PM Narendra Modi wants to boost manufacturing in his country, but it’s cheaper and easier to import than make in India
Prime Minister Narendra Modi, who took office in the summer of 2014, has staked his reputation on his ambitious Make in India program to revitalize the economy. His government has rewritten labor laws, diluted environmental standards and pushed for a new law to make it easier for industry to override the claims of farmers when acquiring their lands for industry. These measures, the government hopes, will make it easier to build and operate factories to provide meaningful employment for the 10 million young Indians who will come of working age each year for the next 15 years.
....
“Come make in India … Sell anywhere, [but] make in India,” Modi declared in his Independence Day address last August, inviting Indian and foreign companies to make a range of products from “electrical to electronics … paper to plastics … satellites to submarines.” Two months later, the Nokia plant shut down.
In February, Nokia’s glass-fronted factory looked like a carefully preserved monument to the information-technology revolution. The shop floors were empty of workers, the assembly lines erased. A solitary janitor in blue overalls mopped the floor below a large poster advertising the company’s Lumia range of smartphones. It was hard to believe that, till recently, the cavernous industrial sheds produced as many as 18 million phones a month.
....
Historical precedent suggests that few countries, apart from the petro-economies, have become wealthy without creating manufacturing jobs. However, new research indicates that mass industrialization, as seen most recently in China, is becoming harder and harder to achieve.
“The numbers of manufacturing jobs that India can secure are likely to be much smaller than the hype suggests,” says Aashish Mehta, associate professor at the Global & International Studies Program at the University of California, Santa Barbara, as developing countries are losing the ability to retain jobs due to mechanization and greater competition from other developing economies. “If costs at home rise, or costs elsewhere fall, production processes can be more easily relocated. Investors seem to get this short-termism.”
The objective of the Make in India campaign is reasonable, Mehta explains, but he is troubled that the sweeping changes in labor laws, land rules, environment regulations and education policy unleashed by the government come with significant social costs and ultimately may not result in enough good jobs. “Manufacturing is important,” he says. “It is just too important and costly to get wrong.”
Gendham, the managing director of Salcomp, the Nokia supplier, agrees. While Salcomp assembles its chargers in India due to lower labor costs, the company still imports most of its high-value components. One way to keep jobs in India, he says, is to attract investment that brings manufacturing and design jobs, over simple assembly tasks, which can be more easily relocated.