13 Jun

Can Trump’s Trade War Benefit Modi’s Make in India Program?

WRITTEN BY Mike Sonnenberg

The Make in India program

This week, we published research titled Can Southeast Asian Countries Gain from the US-China Trade War? This is a follow up to that series.

India’s recently re-elected prime minister, Narendra Modi, launched the ambitious Make in India program at the beginning of his first term in 2014. The goal of the program was to boost the manufacturing sector and push companies to manufacture locally.

The government set ambitious deliverables for the program. The first was to increase manufacturing’s share of India’s GDP to 25% by 2025, and the second was to create 100 million new jobs by 2022.

Has it lived up to expectations?

One way to make these deliverables happen is to attract more foreign investment to India’s manufacturing sector either by pushing companies such as Amazon (AMZN) and Walmart-owned Flipkart (WMT) to produce locally or by attracting investment from other companies with no major presences in India. Amazon has invested $5.5 billion in India. Walmart acquired Flipkart last year for a staggering $16 billion.

The Reserve Bank of India’s data shows that FDI (foreign direct investment) flows in the manufacturing sector were choppy during Modi’s first term. While FDIs grew in his first year in office, they fell in the next year before rising again in 2016–2017 (from April to March).

Job creation was also much slower than expected during Modi’s first term, largely because the government didn’t deliver on its manufacturing sector promise.

In fact, manufacturing’s share of India’s GDP fell to 14.87% in 2017 from 15.25% in 2013 before Modi took charge. To reach the 25% mark by 2025, India will need billions of dollars’ worth of investments in the manufacturing sector.

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