‘Make in India’ or ‘Make for India’?

When the BJP, led by Narendra Modi, rode to power in unprecedented style, it was largely on the back of the twin promises of development and minimum government. Following government formation, ‘Make in India’ became a catch phrase to capture the imagination of investors and global manufacturers.

This slogan was soon contested by none other than Reserve Bank of India governor, Raghuram Rajan, the man who saw the future when he predicted an imminent meltdown of the global financial system much before the collapse of Lehman Brothers. He questioned the wisdom of the ‘Make in India’ approach and suggested that a ‘Make for India’ could be a better alternative.

My view is that the ‘Make in India’ versus the ‘Make for India’ debate is irrelevant, even incorrect.

It’s a consequence Both ‘Make in India’ and ‘Make for India’ are outcomes — outcomes that generally bode well for India. When I was in school, my dad never told me I should become a lawyer or a doctor. He ensured that he inculcated the right climate at home so that I could easily figure out for myself what I loved to do; he also gave me the freedom to pursue it. The climate was crucial. The outcome wasn’t. I chose to be neither a lawyer nor a doctor.

Both ‘Make in India’ and ‘Make for India’ need an underlying climate that is crucial for success. Without the right climate, neither will succeed. With the right climate, it does not matter which succeeds. It may actually be a third alternative which is neither ‘Made in India’ nor ‘Made for India’.

Creating the right climate The number one climate change imperative is moving India up in the ‘ease of doing business’ list, from number 134 (which it is currently) to being in the top 100 within six months and in the top 50 within 12.

This is not easy, therefore insufficient attention is paid to it. Take the telecom spectrum and coal block allocations.

As a fall-out of corruption charges and subsequent investigations, all allocations were cancelled. No one thought about what it would do to businesses that had invested based on these allocations, and the impact it would have on countless people whose lives depended on these businesses.

The government bravely resorted to the ordinance route to address the coal block allocation issue, but that is just not sufficient to put either industry or investors at ease. Cyrus Mistry was vocal in his support for the ‘Make in India’ initiative, but when it came to the Tata Motors-owned JLR setting up a plant, it chose Changshu in China over India.

Therefore, the sooner the government injects confidence through changes in climate, the sooner will such decisions swing in India’s favour. When this happens, it does not matter whether a Tata Motors potentially uses the factory in India to produce cars for the world market or for the Indian market.

Two of the biggest obstacles to the rapid industrialisation of India in the last couple of decades have been land acquisition and environmental clearances.

It will be helpful to see some concrete indications that there is a change of both mindset and will in pushing through the necessary changes.

The basics in place In the last two decades, India’s growth has taken place despite the lack of public infrastructure such as power and transport. Gaps in public policy were partially filled up by enterprising companies, and by an effective public-private partnership — in the last 30 years India’s PPP market is the world’s biggest. Infrastructure has been the dominant area of PPP. Healthcare and education have also seen moderate success.

In the last five years, the share of private universities has risen. However, after the initial euphoria, there have been some setbacks to the PPP model — overbidding, faulty pricing mechanisms and delayed clearances have led to investor losses.

Financing and the absence of a liquid corporate bond market has also been a problem. But there is hope that these can be overcome.

If power, water and other infrastructure is made available to industry it does not matter whether these inputs are used to make in India or make for India. Let the global marketplace and the entrepreneurs decide on a case-by-case basis.

The average Indian is 17 years younger than the average Japanese and 14 years younger than the average American.

This demographic advantage gave us an edge when the global services industry was growing. India managed to get a lion’s share of the services that the developed world decided to outsource.

Promise of youth India’s youth bulge is both a promise and a peril. To accommodate the 300 million people who will join India’s workforce between 2010 and 2040, each year India needs to create roughly 10 million jobs and a new city like Bengaluru, along with the commensurate real estate space and investment in infrastructure.

This workforce couldn’t care less if they were employed to make in India or make for India! They just need to be gainfully employed. Without the required labour reforms, industry would rather not take the risk of employing this workforce.

There is hope. Most countries in the world, including China, are rapidly aging while India will continue to remain young and youthful for the next 20 years and more.

An aging world cannot do without a young India.

We need to quickly create a climate in which this youth power is harnessed effectively. I am confident that if there is one government that could make this happen, it is this one.

The writer was the CEO of TaxiForSure

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