Made in India vs Make in India
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OCTOBER 2022
“Make in India” is the new economic slogan that mixes with nationalism. The intent is to create a newness from the previous economic policies of the country and show a new vibrant India as a manufacturing hub for the world.
For many, “Made in India” and “Make in India” are two different approaches to the manufacturing policy of the country, but there is a fundamental difference between the two.
Make in India
It is primarily based on foreign capital and the design of the product from the foreign customer. A similar manufacturing model in its initial days of Chinese economic reform existed.
When China opened up its economy to the world, it invited foreign companies to use the Chinese factories and manufacturing capabilities for manufacturing foreign goods. Hence, in a short span of 30 years, China became the world’s manufacturing hub.
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... in a short span of 30 years, China became the world’s manufacturing hub.
Companies from the West could send their design to the Chinese manufacturers, directly invest in their factories, and get their goods manufactured due to cheap raw materials and labour costs.
As time passed, the same Chinese manufacturers were able to innovate their design and develop manufacturing practices, producing goods that in today’s times are better than anybody else in the world.
The goods produced by China today are superior in design and cost. It is an unbelievable success story, and China can now design, develop, and produce goods with excellent and unbeatable innovation and research capabilities. This economic model India envisaged when adopting the “Made in India” policy.
With “Make in India”, the objective is to integrate Indian manufacturing practices with the best practices of the world and be a competitor to the Chinese manufacturers and other advanced economies of the world.
The disadvantage of “Make in India” is that there will be no brand recognition of goods produced in India. For example, even today, the world can recognise the excellence in German engineering and Japanese innovation.
The same is difficult to achieve if a country makes goods with someone else’s design and manufacturing practices.
Another immediate objective of “Make in India” is to achieve profit right from the start of the business activity.
It has to be only profit-driven as the foreign investor would be relocating their manufacturing practices from the previous location of higher cost to India, which promises to lower the cost of production.
The advantage of “Make in India” is its quick contribution to the GDP numbers of the country, fast returns and higher business activity that would immediately enhance the GDP.
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The advantage of “Make in India” is its quick contribution to the GDP, fast returns and higher business activity
With many manufacturers lining up to get permission to “Make in India”, the government has to improve its decision-making on economic, social, and political objectives.
It is an advantage in the long run because the government will be more efficient in attracting foreign investment for “Make in India”.
The downside is that the process may overlook environmental, social and cultural issues in a rush to get things done.
Since the project’s success depends mainly on the government’s approval, the system would be prone to lobbying, conflict of interest, bypassing regulations and other rule-bending.
The Indian brands would lose their identity and uniqueness as time passed. For the buyers worldwide, as an example, it will be known as a German brand but manufactured in India.
And when those brands stop manufacturing in India, in totality, there would be nothing recognisable left as “Made in India”.
It is a high possibility; that India could fail to harness the innovation and research capability while being the world’s manufacturing hub.
As an example, textiles were once the core of Indian exports. Now the West has a dump of garments made in Bangladesh, Vietnam, Sri Lanka, Philippines, Brazil, Guatemala etc. As a result, fashion design’s uniqueness and expertise are blurred and have lost their character.
None of these countries can independently design and export their goods while competing in the global market. Therefore, they do need the support of the western outlets.
On the other hand, the German and Japanese engineered and designed cars and vehicles still stand competitive in the global market.
They have auto parts manufactured in China or elsewhere but still firmly retain their unique global positioning. This model will help sustain and weather the worst of global downturns and stiff competition.
The same foreign brands manufactured under “Make in India” will also find their way into the Indian market. There will be two things which will happen to the Indian economy consequently.
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The same foreign brands manufactured under “Make in India” will also find their way into the Indian market.
Firstly, there will be inflation, though creepingly, because those products are designed for the international market and priced accordingly to prevent illegal trade and smuggling. Office printers, automobiles, and Mobile phones are classic examples.
Secondly, the Indian manufacturers with Indian designs would slowly lose the market share, even with the same quality. The sensitivity of Indian consumers to foreign brands, irrespective of their manufacturing location, is high and preferred over Indian brands.
Holistically, it would be a combination of “Make in India” plus “Sell in India”, leading to further deterioration of India’s indigenous development and manufacturing capabilities.
There is another downside to “Make in India”.
It will be foreign corporate and companies who would be investing in the manufacturing capabilities in India.
The role and responsibility of Corporate Social Responsibility will reduce or climb down to a rung of lower priority, especially in the cases of a pandemic or natural calamities.
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The role and responsibility of Corporate Social Responsibility will reduce or climb down to a rung of lower priority ...
They may also have a questionable role when it comes to geopolitics and the position of India. It is very much possible for the foreign company to have operations in countries hostile to India’s national interests.
For the foreign companies, to evaluate the best location for setting up a manufacturing plant, they would go to places where there already exist talent, technical capabilities, and tax incentives from local governments.
It has the potential to bring unequal development not only within the state but also across the country. There will be competition within India, and those States and places which require development will lose out.
There are many multinational corporations which have a powerful influence across the governments of the world. They have money and soft power, good enough to influence geopolitics.
In that case, India would stand exploited. It has happened wed India in the case of the East India Company, which crept into the local governments and kingdoms, and ultimately ended up ruling the country.
Though this idea is far-fetched, we do see pieces of evidence of large multinational corporations influencing government policies of even the most mature countries.
Those companies interested in “Make in India” are solely looking for profits and higher productivity to lower their cost of production.
On that equation, they would strategically like to adopt and continuously upgrade to automation, resulting in a lower employment rate in the country.
The local population would stand exploited because automation would mean a highly skilled workforce that too in few numbers.
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... they would strategically like to adopt and continuously upgrade to automation, resulting in a lower employment rate in the country.
Those companies interested in “Make in India” also have the potential and tendency to look for avenues of tax evasion using accounting methods and transfer pricing. It is a straight loss of revenue to the Indian government.
So, on the one hand, these companies work for high profits; on the other hand, they would be paying meager taxes and generating low employment.
Similar examples can is found where companies like Google and Facebook earn humongous profits but pay negligible taxes.
Made in India
In the case of the “Made in India” policy, it has indigenous capital, entrepreneurship design manufacturing, land, labour, and profit.
It is about branding India and building Indian reputation over the years. The intellectual property rights would also belong to the company of India.
The objective of “Made in India” is to develop manufacturing and scientific strength, improvement in manpower capabilities, growth of human resources and optimum utilisation of natural resources.
As a whole, “Made in India” is a venture by way of government policy to elevate the position of Indian entrepreneurship and to give space to thinkers, designers, and innovators. Though, from a long-term perspective, it would require high investments.
The expected result is overall development and growth of the industry sector and its allied services while providing employment avenues to the local population and attracting the best talents from the country.
Made in India is about minimum imports and more indigenous technology development. It also focuses on import substitution and making products globally competitive.
“Made in India” in defense capabilities also made India self-reliant and mitigated the risk of foreign powers. Though there are issues with the quality of defense production in India, there is always a scope for improvement.
Indeed, they are cheaper than the imports. Therefore, India has maintained its defense production capabilities. As a result, today, India is a manufacturing destination for the manufacturing F-16s.
Until recently, they had been a state secret of the government of the United States of America.
If India did not develop its “Made in India” capabilities for its defense aviation, the original equipment manufacturers of F-16s wouldn’t have looked at or evaluated India for its production.
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... they would strategically like to adopt and continuously upgrade to automation, resulting in a lower employment rate in the country.
In the case of Space Research, India has been focusing on “Made in India” capabilities, which are strategic. India was denied access to cryogenic engines from the global market for its space program.
However, after a few decades of development, it was possible to manufacture and use cryogenic engines for the aids space program. As of today, India possesses an indigenous cryogenic engine technology.
The same holds good for the nuclear research and development programs, where India need not depend upon the capabilities and pressures of any foreign government to pursue its vision.
“Made in India” is a long-term strategic policy where profit comes after the benefit of the people. In contrast, “Make in India” is a business proposition which will yield quick results like profit and growth in the GDP numbers.
Therefore, it may necessarily not lead to the development of the manpower of Indians but certainly would improve the cash flow in the country.
In the case of “Made in India”, all taxes are transparently accounted for and paid to the government. It is also under the direct purview of the public and the press, holding the local politicians and national government accountable for any of their doings.
In the case of a foreign company, they are also libel to the international laws, which can conflict with the Indian laws and dilute the process of holding them accountable.
Open debate
For any business set up in the country, there must be an evaluation of social benefits and costs concerning economic costs and corporate social responsibility.
On the contrary, the social price must also include the social sacrifice the population has to undertake to sustain the business.
It consists of the accountability for the depletion of local natural resources, forestry and changes in the quality of water supply, mines and minerals. Displacement of tribal and local culture is a serious issue.
These are intangible losses, and a method has to be devised to make these losses officially measurable and accountable.
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