From the alarm clock that wakes us up in the morning to the zero-watt bulb that we glow at bedtime, there are innumerable manufactured goods we use every day. Can we name a few among these which were originally developed and manufactured in India and the rest of the world copied them later?
If you experienced a long pause of silence, it is not surprising. Of course, we make many products in India but we have mostly depended on others to develop these products first. And, as long as products are invented, innovated, and/or first manufactured elsewhere, the make in India story will always be viewed as the story of catching-up with others. The muslin cloth is perhaps the last of the popular goods originally developed and produced in India before industrial revolution moved manufacturing to England and Europe. There onward, the baton moved to the US in the first half of the 20th century, followed by Japan in the post World War II era and finally to the South East Asian countries. And, this begs the question - Is it now India's turn in the 21st century? India getting up to speed and firmly carrying this baton forward seems very challenging, for manufacturing does not account for even a seventh of India’s GDP today! In fact, this lament is quite old and goes back to even pre-independence days. The forerunner of the modern Indian economists, Justice M.G. Ranade of the then Bombay Presidency had warned in 1892 that the issue of political dominance by the British was receiving far more attention than the formidable though unfelt dominance of skill, pragmatic education, and capital.
At the time of independence, the dark memory etched on the Indian psyche was of foreign traders coming to India to buy muslin cloth but eventually turning masters of the land. This East India Company phobia coupled with the Russian import of socialistic thinking resulted in Indian government cordoning-off the country from rest of the world. Moreover, within the domestic economy, private sector was cordoned-off in favour of PSUs in a plethora of strategic sectors such as steel, power, petroleum, defence production, transportation, and telecom. Furthermore, large and medium enterprises in the private sector were also cordoned-off in favour of SSI sector in about 800 reserved industrial items such as leather, textiles, and electrical goods. Stringent labour laws, high corporate taxes, and multiplicity of indirect taxes made Indian products noncompetitive in the world market. These policies provided little incentive for public sector to stay efficient, created unfair competition for the private sector, and blocked SSI sector from investing and growing out of its small scale mould. The liberalization process that began with stealth in mid-1980s and then overtly in 1991 had some positive impact; however, compulsions of coalition governments, series of scams involving politicians, and, a general inertia in changing the 'licence raj' administrative structures halted policy reform, preventing Indian manufacturing to become internationally competitive.
And this begs the other question – What is it that we must do for Make in India story to unfold? The answer lies in addressing four issues – removing policy inefficiencies that still continue to stifle manufacturing sector, creating skill and innovation enhancing environment in the country, promoting domestic savings and investments, and, providing macroeconomic stability to businesses. Each of these measures requires an elaborate discussion. You will find this discussion in my below referenced paper, “Make in India: Success Stories, Lesson Learnt.” The paper is based on talks delivered by CXOs of four successful Indian multinationals that began as small scale units around the 1991 liberalization period and represent four very diverse manufacturing sectors. What I have attempted is to galvanize their experiences with principles of economic theory: