Is this same as "Swadeshi" movement?
Any developing country or economy would want that they experience vibrant and sustainable economic growth and one of the ways to do it is to bolster its industrial sector, that is, make things in our own country. It is a no brainer up to this point. So why is P.M. Narendra Modi making such a big deal out of it? Is this a "swadeshi" movement? Not to my mind it is not. While campaigning for "Make in India" theme, the PM is equally focused on providing fair and attractive playing field to motivate foreign investment in capital and corporate FDI. So, what makes "make in India" so relevant and significant now?
Occupational Structure
The PM and his advisors understand the fundamentals of how a vibrant economy could be developed, and understand them very well. At the root of the initiative is creation of well-paying jobs, increase in purchasing power and demand for goods and services. India has depended far too long on agriculture sector to create jobs. The chart below highlights some thought provoking statistics on occupational structure in India. The percentages of working population that is generally divided into three broad sectors, namely, agriculture, industrial and services remained relatively flat for about 3/4th of the 20th century. (1901 to 1971.) It rose somewhat starting with 1971 with the real changes coming post economic liberalization in 1991. The result is that the percentage of workers employed in the agriculture sector has gone down by 20-25 points while the service sector saw almost a 100% rise or 14 points. The sector that showed predictable but undesirable movement is the industrial with only 8 points rise over the same period.
|
Occupational Structure - % |
Sector |
1901 |
1971 |
2007 |
Agriculture |
72 |
72 |
50 |
Industrial |
12 |
11 |
20 |
Services |
16 |
17 |
30 |
The Problem
All developing economies begin their occupational journey with agriculture as the chief source of employment. As the next step, historically, most all of them have shed growing number of occupational percentage points in favor of industrial sector followed by service sector. Thriving industrial economy produces demand for services. However, India's journey on this path is somewhat peculiar. It bypassed the growth in industrial sector and showed considerable rise of occupation in service sector. While in itself this phenomenon was not so undesirable, a cursory analysis reveals that most of the service sector occupational growth came due to industrial economies of other countries. A number of services were outsourced by developed economies to India and other high skill/low wage countries. But, that increased dependence on the fate of economies on which India had little or no control. In order for India to experience sustainable occupational growth in service as well as industrial sectors, it must focus on developing its own industrial sector of which "manufacturing" is one major component.
The problem of supply side constraint is also the target. By increasing the manufacturing activities and infrastructure creating activities the end result will be lower inflation, higher sustainability of economic growth and less intense impact of global economic swings. The demand in India is only growing. With 50% population under the age of 25, there is no question that supply will take a long time to reach the surplus territory.
The Solution
India needs to transform its growth model from being a services-focused economy to manufacturing-focused economy with the potential of creating 8 to 10 million jobs a year and leaving a healthy trail for services sector to pick up its share of occupational growth on. It also enables India Inc. to steer its occupational growth journey back to how it should be. Agriculture followed by industrial followed by services.
This is what "Make in India" is all about.
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