Skip to main content

Wither Make in India? New investments dropped by one third in three years, as stalled projects climbed: Bloomberg

By Our Representative
Prime Minister Narendra Modi and South Korean President Moon Jae-in may have celebrated the inauguration of what Samsung Electronics' what is claimed to be the "world’s largest mobile phone factory", with Modi characterizing it as “extremely important” for his Make in India initiative to boost manufacturing to 25% India’s economy by 2020 and create millions of jobs.
But an in-depth analysis in a news site owned by one of the world's most powerful financial, software, data, and media companies headquartered in Manhattan, New York, Bloomberg LP, believes that this investment was "more the exception than the norm", insisting, "Data from the World Bank and the Reserve Bank of India show manufacturing hasn’t received a significant boost since Modi took office in 2014."
Even as recalling that India’s economy may have "overtaken" France to become the world’s sixth largest, something which the Government of India is seeking to propagate as its huge success, the authors of the Bloomberg analysis, Iain Marlow and Vrishti Beniwal, say, the fact is, the country's "manufacturing has shrunk to about 15% of gross domestic product (GDP) from a peak of 18.6 percent in 1995."
Pointing out that "other data show new investments in India have dropped and stalled projects are on the rise", the authors quotes an economics scholar based in Ottawa, Vivek Dahejia, as saying, “The Samsung announcement is good news, but it must be seen as a one-off at present... Make in India is a noble aspiration of the Modi government. Yet, in the absence of a supporting infrastructure and ease of doing business environment, it’s a tough challenge.”
The article notes that the Make India initiative "is a worthwhile attempt to lure global businesses", but, there is a strong view that "it hasn’t been accompanied by enough meaningful changes to revive manufacturing or alter what is essentially a services-oriented economy."
The authors say, "Unlike Beijing’s Made in China 2025 program -- which targets strategic industries from robotics to new-energy vehicles through state investment and subsidies -- Modi’s Make in India plan is more of an investment promotion strategy."
Recalling that "one of the key reforms under the initiative launched in 2014 was the loosening up of foreign investment restrictions in several sectors, including defense", they assert, "However, private data shows investment is falling."
Thus, the Centre for Monitoring Indian Economy (CMIE) has estimated that new project investments have dropped to Rs 6.62 trillion ($96.6 billion) in fiscal 2017-18 "from Rs 18.7 trillion in fiscal 2015."
Further pointing out that "the value of stalled projects climbed to Rs 7.63 trillion from 5.29 trillion during that period. Even data from the Reserve Bank of India’s bulletin show that corporate capital expenditure has fallen since Modi came to power", they quote Mahesh Vyas, CEO, CMIE, as saying that Modi’s Make in India project hasn’t worked, in part because Indian companies invested heavily for years until 2012, well before Modi’s election, and now have excess industrial capacity.
According to them, "Those capacities have done little to temper growth in imports of foreign-made goods. Rising purchases of smartphones and TVs have made electronics India’s second-biggest import item after oil, and is pushing the nation’s trade deficit wider."
Thus, while under Modi, record foreign direct investment (FDI) may have flowed into India, "improving" the country’s ease of doing business ranking, "Most investment, such as Amazon.com Inc.’s $5 billion commitment to expand operations in India, has gone into the nation’s dominant services and technology industries."
Bloomberg Economics analyst Abhishek Gupta is also quoted as saying, “India’s tough labour laws and higher bureaucratic entry barriers into manufacturing, along with its widespread fluency in English -- a boon in global services -- suggests that its comparative advantage lies in services.”
The authors add, "Even the Make in India program’s mascot -- a lion composed of gears -- hasn’t avoided the onerous regulations and occasional political interference that are still common in India and a key obstacle to investment."

Comments

Paul Streumer said…
"FDI (Foreign Direct Investment) remains just 1.2 percent of India’s overall investment." The crucial development is the fall of internal Indian investment, as local investors have the best feel for the possibilities of the internal market.

The explanation the article gives (quoting Mahesh Vyas, the Centre for Monitoring Indian Economy’s chief executive officer) is that "Indian companies invested heavily for years until 2012, well before Modi’s election, and now have excess industrial capacity". Adding that it takes time to absorb those (capital) investments." That is true, but mainly for huge projects, Six years is sufficient time for small and medium investments to bear fruit. Instead, according the CMIE's graph, some time in 2017 the value of stalled projects overtook the value of new investments.

A more troublesome international environment with worries about expansion of exports, could well be one reason for this. More worrying, given the fact that India has a huge internal market, it also shows a relative lack of trust of local investors in the growth of purchasing power there. This is remarkable as the official growth figures of the economy as a whole are very optimistic. All this suggests that the growth takes place in sectors which are contributing relatively little to a rise in spending power of the public.

It is hard to see how the Indian economy can sustain its present rate of growth, if investments continue at their present low level, existing projects continue to stall, and the spending power of the public as a whole is not rising fast enough.

TRENDING

Green revolution "not sustainable", Bt cotton a failure in India: MS Swaminathan

Counterview Desk
In a recent paper in the journal “Current Science”, distinguished scientist PC Kesaven and his colleague MS Swaminathan, widely regarded as the father of the Green Revolution, have argued that Bt insecticidal cotton, widely regarded as the continuation of the Green Revolution, has been a failure in India and has not provided livelihood security for mainly resource-poor, small and marginal farmers.
Sharply taking on Green Revolution, the authors say, it has not been sustainable largely because of adverse environmental and social impacts, insisting on the need to move away from the simplistic output-yield paradigm that dominates much thinking. Seeking to address the concerns about local food security and sovereignty as well as on-farm and off-farm social and ecological issues associated with the Green Revolution, they argue in favour of what they call sustainable ‘Evergreen Revolution’, based on a ‘systems approach’ and ‘ecoagriculture’.
Pointing out that Evergreen Revol…

Rejoinder: Inescapable to have Central Water Commission as strong technical body in India

By BN Navalawala*
This is with reference to Counterview Blog (December 5, 2018), "Modi govt 'shelves' water reforms report, shows 'no interest' in its recommendations", below mentioned are my comments/observations thereon:
A committee was constituted under the Chairmanship of Dr. Mihir Shah, Former Member, Planning Commission, for restructuring of Central Water Commission (CWC) and Central Ground Water Board (CGWB) for optimal development of water resources in the country in the backdrop of Integrated Water Resources Management (IWRM).

Some Hindu bodies in US defending BJP-RSS' divisive, violent activities: Agnivesh

Counterview Desk Last week, Washington DC saw speakers at a religious freedom roundtable, chaired by the US Ambassador for Religious Freedom, Sam Brownback, express concern over "eroding" space for religious freedom in India. Dr Mike Ghouse, executive director, of the Center for Pluralism in Washington DC, referring to the roundtable, said in an email alert that Indian-Americans have "a moral duty to prevent India from being labeled as a Country of Particular Concern by the United States Commission on International Religious Freedom (USCIRF)".

Preventing childhood deaths: India performs worse than Bangladesh, "equals" Pakistan

By Rajiv Shah
A just-released study, “The Pneumonia and Diarrhea Progress Report 2018”, prepared by the International Vaccine Access Centre (IVAC) at the Johns Hopkins Bloomberg School of Public Health, has identified India among 15 other countries which are still far off the mark in achieving the targets of the Global Action Plan for the Prevention of Pneumonia and Diarrhea (GAPPD).

Karnataka: NGO Akshay Patra "not sensitive" to nutrition demands of school children

Counterview Desk
Well-known civil rights organizations, Right to Food Campaign and Jan Swasthya Abhiyan, have sent a letter to the Union minister of human resource development, the Chief Minister of Karnataka, other concerned ministers and officials of the state expressing concerns regarding the mid-day meal (MDM) to school children, insisting, all contracts to the Akshay Patra for supply of MDM should be immediately terminated.

India's rewritten textbooks talk of demerits of democracy, praise Hitler, underrate Mughals

Counterview Desk
A detailed, 3,800-word review of the books rewritten under directions of the BJP rulers across India since Prime Minister Narendra Modi came to power in May 2014 has suggested that one of aims of the books is to instill a sense of doubt about India’s democratic polity among the country’s young minds. Reviewed in the prestigious US journal, “The New York Review of Books”, in its latest issue (December 6, 2018) by Alex Traub, the scrutiny insists, the effort has also been to paint Indian history from the angle of “Hindu triumphalism”, even as creating “Islamophobia”.

Four children die after poor UP Dalit, Muslim families forced to flee to forest area: PVCHR

Counterview Desk
Peoples’ Vigilance Committee on Human Rights (PVCHR) has said that the forest department police’s crackdown, allegedly without any prior notice, on Dalit and Muslim households in Dakhin Tola, Churk Bazaar, Sonbhadra district, Uttar Pradesh, beating up “children and old people, women, and men in an inhuman way”, has led to “forced displacement, starvation and discrimination”. This has reportedly affected about 350 people.

World Bank clarifies: Its 26th rank to India not for universal access to power but for ease of doing business

By Our Representative
In a major embarrassment to the Government of India, the World Bank has reportedly clarified that it has not ranked India 26th out of 130 countries for providing power to its population. The top international banker’s clarification comes following Union Power Minister Piyush Goyal’s claim that India has “improved to 26 position from 99” in access to electricity in just one year.

Modi's PRO, who served previous Congress, BJP CMs in Gujarat with "equal" competence

By Rajiv Shah
A public relations officer (PRO), even as maintaining anonymity, is supposed to “manage” reputation of his or her client, reflecting the client’s views in order to influence opinion and behaviour. A PRO is also known to use, the world over, media and communication to build, maintain, manage and plan publicity strategies and campaigns, even as dealing with enquiries from the public, particularly media, organising promotional events such as press conferences, open days, exhibitions, tours and visits. A PRO is also supposed to final touches to press statements for his or client.

80% school children are beaten up, 91% parents "approve" of it: Report

By Rajiv Shah
A recent report, prepared by researchers with the civil rights group, Agrasar, has revealed that of the 521 children from marginalized groups surveyed in Gurugram, Haryana, 80% said they are punished at school. Based on data collected from semi-urban communities in Gurugram, the report’s conclusions also take into account survey 100 parents, personal interviews with 26 children, three focus group discussions and one seasonal calendar exercise with 29 parents.