'Make for India' is a better approach, advises Rajan

The Reserve Bank of India (RBI) Governor Raghuram Rajan on Friday warned that the BJP government’s “Make in India” campaign should not focus much on manufacturing and exports because the slow growing industrial countries did not have the appetite for more imports in the near future.

Instead, Rajan suggested that ‘Make for India’ was a better approach where the goods produced were largely for consumption in India.

“There is a danger when we discuss “Make in India” of assuming it means a focus on manufacturing, an attempt to follow the export-led growth path that China followed. I don’t think such a specific focus is intended. If external demand growth is likely to be muted, we have to produce for the internal market,” Rajan said at the Bharat Ram Memorial Lecture in Ficci.
The Narendra Modi government, soon after assuming the office, launched its ambitious programme to make India a manufacturing powerhouse and has advocated boosting exports and incentivising imports. The RBI Governor, however, spoke against the import substitution strategy saying that it might not work for the country in the current global economic scenario.

“I am counselling against an export-led strategy that involves subsidising exporters with cheap inputs as well as an undervalued exchange rate simply because it is unlikely to be as effective at this juncture. I am also cautioning against picking a particular sector such as manufacturing for encouragement simply because it has worked well for China,” he said, adding, “India is different, and developing at a different time, and we should be agnostic about what will work.”

Clarifying that he was not advocating “export pessimism”, the governor, however, said that the strategy of subsidising exports had not worked well for India in the past. This is the first time that Modi’s vociferous ‘Make in India’ campaign has been criticised by authorities within India.