Study of the ‘Make in India’ program: Impact on MSME and specific industrial sectors

Abstract

The Indian manufacturing sector contributes nearly 2 percent to the global manufacturing output and constitutes nearly 15 percent of India’s GDP. However, the contribution has remained the same since 1993 and is very less in comparison to other Asian Economies. The Government of India has taken several measures to boost the manufacturing sector. The National Manufacturing Policy (NMP) was adopted by the Government of India in 2012 with the objective of enhancing the contribution of manufacturing sector to 25 percent of the GDP. In line with several policy reforms and with an objective of boosting the manufacturing sector, the Government of India launched the ambitious ‘Make in India’ program on September 15, 2014. The policy initiatives of the ‘Make in India’ program would have a significant impact on the MSME sector. There is a need to study the impact of the ‘Make in India’ program on the MSME sector owing to the following reasons, • MSME units form a key part of the domestic manufacturing sector, contributing to nearly 8 percent of the country’s GDP, 45 percent of the manufacturing output and 40 percent of the exports. • The MSME Sector has a huge potential for generating employment. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the employment generating potential of the MSME sector has grown at an annual compounded rate of 11.74 percent in the last decade. • The impact of the ‘Make in India’ program on MSME is not clear at this moment and needs further analysis. The ‘Make in India’ program has reforms targeted at 25 sectors. The Indian defence sector, which is also targeted by the program presents numerous opportunities for MSMEs owing to their flexibility, diversity and operational cost. As part of this CCS, we have analyzed the various problems faced by the MSME sector with special focus on financing, the various policies adopted by the Government of India to address these needs and several International experiences pertaining to MSME financing. We have also performed extensive research on the Indian defense sector, the gaps which are hindering MSME units from taking off in this space and the best practices adopted across several countries. Finally we have proposed policy recommendations which would enable MSME units to flourish under the ‘Make in India’ program.