2020: Economic Revolution: Not Reform
As an engineer, for years, I have wondered, if government owned Indian Space Research Organisation (ISRO) can manufacture rockets and satellites and successfully launch them into space, why can India not manufacture aircrafts like Airbus and Boeing?
And then I discovered it cannot even make computer chips while its scientists can design them so easily sitting in Bangalore. In recent times, I have come to realise that India cannot make mobile phones too — the best if can offer is sham manufacturing ( lower order assembling) — same it did with computers in the 90s.
Forget electronics, India started producing currency paper only after PM Modi in 2016 thrust it down the RBI throat under the “Make In India” initiative — after nearly 70 years of importing from Europe and loss of valuable foreign exchange. It is another matter that the machinery and the ink used for printing is still procured from Germany and Switzerland respectively!
It therefore comes as a pleasant surprise that the Korean phone manufacturer Samsung is moving its Chinese plant to India with a promise to export 30% of the global demand. It will bring both investment and foreign exchange.
Yet the news raises suspicion for three reasons that go back to the time of Adam Smith and his “Pin Factory” casting a doubt on Indian manufacturing in the long run.
Land: Manufacturing for global markets require land not just to build factories but also to accommodate ancillary units, housing for workers and entertainment etc. Unlike in China, where land is owned by the state; land ownership in India is private. Governments are scared to compulsorily acquire land for planned industrial development. The Delhi Mumbai Industrial Corridor launched in 2006 is nowhere in sight except in small patches along the planned route.
Labour: Over 90% of Indian employment is in the informal sector whereas the comparable figure for China is 50% and more even for failing nations like Bangladesh and Pakistan. Whereas China is able to dictate wages and working conditions for its manufacturing to achieve global competitiveness, India’s labour laws are so strict that it discourages employments in the first place. Parties like CPI and Congress will let India’s 500 million people remain unemployed than allow its labour laws to be changed. In opposition BJP would do the same.
Capital: Chinese, Japanese and Korean banks provide capital and allow it to perform for the long term — Indian banks demand monthly repayments. Manufacturer-friendly governments creates entrepreneurs, nourish troubled enterprises with state support, the Indian government sends them to jail exactly at the time when they need it most.
While welcoming Samsung, India must reassess its manufacturing goals. “Make in India” is a joke — a “Jumla” — a friend of mine in defence manufacturing told me a few months back. It certainly appears so — with the manufacturing index in free fall.
Prime Minister Modi is a great admirer of Japanese economic nationalism. When he came to power — I genuinely believed that he would identify and put the state machinery behind a few Indian corporates — creating Indian versions of Japanese keiretsu and Korean chaebols even if it meant standing behind the corrupt Ambanis and the Adanis.
Six years have passed and while structural reforms like GST and the sheer consumption demand will bring the economy back to the 8% GDP growth sooner of later, it will not solve India’s manufacturing problems.
By 2020, Prime Minister Modi promised, India will be a developed nation. We are nearly there.
Good news is sporadic. Development is slow and sundry. The imagined vision…clearly out of sight.
What the country needs in 2020 is the blueprint for an economic “revolution” not a plain old “reform” that BJP is promising to deliver year after year.
