India houses world’s largest
youth and literate manpower, on the other hand over 30 million of its
population is still below the poverty line and India has stiff challenges
before it to achieve millennium development goals and sustainable development.
At this juncture, initiatives taken up by the Government have raised great
hopes of not only making India as a global manufacturing hub but implicit in
this is the potential of poverty alleviation through employment generation on a
mass scale, eliminating discrimination from the society based upon caste,
gender or religion and hence achieving sustainable development.
It is necessary for India that it takes
further concrete decisions and steps about costs and other related issues like
political, financial and Ease of Doing Business policies in order to strengthen
its position as a leading manufacturing hub. Success of “Make in India” mission
will lie in the fact, how India is able to raise the living standards of its
vast population, how India meets millennium development goals and how India
contributes to the sustainability of the mother earth.
India has to walk a long way. A beginning has
been made through ‘Make in India’ mission supported by skills development
initiatives and easing of doing business policies. It is highly critical to
maintain and further upgrade these initiatives. It is high time that India’s
government policies focus comprehensively on encouraging areas like industries
growth and development; knowledge management; research and development;
innovation; boosting power and electricity generation capacity, infrastructure
and logistics, look for public welfare schemes and keep environment
preservation in mind for sustainable development.
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Rajiv R. Thakur is with the Jaipuria Institute of Management,
Noida, A-32A, Sector – 62, Noida, U.P. – 201309, India (corresponding author’s
phone: 91-8800466427; e-mail: r.thakur@jaipuria.ac.i.n).
Jitender Sharma is with the Jaipuria Institute of
Management, Noida, A-32A, Sector – 62, Noida, U.P. – 201309, India
(corresponding author’s phone: 91-9899695953; e-mail: Jitender.sharma@jaipuria.ac.i.n).
posted by Jitender Sharma @ 8:28 PM
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