The new government must redouble its efforts on economic reforms, particularly related to manufacturing.
India’s continued urbanisation will see hundreds of millions of agriculture workers relocate to cities to find formal employment in the coming decades.
A failure to generate low-skilled employment could push staggering stress on India’s governance structures.
Success in manufacturing will not only help India’s domestic trade and employment goals but also expand resources for national security
India has powerful domestic compulsions to improve its manufacturing base.
First, India has a massive employment-creation requirement.
About half of Indian labour remains mired in low-productivity agriculture.
If India’s attempts to enact major farming reforms are successful, there could be a fast, massive transition of employment out of agriculture.
These workers are ill-suited for India’s highly successful skilled services sector.
A second reason behind India’s desire to boost manufacturing is the nation’s goods trade deficit.
Despite a perception that India is “anti-trade”, India had a little over $1 trillion in goods trade in the last 12 months — and a $250 billion deficit during that period.
The Modi government’s early attempts to stoke States into competition with each other have fallen by the wayside.
The rankings of States’ business environments called the “Business Reforms Action Plan (BRAP)”, has not been updated since the COVID-19 pandemic
The central government’s plan to help craft model industry laws for States to consider has been underwhelming.
Getting more States to focus on thoughtful, transparent industrial policies is a difficult task
The government should also consider putting stronger emphasis on job-creating manufacturing sectors such as textiles, paper mills, and furniture, instead of pushing almost exclusively for investments in capital-intensive sectors such as semiconductors and robotics.
India’s national election provided an opportunity to assess and redirect policy.
But India’s core needs behind the current manufacturing push — jobs, trade, and security — will not change.
The size of the market and current growth rates are quite attractive to investors.
But more work needs to be done, especially at the State level in India, for “Make in India” to further accelerate.
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