Remaking ‘Make in India’: Reform the rigid and multiple labour laws

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The resurgence of the Indian economy in the third quarter, with a GDP growth rate of 7.2%, has made it again the main economy with the highest growth, leaving China behind. Due to the increase in revenues, Indian imports (non-oil) have experienced a proportional increase, going from $ 318.04 billion in 2015-16 to $ 350.56 billion in 2017-18, an increase of 10, 2%. Sectors such as leather, textiles and pharmaceuticals, which have been the pillar of India’s exports in the past, are not only losing competitiveness, but are also facing increased imports. This comes at a time when the government focuses on Make-in-India, which in addition to promoting exports, also aims to make India an important manufacturing giant.

Although the plan aims to attract foreign investors, it also tries to reduce (non-essential) imports, thus encouraging greater domestic production to serve Indian citizenship. Radical changes and simplifications made to India’s FDI policy since Make-in-India have made it one of the most open economies in the world. The limits on FDI have been liberalized in sectors such as defense, civil aviation, pharmaceuticals and e-commerce activities. As a result, FDI inflows into the manufacturing sector went from $ 16.5 billion in 2014-15 to $ 20.3 billion in 2016-17, a growth rate of 23% in two years. However, with respect to boosting national production, Make-in-India still has to show a significant impact.
To reduce India’s dependence on imports and boost domestic production, it is important to fix “the practicalities” of the economy, as Kaushik Basu also pointed out in his book “A Miscellany of the Economist”.