The Unmaking Of Make In India
June 01 2021, 4:35 PM
Remember Make in India? On Feb. 13, 2016, Prime Minister Narendra Modi declared: “we want the share of manufacturing in our GDP to go up to 25% in the near future.” The programme’s stated goal was to hit this target by 2022 and to generate 100 million manufacturing jobs in India.
So where do we stand one year before our deadline? In a very dismal place, and not only because of the Covid-19 pandemic.
Rather than adding 100 million manufacturing jobs, India lost 24 million jobs between 2016-17 and 2020-21, according to a recent analysis by Ashoka University’s Centre for Economic Data and Analysis. Covid-19 was only the last straw: 11 million jobs had already been lost before the pandemic hit.
Rather than rising to 25%, the share of manufacturing in the overall economy plunged to 14% in 2020-21 from 17% in 2015-16. For all his rhetoric of reviving Indian manufacturing to compete with China, Modi has done much worse than his predecessor Manmohan Singh. Is that the impression you get from reading India’s ‘free and fair’ media?
With domestic manufacturing spiralling downwards, the Modi government has instead been talking up buoyant foreign direct investment flows to India. The government recently celebrated record FDI flows of $82 billion in 2020-21, of which $28 billion was accounted for by one transaction: the sale of Reliance Jio stock to Facebook, Google, and KKR. FDI in recent years has mostly flowed to information technology, computers, e-commerce, and transportation. Manufacturing gets relatively little, as this chart shows:
To summarise, Make in India has failed to achieve any of its stated goals. Rather, every indicator has worsened, be it the share of manufacturing in the economy or the number of jobs generated in manufacturing. The pandemic is no excuse: it only accelerated a slide that had been underway for several years.
This might explain why the government’s rhetoric has shifted to Atmanirbhar Bharat, or self-sufficiency. Who needs results when you can just move the goalposts?
Make in India? Half of manufacturing jobs lost in five years
According to an analysis by the Centre for Economic Data and Analysis (CEDA) based on the CMIE monthly time-series of employment by industry, manufacturing employment in 2020-21 was nearly half of what it was five years ago.
While the employment scenario in the country has turned bleaker of late due to the pandemic after a brief spell of moderate recovery from the fathoms hit in May 2020, manufacturing, which has ostensibly received a lot of policy attention, has been losing out to other sectors and the most to agriculture as job creator over the past few years.
According to an analysis by the Centre for Economic Data and Analysis (CEDA) based on the CMIE monthly time-series of employment by industry, manufacturing employment in 2020-21 was nearly half of what it was five years ago.
The decline was particularly sharper in 2020-21 owing to the pandemic – on a year-on-year basis, the sector employed 32% fewer people in 2020-21 over 2019-20. Real estate & construction also also saw big fall in its share in employment in 2020-21 (see chart) and a secular decline over the five-years to 2020-21.
While there has been a secular decline in manufacturing employment across all sub-sectors, except chemical industries, all sub-sectors registered a longer-term decline. From employing 51 million people in 2016-17, employment in manufacturing, which accounts for 17% of the country’s gross domestic product (GDP), declined by 46% to reach 27.3 million in 2020-21, reflecting the severity of the employment crisis caused by the pandemic.
Similarly, the real estate and construction sector, which employed 69 million people in 2016-17, employed just 53.7 million in 2020-21, down by a quarter. While the pandemic indeed accentuated the decline, the sector had even earlier been hit hard by inventory pile-up, delivery delays and developer delinquencies. The real estate sector had witnessed a sharp increase in employment growth in the 2004-2011 period, thanks to a boom.
According to the CEDA-CMIE study which covered agriculture, mines, manufacturing, real estate and construction, financial services, non-financial services, and public administrative services, sectors that account for 99% of total employment in the country, agriculture now employs more people than five years ago. The agriculture sector that employed 145.6 million people in 2016-17, employed 151.8 million in 2020-21, allowing its share in employment to grow from 36% to 40% during the period. Employment in agriculture has been on the rise over the last two years with year-on-year growth rates of 1.7% in 2019-20 and 4.1% in 2020-21, indicating a marginal shift away from manufacturing, non-financial services, mining and real estate sectors to the traditional resort for livelihood.
Among the service sectors, non-financial services, the largest component among service industries, the employment rose over the five-year horizon to 119.7 million to 127.7 million in 2020-21, but there was a sharp y-o-y decline in 2020-21, owing to the pandemic.
As reported by FE recently, like the one a year ago, the recent lockdown also has had an immediate, telling effect on the employment scenario in the country. The country’s unemployment rate, that has remained elevated for a few weeks, soared to a near one-year-high of 14.45% in the week ended May 16. While an already-high urban joblessness has turned more acute, a near-100% week-on-week rise in rural unemployment pushed the overall joblessness rate to a level not witnessed since the the week ended June 7 last year, when it stood at 17.51%.
June 01 2021, 4:35 PM
Remember Make in India? On Feb. 13, 2016, Prime Minister Narendra Modi declared: “we want the share of manufacturing in our GDP to go up to 25% in the near future.” The programme’s stated goal was to hit this target by 2022 and to generate 100 million manufacturing jobs in India.
So where do we stand one year before our deadline? In a very dismal place, and not only because of the Covid-19 pandemic.
Rather than adding 100 million manufacturing jobs, India lost 24 million jobs between 2016-17 and 2020-21, according to a recent analysis by Ashoka University’s Centre for Economic Data and Analysis. Covid-19 was only the last straw: 11 million jobs had already been lost before the pandemic hit.
Rather than rising to 25%, the share of manufacturing in the overall economy plunged to 14% in 2020-21 from 17% in 2015-16. For all his rhetoric of reviving Indian manufacturing to compete with China, Modi has done much worse than his predecessor Manmohan Singh. Is that the impression you get from reading India’s ‘free and fair’ media?
With domestic manufacturing spiralling downwards, the Modi government has instead been talking up buoyant foreign direct investment flows to India. The government recently celebrated record FDI flows of $82 billion in 2020-21, of which $28 billion was accounted for by one transaction: the sale of Reliance Jio stock to Facebook, Google, and KKR. FDI in recent years has mostly flowed to information technology, computers, e-commerce, and transportation. Manufacturing gets relatively little, as this chart shows:
To summarise, Make in India has failed to achieve any of its stated goals. Rather, every indicator has worsened, be it the share of manufacturing in the economy or the number of jobs generated in manufacturing. The pandemic is no excuse: it only accelerated a slide that had been underway for several years.
This might explain why the government’s rhetoric has shifted to Atmanirbhar Bharat, or self-sufficiency. Who needs results when you can just move the goalposts?
Make in India? Half of manufacturing jobs lost in five years
According to an analysis by the Centre for Economic Data and Analysis (CEDA) based on the CMIE monthly time-series of employment by industry, manufacturing employment in 2020-21 was nearly half of what it was five years ago.
While the employment scenario in the country has turned bleaker of late due to the pandemic after a brief spell of moderate recovery from the fathoms hit in May 2020, manufacturing, which has ostensibly received a lot of policy attention, has been losing out to other sectors and the most to agriculture as job creator over the past few years.
According to an analysis by the Centre for Economic Data and Analysis (CEDA) based on the CMIE monthly time-series of employment by industry, manufacturing employment in 2020-21 was nearly half of what it was five years ago.
The decline was particularly sharper in 2020-21 owing to the pandemic – on a year-on-year basis, the sector employed 32% fewer people in 2020-21 over 2019-20. Real estate & construction also also saw big fall in its share in employment in 2020-21 (see chart) and a secular decline over the five-years to 2020-21.
While there has been a secular decline in manufacturing employment across all sub-sectors, except chemical industries, all sub-sectors registered a longer-term decline. From employing 51 million people in 2016-17, employment in manufacturing, which accounts for 17% of the country’s gross domestic product (GDP), declined by 46% to reach 27.3 million in 2020-21, reflecting the severity of the employment crisis caused by the pandemic.
Similarly, the real estate and construction sector, which employed 69 million people in 2016-17, employed just 53.7 million in 2020-21, down by a quarter. While the pandemic indeed accentuated the decline, the sector had even earlier been hit hard by inventory pile-up, delivery delays and developer delinquencies. The real estate sector had witnessed a sharp increase in employment growth in the 2004-2011 period, thanks to a boom.
According to the CEDA-CMIE study which covered agriculture, mines, manufacturing, real estate and construction, financial services, non-financial services, and public administrative services, sectors that account for 99% of total employment in the country, agriculture now employs more people than five years ago. The agriculture sector that employed 145.6 million people in 2016-17, employed 151.8 million in 2020-21, allowing its share in employment to grow from 36% to 40% during the period. Employment in agriculture has been on the rise over the last two years with year-on-year growth rates of 1.7% in 2019-20 and 4.1% in 2020-21, indicating a marginal shift away from manufacturing, non-financial services, mining and real estate sectors to the traditional resort for livelihood.
Among the service sectors, non-financial services, the largest component among service industries, the employment rose over the five-year horizon to 119.7 million to 127.7 million in 2020-21, but there was a sharp y-o-y decline in 2020-21, owing to the pandemic.
As reported by FE recently, like the one a year ago, the recent lockdown also has had an immediate, telling effect on the employment scenario in the country. The country’s unemployment rate, that has remained elevated for a few weeks, soared to a near one-year-high of 14.45% in the week ended May 16. While an already-high urban joblessness has turned more acute, a near-100% week-on-week rise in rural unemployment pushed the overall joblessness rate to a level not witnessed since the the week ended June 7 last year, when it stood at 17.51%.
