Make in India & Make for India

balasubp@gmail.com
Make in India(MII) & Make for India (MFI)
delivered on Jan 18, 2015 by
Dr. P. Balasubramanian, Ph.D. 
Founder & CEO, Theme Work Analytics, Bangalore 
& West Lafayette, IN, USA
Seminar Series of lectures at
Madurai School of Management
Copyright of this presentation belongs to PB. Reproduction in any form requires prior permission.

Agenda
❖ Make In India
❖ Make for India
❖ Historical Perspective
❖ Challenges facing India
❖ Goods and Money Flows
❖ Comparative Advantage of Nations
❖ The India Advantage
❖ Comparative Assessment

The Make in India campaign
To give a collective thrust to manufacturing sector;
to make India a global manufacturing hub
To create jobs and to revive growth in economy
To retain international investor interest in India

The Make in India campaign
How will this be accomplished?
by facilitating ease of entry and investment
through removal of policy and process
constraints
by enhancing investments in transportation,
energy and other infrastructure sectors

The Make for India proposition
asks for focus of manufacturing in India to be
on satisfying the needs of Indian markets.
less reliance on export markets
to create a positive cycle of higher demand and
higher supply of goods in India leading to
higher production and sales.
Hence will lead to higher income for Indian
citizens; help to improve and rebuild skill sets.

Hence these two propositions are not
mutually exclusive or contradictory.
They are by and large complementary.
They differ however on one major aspect,
viz the export thrust.
MII seeks to make India the global hub
for manufacturing while MFI’s focus is to
develop the Indian market and economy
copyright : PB

A historical perspective is necessary
Till four centuries ago India was one of the richest
countries in the world. Every European voyager set
sail to discover a short route to India. Purpose was to
acquire the Wealth of the Nation, vie Silk and Spices.
It is estimated that 25 % of world exports emanated
from India

A historical perspective is necessary
India was the land of artists, artisans, poets
and scholars .
It was the home of mathematicians,
astronomers and biologists.
It was where knowledge to process sugarcane
and cotton resided 3000 years ago.
It knew how to process metals.
It was one of the richest nations in the world.
With spices and silk.

femlit.gif
India during the industrial age
Spent two centuries fighting colonialism.
Subjugation of India’s economic interest to that of
Great Britain.
India was a source of raw materials and a market
for British goods.
Trade through appointed agents.
Even building of the vast rail network in India
benefited only the steel and machinery industry of
the British.

No science education in Universities till mid 1800s.
No budget, focus or initiative on research at
universities.
No network of scientists, scholars and no
dissemination of knowledge.
Intellectual Property Rights, an unknown concept

Two centuries of colonialism meant that
•We missed the Industrial revolution
•We yielded the ground on scientific temper and spirit
•We lost the entrepreneurial spirit

The world however has moved from the Industrial age
to Information age in the last 50 years.
The computer and internet revolution has swept across
the globe. Business Advantages built skilfully over two
centuries have been wiped out to create a level playing
field.
“Death of Distance, time zones and Information gaps ”
The business advantage accrues to the innovator, owner
of knowledge assets
Where in the world are we now?

Challenges facing India
Source: http://www.slideshare.net/zendeem/indias-economic-profile

India: Composition of GDP
32%
46%
22%
Industry Services Agriculture
China: Composition of GDP
27%
31%
42%
Industry Services
Agriculture
Source: Internal elaboration on World Development Indicators database, September 2008
Sectoral composition
USA data : Agri 1.2 % Industry 19.8 % Services 79 % (2007 )
Source : www.indexmundi.com/united_states/
gdp_composition_by_sector.html

http://blog.euromonitor.com/2012/08/india-lagging-far-behind-china-in-female-literacy-and-employment-rates.html

Source: https://www.equitymaster.com/5minWrapUp/charts/index.asp?date=08/29/2013&story=1&title=How-does-
India-look-on-the-misery-index

❖ Needs a second green revolution to improve
Farm Productivity
❖ Must find ways to improve storage and
logistics of agri product distribution
❖ Needs to find alternative sources of energy to
reduce import dependency and environmental
degradation
❖ Has to fight flooding and draught impacts in
different parts of the country
❖ Bring potable water to villages
………

❖ Generate employment in millions
❖ Enhance health care and nutrition across the
population
❖ Build technical and marketable skills in millions
❖ Find more teachers
❖ Significantly boost exports ;stabilize currency
❖ Building innovation & entrepreneurial Base and
skill sets

Two Countries Model (using different but hard currencies)
Country A Country BMoney Flow
(current)
Flow of Goods &
NF Services
Money Flow
(Future)
Flow of Titles to
Physical Assets
Currency
Exchange
Market
Money Flow
(current)
Money Flow
(Future)
Model copyright: PB

• Trade imbalances can arise but are addressed by money
flows in required direction
• Money flows can occur independent of Trade
• One country funds can be used to hold titles to assets in
other country
• Exchange rate setting mechanism can be either
controlled or uncontrolled
• Relative strength of economies of the countries impacts
on the exchange rate
Two Countries Model (using different but hard currencies)
copyright : PB

• Model gets complicated in many ways
• Country B ( with soft currency) may not be able to procure
all the Goods and NF Services it seeks/needs.
• Government of Country B has a major role in controlling
the exchange rate. It further brings many import
restrictions.
• Sometimes through Development Grants, Aids and Loans
obtained through a Development Bank/Entity of Country A,
Country B can get access to hard currency to procure goods
and NF Services from Country A
Two Countries Model (with hard and soft currencies)
copyright : PB

Law of comparative Advantage
David Ricardo, in 1807, enunciated this principle.
Consider two countries A and B, whose citizens
need both food and clothing.
Country A people are smarter than Country B.
They are more productive than B in producing
food and clothing. The productivity difference is
higher in food compared to clothing. But they have
enough resources to produce only one of them.
Then Ricardo showed that people of both
countries are better off if Country A produces
food and Country B, clothing and they trade with
each other.
Cooperation leads to Win Win for both.

Population Groups of relevance
➢ Investing Era : [0 to 22 years]
Child to Adulthood, Faculty Development,
Skills, Knowledge and Character building
➢ Harvesting Era : [22 to 65 years]
Productive Employment and
Asset Building for the nation
➢ Protecting Era : [65+ years]
Providing adequate health care, means of living etc

source: NationMaster.com

China Data

USA Data

“The Democracy, Demography and Demand Leverage””
Significant Advantages of India
The Democracy
Dividend
represents an open, stable and
vibrant society that treats all
citizens as equal
The Population
Dividend
both the absolute number and
the age-wise distribution create
a huge local market on both
demand and supply sides
The Diversity
Dividend
identifies a tolerant, pluralistic
and multi cultural society that
can be very innovative.
copyright : PB

Export Thrust vs. focus on Domestic Economy
Advantage ET Advantage DE
Skill sets of populace would
rise to international levels
faster.
Foreign Investments will be
higher.
GDP and per capita income
will rise faster
Nation can be a hot bed of
innovation since India is very
cost conscious.
Better balance between rural and
urban growth can be achieved.
Economy will be robust and not
buffeted by international crises.
copyright : PB

Export Thrust vs. focus on Domestic Economy
Disadvantage ET Disadvantage DE
Higher dependency on other
nations IP.
Higher dependency on foreign
capital will destabilize the
Indian economy even in short
term.
Foreign markets and raw
material supplies are subject
to vagaries of demand.
GDP and per capita income
growth will be slower.
Employment generation will
be slow to start with.
Nation can become insular and
overly protective of its
economy even in inefficient
sectors.
copyright : PB

balasubp@gmail.com
delivered by
Dr. P. Balasubramanian, Ph.D. 
Founder & CEO, Theme Work Analytics, Bangalore 
& West Lafayette, IN, USA
Seminar Series of lectures at
Madurai School of Management Best Wishes !

Make in India & Make for India

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