THE funny thing about Make in India is that while the slogan, the advertising, the graphics and the fancy social media campaign are all new, the idea is as old as the freedom struggle. It was Jawaharlal Nehru who first brought to global attention the true cost of colonization to India. When the Europeans first got here, they were lured by the fabled riches of India, at the time one of the richest countries in the world. By the time we finally got rid of the British in 1947, we were one of the poorest countries in the world.

In the two centuries that the British had spent ruling India, they had guaranteed that we missed the industrial revolution. Rather than set up an industrial base in India, they were content to leave the majority of the population in the villages, producing crops which the British bought/acquired and then used to finance their own development. As Gandhiji reminded us, the cotton mills of Lancashire functioned on the basis of cotton acquired at low rates from Indian farmers.

By 1947, the time we became an independent country, we were left with two, or perhaps three, ways of making up for lost time. The first was Gandhiji’s. He was always uncomfortable with the big cities that grew around industrial complexes and much preferred the India of the villages. During the freedom struggle, khadi and the charkha had become symbols of resistance, a way of rejecting the mill-made cloth that had been churned out by Lancashire’s factories. All through he hoped that independent India would go forward as a village-based economy focusing on the small-scale sector and cottage industries.

The second way was Nehru’s. As much as he admired the Mahatma, he had been impressed by the Soviet model. He saw the Russians pushing forward to make up for the time they had lost under the Czars and in the bloodbath of the Second World War.

Nehru believed (correctly, as it turned out) that India needed a vast industrial infrastructure and recognized that the private sector did not have the resources to fund it. So the state had to get involved as it had in Russia. Vast steel plants, giant power plants and grand dams would become the temples of modern India as we worshipped at the altar of industrialization which would lead to progress.

 

And there was a third way. Though we tend to play this down now, the Congress party was financed by businessmen. Gandhiji’s benefactor was G.D. Birla, in whose Delhi residence he died. There was no question of going the full Soviet route. There would always be room for a private sector, for individual business houses. Just as Gandhiji was close to the Birlas, Nehru was a friend of J.R.D. Tata, whom he admired at a personal level.

So eventually, the Congress gave us three different versions of Make in India. There was Gandhiji’s way, focusing on the small-scale sector. There was Nehru’s way, learning from the Soviet model to pump vast amounts of tax payers’ money into the creation of a state-run industrial infrastructure. And then there was a third way: let their friends in the private sector make what they needed.

Oddly enough all three ways intersected at one point. Both Nehru and Gandhi were deeply suspicious of foreign trade which they believed had done so much harm to India. Gandhiji, after all, had encouraged his followers to burn mill-made fabric imported from Manchester.

These prejudices suited the private sector just fine. If the government would not allow imports in without taxing them heavily, well then, it meant that Indian industry could make what it wanted and charge what it liked. The foreign version may be better and/or cheaper. But it would also be impossible to get in India.

It was around the vested interests and entrenched beliefs of this trio that the Indian economy, as we knew it till 1991, developed. Such was the legacy of suspicion of foreigners that ‘self-sufficiency’ became a by-word. In an ideal world, we were told, India should not have to import anything from abroad. We should be able to make nearly everything ourselves. It was one more variation on the idea of Make in India.

And because Nehru’s admiration of the Soviet Union’s planned economy still lingered, all industrial production was subject to a strict regime of taxes, licenses, inspections and controls. After all, the market alone could not be allowed to decide how scarce resources were to be allocated. When foreign companies were allowed to operate in India, they were subject to stringent controls. Periodically, the government would change its mind about how much of their Indian units the foreigners could own and they would be required to divest their shares. Consequently, none of them made huge investments in India. If they believed in Make in India, it was to Sell In India.

 

By the late 1980s, there was a consensus to the effect that we had gone wrong. Yes, there were advantages to Making In India. We had developed – at great sacrifice – an industrial base for ourselves. (Contrast this with Pakistan which flung itself into America’s arms after Independence and had difficulty making a tube of toothpaste on its own.) But did it really make sense for us to throw out IBM in 1977? Was there any justification for expelling Coca Cola only because they would not whisper their secret formula into George Fernandes’s ear?

And did we need to make everything in India? The story goes that when Pandit Nehru banned the import of cosmetics, Indira Gandhi remonstrated with him. Finally, he sent for J.R.D. Tata and asked if the Tatas could set up a company that made cosmetics. (J.R.D. Tata said yes; which is how Lakme was born! Ironically enough, Lakme is now owned by Unileaver.)

 

In 1980s, the process of rethinking our insistence on making everything ourselves had begun. But it wasn’t till 1991, with India virtually bankrupt and the IMF holding a pistol to our heads, that the old license-permit-quota raj was finally dismantled.

Now, the call went out, India welcomed foreign investment. We welcomed imports. Foreign companies could come and set up their units here. They could Make in India or they could just make it anywhere else and Sell In India.

By the beginning of the 21st century, as India became more confident, governments began to re-examine their options. The global image of India had certainly changed. But it had changed in a way that Gandhiji would have approved of. The respect that India had earned was not because of our great manufacturing success but because of a new age small-scale industry: computer software.

The software engineers were the children of Nehru. They emerged out of the IITs he had set up and subsidized. But they were also Gandhiji’s people because they did not set up huge manufacturing units employing thousands (or even hundreds) of unskilled workers. They worked with their computers, creating software that the world wanted to buy. Gandhiji had the charkha. They had their computers.

As great as the software industry was for India’s image as it became the first best example of Make in India for the 21st century, it was not the giant employment generating, investment attracting enterprise that the government was looking for.

And so prime minister after prime minister scoured the world looking for foreign investment. For instance, Manmohan Singh believed in 2008, when the global financial crisis loomed on the horizon, that India had a small window to draw even a fraction of the quantum of investment that China was attracting each year. He believed, perhaps accurately, that the billions of dollars of foreign investment had transformed China and helped it fight poverty.

 

It was with this end in mind that Manmohan Singh began an assiduous cultivation of America. He pushed for the Indo-US nuclear deal, threatening to resign if it was not passed, because he believed it was a vital first step in attracting US investment to India. Sign the deal, he believed, and American corporations will rush to invest in India. As we know, it did not work out that way. Perhaps this was because of the global financial crisis that finally erupted after the deal was through. Or perhaps Manmohan Singh had miscalculated to begin with.

Now, Narendra Modi is offering yet another version of Make in India. Judging by what I’ve seen and heard so far, his vision is influenced by China. Modi, who has often visited China and frequently talks about the country, must have seen the vast factories that China has constructed. For foreign companies, fed up of high wages, and union demands at home, these factories offer a glimpse of the future.

Chinese workers are disciplined, the infrastructure is good, wages are low and productivity is high. You can make the same product that you make in America or Italy at one-tenth the cost. Why, ask proponents of this latest avatars of Make in India, can’t India follow China’s example? There are parts of the country where infrastructure is well maintained and labour is plentiful. Surely, if we can set up the same sorts of factories we can compete with China for foreign investment?

 

It is a seductive vision. But, it runs up against two problems. The first is India’s federal structure. As investor after investor has learned to his cost, getting the central government to clear a project, tedious as it might be, is the easy part. The more difficult element is dealing with the state government, the district administration, the police and local discontents and malcontents.

In China, an investor can cope with local problems by spreading a few thousand dollars around. It may be corrupt, but it is efficient. In India alas, the system is just as corrupt but it is not at all efficient. And then there is the problem of local opposition. As company after company – from POSCO to the Tatas – has discovered to its cost, if villagers object to land acquisition, if tribals say you are seizing their sacred land, or if local politicians want to sabotage the project, then there’s not much you can do except eventually withdraw from the project.

In all fairness, Modi has faced these problems in Gujarat and he has found solutions. But, it may not be so easy to force other states to find solutions. In West Bengal, the support of the ruling CPM and of the UPA in Delhi, could not save the Tata Nano project. And once one or two high profile projects fail, the signal goes out: it is easier to do business in China.

There is a second problem. Any economist will tell you that India’s labour laws are an impediment to growth. And yet, such is the strength of organized labour, a high wage island in an ocean of poverty, that few governments dare reform the laws.

When Modi was elected, it was widely assumed that with his mandate he now had the political muscle to take on the unions. But given the problems he has faced with the land acquisition bill, when a coalition of interests inside and outside parliament sprang up to oppose him, it is not clear if he still has the will to tackle the labour laws. Certainly, labour law reform no longer features in any of the speeches made by this government’s leading lights.

Which leads to the question: can you really import a Chinese style model of giant manufacturing units to a country like India with its peculiar problems unless you do the difficult groundwork of taming the states and keeping the unions in check? Modi seems to think he can. But judging by the lukewarm response to the Make in India initiative, the rest of the world is still waiting and watching.

And finally, there are the economic objections. Is giant manufacturing the way to go? Is this model really best suited to India? Aren’t we better off pushing for smaller, lesser publicized projects and looking at sectors other than manufacturing? Is India really best placed to become the world’s factory?

 

My guess (and it is only a guess) is that eventually Modi will scale back the ambitions of this avatar of Make in India. It will survive, of course, but it will survive with a host of other conceptions: the small-scale sector favoured by Gandhiji, the plants that grew out of native Indian ingenuity, the brilliance of our start-up wizards and our management skills.

If the history of post-Independence India has taught us one thing, it is this: there are many Indias, and for an idea to work, you have to Make In Many Indias.