Make in India- Why we need it to work?

"Make in India" is a new push on manufacturing by the new Indian Prime Minister, Narendra Modi. It is a sales pitch the Prime Minister is making on 25 key industries to attract foreign businesses into India. It is partly a conference and partly a portal that will list the things Indian government will help foreign investors. 

What does Make in India include?

1. Fundamentally it is a sales pitch . The Prime Minister wants the foreign companies to manufacture their products in India.
2. It covers 25 major sectors (automobiles, chemicals etc) that the government feels are the most important for India. Government is putting all its effort to bring new businesses in these. 
3. It will work well with the "Invest India" - an initiative by the Commerce ministry to make it very simple to get investment approvals for manufacturing. 
4. It will have a web portal with in-depth details on government initiatives in various sectors and also a hotline for foreign investors to get immediate support.

Why we need it to work?
The core idea of the campaign is to make India a manufacturing super power by inviting as many foreign manufacturers to set their base in India.  So what will happen if many foreign companies set their manufacturing units in India?

It creates More Employment More new industries means more new job opportunities. India has an unemployment rate of 8% and according to the recent surveys India will require 55 million more jobs by 2015. "Make in India" campaign gaining desired traction will be a vitamin injection to the employment sector.

It increases Industrial sector’s GDP contribution to our Economy The service sector’s and Industrial sector's GDP contribution to our economy has improved considerably in the last fifty years whereas Agricultural sector has taken a huge hit in GDP contribution to the economy

Making this work will have huge impact on India’s GDP while changing the entire graph of our employment sector.India’s GDP contribution inManufacturing(currently at 15%) will increase substantially.

MNREGA- Why it failed?

The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) was adopted in 2005 and first became operational in 200 of the poorest districts in India in February 2006. Within two and a half years it was extended to the rest of the country in April 2008.

Why did MNREGA fail?
Work needed to be provided to a person who registers for it within fifteen days of the date of demand. If work is not provided within 15 days of applying, the state is expected to pay an unemployment allowance which is one- fourth of the wage rate.
Therefore, the Act acted as a social safety net, provided employment to the poorest and aimed at inclusive growth and strengthening of the rural economy. This looks somewhat like the unemployment allowance system being followed in some of the developed nations, except that the government forgot-

1. India has a huge population(read unskilled labour force) and comparatively lesser demand for work (rampant corruption and mismanagement worsen the situation). This means the situation is inevitable where many would not get the job and will receive the unemployment-allowance. 
2. The Planning Commission had pointed out that payments to the workers were delayed as there was a late measurement of work. There were constant delays in payments and workers often waited for months to receive their wages. Delayed wages warranted compensation under the Payment of Wages Act. However, due to an ineffective grievance mechanism the problem was not being addressed.
3. There were not enough administrative and technical officials. The lack of administrative power in running the scheme in a proper decentralised manner to accomplish the building of blocks and capacity is simply a blunder.

Among other reasons, these were the ones that made MNREGA a terrible failure. 

There are many reasons for its failure but almost all of them can easily be traced back to 2 factors:
1. Corruption
2. Mismanagement

It was an extremely promising scheme which was implemented in the worst possible way leading to the failure. 

What is the ongoing Greek economic disaster and what does it mean for India?

After the second world war, unification attempts shifted from the power of the gun to the power of the currency. European powers along with the USA worked on a strong economic integration to prevent another world war. 

The first move was initiated in 1951 by a group of 6 countries - France, West Germany, Belgium, Netherlands, Luxembourg and Italy. These continental powers saw most of the action both the world wars. Thus, the economic integration started from there. The West European countries were next to each other, similar in their development and incomes and thus the integration was quite successful. 

However, in 1981 Greece was admitted into EU. This was unusual as Greece was way behind Western Europe in development. Greece was comparable to other eastern European countries and none of Eastern Europe was admitted into EU. 

Troubles with the Greek Economy 
Free trade areas and economic integration often makes sense among comparable economies. However, Greece and rest of EU were quite dissimilar. Greek companies could not withstand the competition, while the wages of Greek employees were rapidly rising to level with rest of EU. 

The result was that unlike every other EU power who enjoyed economic gains by being a part of the EU, Greece receded. Its economy declined

Impact on India-

1. Greece was admitted to EU and later became a part of the Euro.  Trouble there will affect India's exports. India exports nearly $40 billion every year to EU [Rs. 2.4 lakh crores]

2. World financial markets are closely linked. Just as kids in a class catch cold if just one kid gets it, financial markets get screwed if one market goes down. Investors in US and elsewhere would pull money out of India and other "foreign" stocks for the losses in Greece [basic human psychology is that if we get into trouble with one person, we avoid everyone similar to them]. When investors pull money away, Indian stock markets will crash. That will affect Indian companies.

3.When world bond markets get into a problem, Indian government would find it tougher to borrow money and that would affect domestic investments & growth. It would also push down the currency [meaning imports will go up] and cause inflation.

Issues related to Minimum Support Price

India is faced with a complicated situation as on one hand there is record production of cereals and on the other hand there have been trends of stagnant high inflation even when FCI godowns are overstocked. Many blame India’s minimum selling price policy for this situation. It has two unintended negative impacts; one is growth in agriculture is not dictated by demand of economy, other is persistent inflation. There are many other interventions which are isolated/unintegrated and lack broad vision of sector as a whole. Further, India has challenge to align domestic markets with international markets as exports of agriculture products can bring more prosperity to country side. It is said that 1% increase in Agro exports results in Inflow of 8500 crores in the sector. In this sense we can’t ignore WTO negotiations. These are to be negotiated while taking care of sovereignty and food security of India. 

Income based poverty line vs Consumption based poverty line

Even though NSSO captures consumption expenditure which used by Planning commission to determine poverty line. An alternative way of calculation of poverty line can be one based on Income of the population. But till now all committees have favoured consumption based poverty line due to following factors –

1. Huge majority of population has irregular income, most of them are in informal sector which consists of self-employed people, daily wage laborers etc. Income of this group is highly variable both temporally and spatially, while consumption pattern are comparatively much stable.
2. Even in case of regular wage earners, there are additional side incomes in many cases, which is difficult to take into account.
3. For e.g. MGNREGA provides employment for about 100 days, for rest of the time too people will earn something.
4. NSSO’s sample based surveys use a ‘reference period’ (say 30 days). They will ask households under survey about their consumption in last 30 days. This they will take a representative of general consumption of that household. This is not possible in case of income.

Brazil falls deep into recession.

Once a major economic success story, Brazil sank into recession. Its economy contracted 1.9% in the second quarter compared to the first. It was the second consecutive quarter of contraction.

Here are the major reasons why Brazil, is now in a recession:

1. Brazil's exports to China had exploded over the last decade. Now that China's economy is slowing, it needs fewer exports from Brazil. 

2. Brazil's state-run oil company, Petrobras, is in a massive corruption scandal tied to many members in Rousseff's political party. The large money-laundering scandal spans across oil, business and political leaders in the country. 

3. Prices for all of Brazil's key commodities -- oil, sugar, coffee, metals -- have tanked. Commodities are the engine behind Brazil's economy and they've lost value fast.

The recession comes as Brazilians are holding mass calling for Roussef's impeachment. Although corruption isn't new in Brazil, the scale of the Petrobras corruption is large. Petrobras officials said earlier this year that the company lost $2 billion just in bribes.

Why isn't the USA stopping China from becoming an economic superpower?

If we analyse the situation rationally, there are two reasons for this-

1) China has something like 4.5 times America's population, so the fact that their economy is en route to exceed ours is hardly surprising. If you think that's a bad thing, you are essentially saying that 1.4 billion people should be living in poverty. What reason is there for believing that the U.S economy should always be the largest on earth?

2) What do you think the government should be doing to prevent the Chinese economy from growing? A boycott is hardly possible and a trade war would hurt us as badly as them. Investment restrictions would again just hurt us and benefit Europe and Japan.

The fact is that the American and Chinese economies are tightly linked. We should be thinking about how to benefit from China's rise (for example, selling them some scrubbers for their coal plants) instead of pointlessly trying to keep them down.