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

Abstract

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 performance of the scheme. The paper also attempts to investigate the factors that hindered its success.

India: Developmental challenges faced by a dual economy

“…The institutional costs relating to labour laws, health care and social security of regulating and utilising this massive working age but unskilled population are seemingly insurmountable (Choudhury, 2022). 2 It is no surprise that most of India's poor work in informal sectors in a dispersed and unorganised manner (Crane, 2017).…”