"If one believes that employment generation through manufacturing will solely be limited to the manufacturing sector itself then it is a wrong assertion."Pradipto Ganguly, CEO & Co-Founder, Britzo

Since the beginning of this decade, India’s unemployment rate has been juggling from 3.62 percent to 3.41 percent. In 2017, the figure stood at 3.52 percent, roughly above the decade’s mean of 3.51 percent. Now, if you consider India’s population of 1.35 billion, this gives us more than 47 million, or over 4.7 crore, unemployed Indians– who are capable of contributing to the nation’s workforce– always unemployed.

But can the situation change for good with the ‘Make in India’ initiative? As a matter of fact, it is an eventual possibility.

Towards International Trade Dominance: How can ‘Make in India’ boost the Indian economy?

Before we delve deeper into the subject, let us first understand why ‘Make in India’ is imperative, especially to our nation. India’s top-ten imports account for almost four-fifths (78.2 percent) of its purchases from other countries. Besides mineral fuels, this includes $46.9 billion (10.6 percent) worth of electrical machinery and equipment, $36 billion (8.1 percent) worth of machinery such as computers and electronics, $13 billion (2.9 percent) worth of plastics and plastic articles, $11.9 billion (2.7 percent) worth of animal/vegetable fats, oils, waxes, and optical, technical, and medical apparatus worth $8.4 billion (1.9 percent). Nearly 50 percent of all electronic products sold in India are imported. If India is able to successfully build its manufacturing infrastructure, the nation can save billions of its foreign reserves annually, which is as high as $116.2 billion just out of these commodities, by merely catering to the local demand. But the real fruits of ‘Make in India’ become more apparent if we bring international trade into perspective.

For long, India has suffered because of its underdeveloped industrial infrastructure. This is despite the country’s favorable geographical location that has access to nearly all Asiatic countries and a budding market of Africa. The nation, on one hand, holds a central location between Far-Eastern and Middle-Eastern markets, and on the other, has access to European market through Gulf of Aden, and to Australia via the South East. It has to be also noted that these trade routes are sea-based, that are more economical than land-based freight transportation. If India successfully builds its manufacturing infrastructure matching the global benchmark, the nation has the true potential to emerge as a dominant global supplier. Here, the country is also benefitted by the globally changing demographics.

India has one of the youngest populations and will house a billion people aged between 15 and 64 years by 2027, essentially the world’s largest workforce. The country also has the advantage of wage arbitrage with cost of factory labor less than $2 per hour. Technologically speaking, India’s digitization drive is increasing its overall efficiency and effectiveness in trade with every day that passes. The nation further benefits by its ability to indigenously build ancillary systems, such as purpose-specific satellites. The nation also has one of the globally leading IT service and support infrastructures and skilled workforce.

These are some of the reasons why multinational organizations are considering the prospect of establishing their manufacturing bases in India.

Employment generation and the factors that dominantly play in the background

If one believes that employment generation through manufacturing will solely be limited to the manufacturing sector itself then it is a wrong assertion. Consider that any product, for instance a smartphone, is manufactured within the country. It is going to benefit every sector that is remotely associated with the smartphone industry. Besides manufacturing and assembly units of the smartphone, OEMs (Original Equipment Manufacturers) will establish bases within the country to decrease their shipping costs, and hence, the overall cost of manufacturing. While the manufacturing unit will employ its in-house workforce, ranging from assemblers, line managers, engineers, and senior resources, it will also require the involvement of both in-house and outbound logistics operators for supply chain management. Further, these products will cater to the demand of the national market and the profit generated will entirely be retained within the country. It will benefit a broader ecosystem as compared to a fixed channel of distribution as of now.

The decreased inflow of import will help the government in increasing its fiscal surplus and will further catalyze employment generation through alternative routes. Once the nation has adequate manufacturing capacity and the supporting infrastructure in place, the next logical move will be to promote more innovations that are strategically aimed at next-generation technologies and commodities.

India has recently inaugurated the world’s largest mobile phone factory in association with the South Korean tech giant Samsung in Noida, which is expected to annually manufacture 52 million smartphone units once it achieves full production capacity. The plant will, by itself, generate 15,000 jobs locally and increase Samsung’s India-based production from 10 percent to 50 percent over the next 3 years. Our nation is, moreover, in talks with multiple internationally dominant players, including Apple, while simultaneously acting as a catalyst for its innovation-driven indigenous brands to collectively make it a global manufacturing behemoth, and thereby accomplishing the true vision of ‘Make in India’.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house