Make in India not a success? Experts raise doubts

An analysis reveals that the programme may not have yet made any impact on FDI

Punching holes in the government's claims on the success of Make in India campaign, an analysis by two renowned experts reveals that the programme may not have yet made any impact on Foreign Direct Investment (FDI) into focus sectors.

The investments should be examined from the point of view of fresh capacity addition in the domestic production and not on account of round-tripping of funds, the report said.

"The statements regarding the contribution of FDI to India's development which ignore these critical features of FDI would be misleading, if not mischievous. India should start taking an objective view based on appropriate empirical evidence," it said.

The report was prepared by K S Chalapati Rao, Professor (Retd), Institute for Studies in Industrial Development (ISID), and Biswajit Dhar, Professor, Jawaharlal Nehru University. The policy brief was based on a study being conducted at ISID.

The 'Make in India' initiative was launched in September 2014 with an aim to promote India as an investment destination and a global hub for manufacturing, design and innovation. Under this programme, the government is focusing on 25 sectors including defence, food processing and leather.

The report also showed that FDI under the automatic route fell by nearly 30 per cent during April-August period of 2016-17 fiscal.

"FDI equity inflows through the automatic route, which allows foreign investors to take their own decisions without waiting for specific government approval, fell by almost 30 per cent during the first five months of the current year," the report said.

This fall would not have occurred had the foreign investors responded consistently to the more liberal policy environment of the government, it added.

According to the government data, FDI during October 2014 to May 2016 grew by 46 per cent to USD 61.58 billion after the launch of Make in India programme.

"These claims, however, ignore the simple fact that decisions on long-term investments will not be taken instantly and will be based on careful analysis of investors' future requirements and the relative advantages offered by alternative locations globally," it added.

Further, it said the overall FDI increase during January - September 2016 was achieved in a large measure because of a huge jump in the acquisition of existing shares by foreign investors by displacing the existing investors.

The authors have pointed out major deficiencies in the official data, which, according to them, have remained "unnoticed" till now.