Under the "make -in -india" policy, India takes measures to the external and high -tariffs, such as high -tariffs, to protect domestic industrial industry.On the other hand, we will take preferential treatment for foreign companies that manufacture domestic manufacturing.Regarding the former, withdrawal from regional comprehensive economic collaboration (RCEP) agreement negotiations is also new to memory.In February 2021, the tariff was raised on a budget proposal in FY2021 (April 2021 to March 2022).Regarding the latter, incentives such as production -linked incentives (PLI) schemes that provide subsidies in accordance with sales are prepared for companies that manufacture specific products in Japan, and the Taiwanese manufacturers that are consigned to the iPhone manufacturing are utilized in India.Production expands.
Why does India take this kind of movement?And is it going as expected?I want to think about the trade deficit, which is said to be a structural problem.
"Ame and whip" of "Make in India"
"Make -in India" is a slogan in the promotion of manufacturing industry since 2014, when Prime Minister Modi took office.Through the development of the investment environment, the goal is to promote direct investment invitation and raise the ratio of the manufacturing industry to 25 % to 25 %.As a result, we aim to create new employment, reduce trade deficit, and expand exports.
Under this policy, the Indian government will promote domestic manufacturing protection and high -value -added parts.Externally, basic tariffs and imports are carried out to specific products.In the budget proposal in FY2011, basic tariffs were raised for parts such as chargers and mobile phone printed circuit boards in the field of electricity and electronic components, and compressors of refrigerators and air conditioners in the home appliance field (February 12, 2021, 2021.reference).In October 2020, the import prohibition of air conditioners with refrigerant air conditioners was introduced.
On the other hand, for foreign -affiliated companies that expand in India, many fields will be opened and invested in investment.In particular, it is eager to call in the manufacturing industry.Costed measures such as reducing corporate tax (see business shorts dated October 1, 2020) and production -linked incentives (PLI) schemes that promote domestic production (see business shorts on May 21, 2020).
Even in the new Corona evil, the Indian government launched the "Self-Reliant India" in May 2020, strengthening "Make-in India", and establishing and importing a global supply chain.It has expressed a reduction in dependence (see Business Belinations on May 14, 2020).
Formula deficit and trade deficit due to IT power
Why does the Indian government take policies to protect these domestic industries?I want to see the economic structure in the background.From the breakdown of the current account in Fig. 1, a permanent account deficit mainly caused by the trade deficit can be seen.It is the service balance and the second income balance that earns the surplus.Most of the service balance is occupied by computer services such as software consignment development.As for the second income balance, most of them have secured surplus by remittances from overseas, including workers in the Middle East.
On the other hand, a large deficit is the trade balance.In 2012, a trade deficit approaching $ 200 billion.At one point, the deficit decreased due to a decline in crude oil prices, but it has been a high level since then, and the deficit has not been offset in the surplus service balance and the second income balance.
India has emerged as an IT service exporter for Europe and the United States since the 1990s.As a result, unlike the ASEAN countries, the third industries (service industries), not the second industry (manufacturing), became the main industries first.Therefore, the surplus ratio of the service balance is large.With economic growth, domestic demand for high -value -added products, such as home appliances and personal computers, has increased in domestic demand, and many of the demands have been covered by imported products.At present, there are no industries that can replace the imports in domestic production, and industries that can earn a profit by export.
Concerns about the trade deficit against China
Looking at the import status by country in more detail, it can be seen that excess imports from China, especially electrical equipment (HS code: 85), have a significant effect (see Fig. 2).The proportion of trade deficits in trade deficits was 53 % in FY2016.After that, it accounts for about 30 to 40 %.A particularly large impact is an electric device that contains a mobile phone.It accounts for around 40 % of the whole deficit.
With the economic growth, demand, including electrical equipment, is expected to increase, and eliminating the deficit to China has become an urgent issue.In fact, it seems that the reason for leaving RCEP in November 2020 is that the decrease of tariffs is due to increasing imports from China, whose deficit is expanding, (Times dated November 15, 2020).・ Obu India paper).
Exports from India to China are increasing.However, India has relatively export low -value -added items and does not make up for the trade deficit.The export amount to China in China was 16 year -on -year..For the first time, $ 20.9 billion, up 2.9 billion, grew significantly for the first time.These were pushed up by steel stone, steel, aluminum, copper, etc.The proportion of primary and metals is large.On the other hand, industrial products account for exports to China are extremely low.Therefore, there are also reports that India should focus on expanding exports of high -value -added products (business line dated February 23, 2021).
What are the results of makeup in India?
So far, we have seen Indian trade structures.It can be seen that the importance of the manufacturing promotion measures by "Make -in India" is in industrial development that enables import alternatives and export high value -added products.So, did the promotion of "Make -in India" have achieved results on these issues?
Looking at the entire manufacturing industry, the goal of improving the ratio of the manufacturing industry in "Make -in India" is not yet visible.The market share in GDP was 17 % as of 2020.The government has not reached the 25 % goal.
However, there are some fields that are produced individually. In the field of mobile phones, in addition to high -tariff policies, a step -by -step manufacturing program (PMP), which gradually increases tariffs on various parts, has been introduced. Mobile phones have expanded from 60 million units in 2014 to 2205 million units in 2017 (see Business Belinations on March 12, 2019, June 24, 2019. See the region / analysis report). Over the past few years, industrial accumulation and production base expansion, including Taiwanese manufacturers such as Fox Cons and Wysron, which are consigned to the manufacturing of iPhone, and Chinese manufacturers such as Samsung (Korea) and Xiaomi. Some reports that the movement of the production base dispersion, which had been intensifying the US -China trade friction, worked in an advantageous work (Live Mint paper dated June 12, 2019). Mobile phones (HS code: 851712), which were $ 7.43 billion in 2014, decreased to $ 860 million in 2019. In addition, the proportion of China, which accounts for the total imports, has fallen to 60 % in 2020. This ratio in 2017 accounted for 97 % (see Figure 3).
Achievements for exports
The sale of these mobile phone manufacturers is basically for domestic demand.Nevertheless, exports are also working on exports.Mobile phone exports were only $ 140 million in 2017.However, in 2020, it has expanded to $ 301 billion in the corona (see Figure 3).This is also the background of the advancement of government preferential measures, such as the PLI scheme, (see Business Belinations on March 18, 2021).
In this way, in the mobile phone field, which was a major imported item from China, the shift to domesticization and export industries has progressed.This is an example where foreign capital attracting, imported alternatives, and export expansion can be realized at the same time.Indeed, "make -in -india" is the goal.
In addition, Amazon announced in February 2021 to set up a production base for Fire Stick TV in Chennai, Tamil Nadu.He commented that it would promise a total of $ 10 billion exports by 2025.This seems to be a movement to reduce the dependence on China, a supply base (Times of India paper dated February 17, 2021).It can be said that the production base in India is steadily progressing.
What about other fields?In general machinery, electrical equipment, and transportation equipment, exports have gradually increased as a result of the efforts so far.In 2020, they each achieved a share of about 5-6 % of the total Indian exports.
Strategy to steadily execute the growth strategy
India has been considered a country with many business issues for companies that have been in the company, due to infrastructure, tax, tax, tax, and complications of administrative procedures.Under such circumstances, what was conceived in "Make -in India" was "Business environment development → foreign capital invitation (technology relocation) → domestic manufacturing industry promotion → import alternative → export expansion".And it was a trend to eliminate the trade deficit.
Considering this trend, imported and export expansion is only partially advanced.However, the development of business environment, which is a major premise, has certain results.Prime Minister Modi has been promoting many reforms, including the introduction of goods and service tax (GST), relieving foreign capital regulations, online various licenses and procedures, and legislation, such as bankruptcy bankruptcy law.The results have risen significantly from 142 (2015) to 63rd (2020), looking at the World Bank's Business Environment Ranking.
Of course, it would be difficult to realize industrial development and economic structure.It will take years to realize export expansion at the end of the manufacturing industry.However, it may be said that India steadily implements the growth strategy to be drawn, and some of the results are starting to appear.
