Indian Prime Minister Narendra Modi's “Make in India” call to make India a manufacturing hub gets a big push in a report by Moody's Analytics, a subsidiary of the global rating agency Moody's.
"Indian politicians are fond of such grandiose announcements, but in Modi's instance it may have some substance," wrote Glenn Levine, an economist with Moody's Analytics.
Last month, delivering his first Independence Day speech Prime Minister Modi had spoken of the need to strengthen the manufacturing sector. He has also appealed repeatedly to investors: "Come, make in India".
Glenn Levine's report, titled "India Outlook: Prospects Brighten," has drawn its optimistic conclusion from Modi's 13-year tenure as Gujarat chief minister, when the state's GDP growth averaged 8.9 per cent as compared to the national average of 7.2 per cent. "As chief minister of Gujarat he helped provide a reliable electricity supply and attracted both local and foreign-owned manufacturing," the report says.
The government's push for manufacturing comes at a time when many global manufacturers are seeking an alternative to China as costs and risks there rise, the report notes.
Labour unrest has surged in China in recent months amid a slowdown in economic growth. That situation suits India and the new government, which won a historic mandate this May on the promise of faster growth and more jobs.
"Manufacturing offers the surest way to employ millions of workers in middle-income jobs, provide a stable source of foreign currency, and create a reliable path for development. India already has the cheap labour and large local market. Better infrastructure and easier regulations, especially around labour, will help propel manufacturing," the report says.
A majority of India's workforce consists of unskilled labour that has traditionally been absorbed by the manufacturing sector. However, the sector's contribution to India's GDP has remained largely stagnant at around 15 per cent of GDP for many years now. The report also notes the "modest progress" made by the new government to liberalise labour laws - an essential step towards becoming a manufacturing power. The government has recently proposed changes to allow companies to make greater use of apprentices, allow workers to put in more hours more overtime, and allow women to work night shifts. "All this adds upside to the outlook," the report notes.
According to Moody's Analytics, the Modi government has made some progress, but it should measure success by whether foreign manufacturers want to do business in the country. "It is a difficult task, but if Modi achieves it he could lift India's long term GDP growth, which is the surest way to lift millions out of poverty," the report concludes.