Why did make in India scheme fail to attract FDI inflows in Indian manufacturing sector?

• Published date: 01 February 2022
• Author: Rahul Nath Choudhury
• Date: 01 February 2022
• DOI: http://doi.org/10.1002/pa.2341

ACADEMIC PAPER

Why did make in India scheme fail to attract FDI inflows in

Indian manufacturing sector?

Rahul Nath Choudhury

Independent Researcher, New Delhi, Delhi,

110070, India

Correspondence

Rahul Nath Choudhury, Independent

Researcher, New Delhi, Delhi, 110070, India.

Email: rahulnathc@gmail.com

To boost the manufacturing sector, India announced a highly ambitious scheme Make

in India in 2014. The scheme aims to transform India into a global design and

manufacturing hub by fostering innovation, facilitate investment and build best in

class manufacturing infrastructure. The scheme envisioned to increase the share of

the manufacturing sector to the GDP to 25% and create 100 million new jobs by

2025. Another prime objective of the plan was to attract foreign direct investment in

the Indian manufacturing sector. The government identified 25 industries in the

manufacturing sector. Several steps were undertaken to publicise the campaign both

domestically and internationally. The government allocated around Rs. 1821.5 Cr

since the launch of the scheme. But, after the six years of its launch, the scheme has

made little impact on the economy. The scheme could neither increase the share of

the manufacturing sector in GDP nor could attract any significant volume of FDI in

the manufacturing sector. In this backdrop, this study attempts to assess the perfor-

mance of the scheme. The paper also attempts to investigate the factors that hin-

dered its success.

1|INTRODUCTION

Immediately after the formation of the governmen t, National Dem-

ocratic Alliance (NDA) in 2014 led b y the Prime Minister Narendra

Modi announced one of its highly ambi tious plans “Make in India”

(MII). The scheme aims to transform India into a globa l design and

manufacturing hub by fostering innovation, faci litate investment

and built best in class manufacturing i nfrastructure. The scheme

aims to increase the share of the manufacturin g sector to 25% of

the GDP by 2025 and create an additional 100 million j ob. MII

covers 25 different manufacturing industries. The scheme relied

heavily on foreign capital to achieve its goal. Hence, attracting For-

eign Direct Investment (FDI) in the Indi an manufacturing sector was

set as one of the key objectives of the scheme.

1

Indian Prime Min-

ister, Narendra Modi in his first Ind ependence Day speech on

August 15, 2014, said,

“I want to tell the people of the whole world: Come, make in India.

Come and manufacture in India. We have skill,talent,discipline and the

desire to do something. We want to give the world an opportunity that

come make in India.”

Keeping FDI in mind, several amendments were made in the FDI

policy of India. The policy revisions were mainly in the form of

removal of investment caps, altering the routes of investment from

government to automatic (DPIIT, 2017). A list of priority countries

was prepared to facilitate fast track investment. Awareness

programmes were organised for international investors to attract for-

eign capital. The scheme was lauded across the globe by Indian

leaders, which is evident from the several speeches they made

abroad.

2

Several other initiatives like investors summit, global public-

ity program was launched to popularise the scheme. Several profes-

sionals from across the bureaucracy, academia and industry were

engaged to make the scheme a success. Till now the government has

allocated Rs. 1821.5 Cr to the Make in India scheme under seven dif-

ferent categories.

3

Despite all efforts, the available data suggest apart

from handful ones, no significant amount has been invested so far.

Further, the share of the manufacturing sector in the total FDI equity

inflows has decreased during this period 2014–2018.

In this conjuncture, it becomes pivotal to investigate why such a

big scheme failed to attract investment and make any significant

effect. In this context, the current paper tries to examine the

Received: 1 June 2020 Revised: 30 June 2020 Accepted: 27 July 2020

DOI: 10.1002/pa.2341

J Public Affairs. 2022;22:e2341. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons Ltd 1of9

https://doi.org/10.1002/pa.2341