Make in India: A Year in Review

By Melissa Cyrill, Dezan Shira & Associates

Posted: 2nd October 2015 10:24

Make in India is one year old this week. Designed to kick-start India’s lagging manufacturing sector, the national program has affirmed the business-friendly nature of the Bharatiya Janta Party (BJP)-led National Democratic Alliance (NDA) government. This was a key campaign promise by the BJP in the 2014 general elections – regain foreign investor confidence after years of high-profile corruption scandals and some adversarial economic policies.
Yet, even as Make in India has made the country a more competitive investment destination, it will take several years before the program’s effectiveness can be fully gauged.

Modi Magic?

Prime Minister Modi has fronted the Make in India program during his official visits to 28 countries in the past 15 months. This level of personal investment is not just linked to his overwhelming electoral mandate, and plans to increase India’s global standing, but also to the expectations of his corporate allies who financed his electoral campaign. Thus far, India has received over US $19 billion in foreign direct investment (FDI) in 2014-2015 from a dozen major FDI source countries that Modi visited since taking over in May 2014.

This week Modi will be in the U.S. for the UN General Assembly (UNGA). Besides bilateral meetings on the UNGA sidelines, he will meet with the CEOs of the world’s top companies to discuss ideas that will transform India into the next global manufacturing hub. Next, he will travel to Silicon Valley where he will meet industry leaders to promote his Digital India, Skill India and Smart Cities schemes, which all complement the Make in India program.

In contrast to the slow response to the initial Make in India call, Modi’s U.S. visit may generate a more positive response in 2015. Over the past year, the government has laid some important groundwork. Government legislation – such as the Union Budget and the formation of the think tank Niti Aayog (National Institution for Transforming India Aayog) – has sought to make the states equal partners in the national economic growth.

The Make in India program, meanwhile, has focused on 25 industries where a 100 percent FDI has been allowed, with exceptions for space (74 percent), defense (49 percent) and news media (26 percent). This summer welcomed a host of investments; many top executives name-checked Make in India as a reason for their investment. The summer’s highlight was Foxconn signing a US $5 billion MoUwith Maharashtra state in August.

The following illustrates some of the success that has been associated with Make in India:

Challenges Limit Scope for Growth

Make in India faces many challenges that limit the impact it makes on the ground. The program has undoubtedly reduced mental barriers to investing in India for many foreign executives, and demonstrated clear government resolve.  However, the government has not been able to build on Make in India as rapidly as planned, while aspects of the Make in India scheme remain difficult for foreign investors to piece together in meaningful ways. Some critics allege that Make in India isn’t as user friendly as its feel-good marketing.

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.

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