make in india & make for india

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Make in India(MII) & Make for India (MFI)

delivered on Jan 18, 2015 by Dr. P. Balasubramanian, Ph.D.

Founder & CEO, Theme Work Analytics, Bangalore & West Lafayette, IN, USA

Seminar Series of lectures at Madurai School of Management

Copyright of this presentation belongs to PB. Reproduction in any form requires prior permission.

Agenda

❖ Make In India ❖ Make for India ❖ Historical Perspective ❖ Challenges facing India ❖ Goods and Money Flows ❖ Comparative Advantage of Nations ❖ The India Advantage ❖ Comparative Assessment


The Make in India campaign


To give a collective thrust to manufacturing sector; to make India a global manufacturing hub

To create jobs and to revive growth in economy

To retain international investor interest in India

The Make in India campaign


How will this be accomplished?

by facilitating ease of entry and investment through removal of policy and process constraints

by enhancing investments in transportation, energy and other infrastructure sectors

The Make for India proposition


asks for focus of manufacturing in India to be on satisfying the needs of Indian markets.

less reliance on export markets

to create a positive cycle of higher demand and higher supply of goods in India leading to higher production and sales.

Hence will lead to higher income for Indian citizens; help to improve and rebuild skill sets.


Hence these two propositions are not mutually exclusive or contradictory.

They are by and large complementary.

They differ however on one major aspect, viz the export thrust.

MII seeks to make India the global hub for manufacturing while MFI’s focus is to develop the Indian market and economy

copyright : PB


A historical perspective is necessary

Till four centuries ago India was one of the richest countries in the world. Every European voyager set sail to discover a short route to India. Purpose was to acquire the Wealth of the Nation, vie Silk and Spices.

It is estimated that 25 % of world exports emanated from India


A historical perspective is necessary

India was the land of artists, artisans, poets and scholars .

It was the home of mathematicians, astronomers and biologists.

It was where knowledge to process sugarcane and cotton resided 3000 years ago.

It knew how to process metals.

It was one of the richest nations in the world. With spices and silk.


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India during the industrial age

Spent two centuries fighting colonialism.

Subjugation of India’s economic interest to that of Great Britain.

India was a source of raw materials and a market for British goods.

Trade through appointed agents.

Even building of the vast rail network in India benefited only the steel and machinery industry of the British.



No science education in Universities till mid 1800s.

No budget, focus or initiative on research at universities.

No network of scientists, scholars and no dissemination of knowledge.

Intellectual Property Rights, an unknown concept



Two centuries of colonialism meant that

•We missed the Industrial revolution

•We yielded the ground on scientific temper and spirit

•We lost the entrepreneurial spirit


The world however has moved from the Industrial age to Information age in the last 50 years.

The computer and internet revolution has swept across the globe. Business Advantages built skilfully over two centuries have been wiped out to create a level playing field.

“Death of Distance, time zones and Information gaps ”

The business advantage accrues to the innovator, owner of knowledge assets

Where in the world are we now?


Challenges facing India

Source: http://www.slideshare.net/zendeem/indias-economic-profile

India: Composition of GDP

32%

46%

22%

Industry Services Agriculture

China: Composition of GDP

27%

31%

42%

Industry ServicesAgriculture

Source: Internal elaboration on World Development Indicators database, September 2008

Sectoral composition

USA data : Agri 1.2 % Industry 19.8 % Services 79 % (2007 )

Source : www.indexmundi.com/united_states/gdp_composition_by_sector.html



http://blog.euromonitor.com/2012/08/india-lagging-far-behind-china-in-female-literacy-and-employment-rates.html



Source: https://www.equitymaster.com/5minWrapUp/charts/index.asp?date=08/29/2013&story=1&title=How-does-India-look-on-the-misery-index


❖ Needs a second green revolution to improve Farm Productivity

❖ Must find ways to improve storage and logistics of agri product distribution

❖ Needs to find alternative sources of energy to reduce import dependency and environmental degradation

❖ Has to fight flooding and draught impacts in different parts of the country

❖ Bring potable water to villages ………




❖ Generate employment in millions

❖ Enhance health care and nutrition across the population

❖ Build technical and marketable skills in millions

❖ Find more teachers

❖ Significantly boost exports ;stabilize currency

❖ Building innovation & entrepreneurial Base and skill sets

Two Countries Model (using different but hard currencies)

Country A

Country B Money Flow (current)

Flow of Goods & NF Services

Money Flow (Future)

Flow of Titles to Physical Assets

Currency Exchange Market

Money Flow (current)

Money Flow (Future)

Model copyright: PB



• Trade imbalances can arise but are addressed by money flows in required direction

• Money flows can occur independent of Trade • One country funds can be used to hold titles to assets in

other country • Exchange rate setting mechanism can be either

controlled or uncontrolled • Relative strength of economies of the countries impacts

on the exchange rate

Two Countries Model (using different but hard currencies)

copyright : PB


• Model gets complicated in many ways • Country B ( with soft currency) may not be able to procure

all the Goods and NF Services it seeks/needs. • Government of Country B has a major role in controlling

the exchange rate. It further brings many import restrictions.

• Sometimes through Development Grants, Aids and Loans obtained through a Development Bank/Entity of Country A, Country B can get access to hard currency to procure goods and NF Services from Country A

Two Countries Model (with hard and soft currencies)

copyright : PB

Law of comparative AdvantageDavid Ricardo, in 1807, enunciated this principle.

Consider two countries A and B, whose citizens need both food and clothing.

Country A people are smarter than Country B. They are more productive than B in producing food and clothing. The productivity difference is higher in food compared to clothing. But they have enough resources to produce only one of them.

Then Ricardo showed that people of both countries are better off if Country A produces food and Country B, clothing and they trade with each other.

Cooperation leads to Win Win for both.



Population Groups of relevance

➢ Investing Era : [0 to 22 years] Child to Adulthood, Faculty Development, Skills, Knowledge and Character building

➢ Harvesting Era : [22 to 65 years] Productive Employment and Asset Building for the nation

➢ Protecting Era : [65+ years] Providing adequate health care, means of living etc


source: NationMaster.com


China Data

USA Data



“The Democracy, Demography and Demand Leverage””

Significant Advantages of India

The Democracy Dividend

represents an open, stable and vibrant society that treats all citizens as equal

The Population Dividend

both the absolute number and the age-wise distribution create a huge local market on both demand and supply sides

The Diversity Dividend

identifies a tolerant, pluralistic and multi cultural society that can be very innovative.

copyright : PB


Export Thrust vs. focus on Domestic Economy

Advantage ET Advantage DE

Skill sets of populace would rise to international levels faster.

Foreign Investments will be higher.

GDP and per capita income will rise faster

Nation can be a hot bed of innovation since India is very cost conscious.

Better balance between rural and urban growth can be achieved.

Economy will be robust and not buffeted by international crises.

copyright : PB


Export Thrust vs. focus on Domestic Economy

Disadvantage ET Disadvantage DE

Higher dependency on other nations IP.

Higher dependency on foreign capital will destabilize the Indian economy even in short term.

Foreign markets and raw material supplies are subject to vagaries of demand.

GDP and per capita income growth will be slower.

Employment generation will be slow to start with.

Nation can become insular and overly protective of its economy even in inefficient sectors.

copyright : PB

[email protected]

delivered by Dr. P. Balasubramanian, Ph.D.

Founder & CEO, Theme Work Analytics, Bangalore & West Lafayette, IN, USA

Seminar Series of lectures at Madurai School of Management Best Wishes !


make in india & make for india

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