Lackluster 'Make in India' hitting India's growth: UBS

The lacklustre implementation of Prime Minister Narendra Modi's 'Make in India' initiative is hitting India's growth prospects, according to a report.

"India seems to be missing this opportunity as of today. Economies with favourable demographics that failed to absorb labour effectively in manufacturing, such as Brazil, Egypt, Mexico, South Africa, and Turkey, have also failed to generate high economic growth or attract as much investor interest," global wealth manager UBS said in a report published on Tuesday.

The report attributed the phenomenon to slow progress of the Make-In-India initiative by the government. "The progress under the initiative has not shown up yet (the manufacturing share has not improved over the past five years), though India's share in global goods exports has risen over the past five years," the report stated.

In 2014, the Modi government launched its flagship campaign, called ‘Make in India’, targeting domestic manufacturing and devised to 'transform India into a global manufacturing hub’.

India, however, remains the big growth hope story for global investors, more so with a slowing China and most of the major global economies, the report said.

This hope is reflected in markets pricing in sustained medium-term earnings growth of 15%.

However, the report raised the caution stating that: "Such hopes are in stark contrast to more muted expectations for ‘Make in India’ and may be premised on hopes of a big private capex cycle, which may likely remain elusive in our view."

On the downside, while most of the success factors' outlooks are positive, these remain well-known
constraints in absolute levels -- land, labour, capital, infrastructure, and so on, the report added.

"Elections are a near-term distraction for policymakers, but we would also be tracking the political economy after the elections. As we have highlighted earlier (link), the recent spurt in competitive populism could mean little room for the new government to focus on this opportunity through incentives or infrastructure building," it said.