Make in India Or Help Make in India

Narendra Modi is currently wooing firms in Germany and other countries to help his Make in India initiative. It’s good to hear of initiatives aimed at making foreign companies invest in India. But we need to ask if this will help us become an economic powerhouse or make us become the next US.

The United States used to be a manufacturing hub for a very long time. The invention of the semiconductor chip helped propel it to new heights in R&D and manufacturing innovations. However over time, they started outsourcing production and manufacturing to save costs , thus gradually moving manufacturing out of the United States to China and other countries. Thus now , the United States may have some of the biggest marquee brands but they don’t create those products in their own country anymore and this reflects not just in the prices but also in jobs. Even though the US has most of the major technology companies, they create value with a very small set of employees and hence the income disparity is rising.

There is a strong chance this may happen in India as well. On one end, we have IT companies bottoming out as the outsourcing boom finally reaches its zenith and now IT companies , BPOs and other partakers of the gold rush have realized that it’s time to find new ways to grow. At the same time, manufacturing in India is very limited. Except for the automobile industry and investments in infrastructure companies due to government expenditure, we see limited manufacturing where Indians have complete control over the product design and implementation.

What is required from the Modi government is clear policies and change in the bureaucratic attitude of our civil servants. This means we have better policies in specific sectors such as semiconductors, service industries and also provide good tax laws which provide incentives not just for foreign companies to invest in India but also for locals to set up their own businesses. Manufacturing hubs will create an ecosystem of small businesses around them while local businesses will create jobs and create their own models rather than copying US business models.Equally importantly, we should look at becoming a data hub. Over time, as crypto currency and other digital formats become prevalent, it’s important we build India to becoming a proper data hub so we become a financial power as well. As the book Cryptonomicon states, there will be a time when currencies will all be zeros and ones and then the integrity of a currency and a country will depend on how confident people are about it’s data security and data rules . It’s integral that India develop a system of transparency while dealing with how we treat data and internet usage so people and countries have confidence in us.

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