Modi should have hit the ground running but he did not. Perhaps that’s why he keeps talking about prime ministers who are long dead and gone. Gadkari is continuing with the older ideas on infrastructure, like our Sagarmala programme in 2003, which was the maritime equivalent of the Golden Quadrilateral highway project. But other than that, like agriculture, other sectors are in distress.

The Economic Survey 2018 stated that the telecom sector, which employed 40 lakh people, was going through a period of stress and debt; its debt was said to be Rs 7.7 lakh crore. About 1.5 lakh jobs were lost, 30,000 in 2018 alone, some from shut telcos, some from the merger between Vodafone and Idea, but the bulk from the distress in the sector.

The textile sector, saddled with outdated machinery and low productivity, saw a 13 per cent year-on-year decline in exports in January 2018. The steel sector, according to data gained through the IBC, is the biggest defaulter among corporates on debt: a total of forty-five cases involving Rs 57,000 crore were with the IBC. Domestic producers were hit by the dumping of cheap imports from China, South Korea and Ukraine.

The IT sector saw 40 per cent of its start-ups in 2016 fail, and complicated tax rules led to a decline of angel funding (investment in small start-ups or entrepreneurs, the opposite of venture capitalists) by 53 per cent in the first half of 2017.

According to the 2018 Economic Survey, software exports contracted by 0.7 per cent in 2016–17 before rising again by 2.3 per cent in the first half of 2017–18. The survey blamed protectionism in Western countries for the slowdown in IT exports.

The MSME sector was worst hit by the twin shocks of the 2016 demonetisation and the 2017 GST... According to the RBI’s Mint Street report in August 2018, demonetisation came with a further decrease in credit to the sector, while GST deeply dented its exports. The MSME sector comprises 6.3 crore units and employs about 11.1 crore Indians, contributing about 30 per cent of the GDP, 43 per cent of manufacturing output and around 40 per cent of total exports.

The CSO measures the Index of Industrial Production (IIP) growth year on year, and the figures have not been encouraging during the Modi years, particularly if you look at them after the whimsical demonetisation of November 2016.

In July 2017 it was a measly 1 per cent. In October 2017 it was again a sad 1.8 per cent, before bouncing back to 7 to 8 per cent for the next few months. But in March, April and May of 2018 it hovered around an anaemic 4 per cent. This oscillation shows a depressed industrial environment.

The UN Conference on Trade and Development (UNCTAD) in its World Investment Report 2018 shows that foreign direct investment (FDI) to India declined from USD 44 billion in 2016 to USD 40 billion in 2017. Even if you were to consider USD 40 billion a good enough figure, it is still only 1.2 per cent of overall investment; and the bulk of it did not go into manufacturing, according to figures from the department of industrial policy and promotion, which means that “Make in India” failed to bring FDI into manufacturing, as was envisioned.

In 2015–16, services, computer software and trading got 41.5 per cent of FDI, while core manufacturing got only 14 per cent. Other non-manufacturing sectors that got foreign money were hotels, tourism and telecommunications. Because Indian economic growth relies heavily on services, to revive manufacturing requires a boost to infrastructure. “Make in India” is thus basically an investment promotion plan, unlike the “Make in China 2025” plan which looks at strategic industries through subsidy and public investment.

Still more curious is the fact that the Cayman Islands is the number one FDI source, raising the suspicion about the origin of the funds – that it may possibly be “round-tripping” (when Indian companies reroute their money abroad and back to India to save tax; Cayman Islands is tax-free).

So while the World Bank in 2017 ranked India at 100th, jumping up 30 places, on the list of 190 countries in ease of doing business, that does not necessarily mean India will get more business, particularly as the world grows more protectionist.
Due to this decline in industry, our exports took a massive hit during Modi’s first four years.

This, coupled with rising crude prices in 2018, is causing our CAD to climb to dangerously high levels... India’s exports started shrinking in December 2014 due to weak global demand and a slide in oil prices, and continuously shrank till September 2016. In 2016–17, the growth was 5.2 per cent, and in 2017–18 it was seen at 9.8 per cent.

But if you want to average the export growth over Modi’s four years, in June 2014 it was USD 26.48 billion and in June 2018 it was USD 27.7 billion, according to the Ministry of Commerce and Industry.That is a rise of just half a per cent in Modi’s four years (0.046 per cent, to be precise). And exports make up 20 per cent of our GDP.

Exports also tell us a story of misery depending on the industry we speak of. Export sectors that employ many workers, like carpets, gems and jewellery, small engineering goods, tobacco, tea, or leather and leather goods, for instance. The distress in these industries generally goes unnoticed because it is confined to pockets; it does not become a national story.

Modi’s love for grand announcements and mega projects can undermine “Make in India”, as in the case of the proposed Ahmedabad–Mumbai bullet train, whose estimated cost of Rs 1.2 lakh crore will go up as the rupee goes down.

News reports stated that 70 per cent of the components would come from Japanese companies. There has been other criticism of the bullet train – that no one has studied the potential demand, particularly given that air travel keeps getting cheaper and cheaper. However, all that matters to Modi is that even in remote corners of India, like Jharkhand, people hear that a bullet train is coming.

Possibly there is a time for such projects. China has been making bullet trains for long, and they run all over that country.There could of course have been better use of the funds: the railways need all kinds of improvements, they have very old tracks and bridges, overbridges need to be constructed on a large scale, etc.; its modernisation and safety are also urgent requirements.

In the manner that the national highways have expanded, from four lanes to six lanes, the railways also need to expand to four tracks and six tracks, or have a separate freight corridor on the Delhi–Mumbai or Delhi–Kolkata routes. This will expand the demand for investment goods that I repeatedly talk about.

Incidentally, the RBI governor at the time, Raghuram Rajan, in December 2014, criticised “Make in India”. He said that an import substitution strategy (irony: Nehru adopted this) or an incentive-driven export-led growth mechanism would not work for India.

Incidentally, the great irony about “Make in India” was brought out by the Parliamentary Standing Committee on Commerce, which on 26 July 2018 tabled in the Rajya Sabha its report “Impact of Chinese Goods on Indian Industry”. The report said that the central government, the state governments, and public sector undertakings don’t buy stuff that is “Made in India”; they buy cheaper Chinese goods. Chinese-made drugs, bicycles, toys, steel, solar panels, textiles, firecrackers and other products were being dumped in India. The committee noted that a differential duty scheme on mobile phones had reduced Chinese imports, and suggested the same with other products.

Part of the reason was that Indian exports suffer a great deal of red tape, whereas Chinese goods are easily registered and rapidly certified by the Bureau of Indian Standards.The government in the summer of 2018 raised tariffs on Chinese solar panels, but the Directorate of Revenue Intelligence, according to an August 2018 news report, found that the Chinese were nimble enough to reroute their exports through the Association of South East Asian Nations (ASEAN) countries like Malaysia, with which we have a free trade agreement.

It ought to be mentioned that a component of “Make in India” was skill development, but it was such a disaster that the minister for skill development and entrepreneurship, Rajiv Pratap Rudy, was fired in September 2017.

The ministry was given to the extremely busy petroleum minister and party troubleshooter Dharmendra Pradhan, only proving that behind the theatrical announcements and grand plans are poor homework and worse follow-up.

Even the mascot of “Make in India” could not escape an ironic twist, according to a Bloomberg report. A large lion composed of gears, and built by a public sector undertaking, was defeated by red tape and political interference. It was placed outside the office of the department of industrial policy and promotion but had to be removed as it was found to be breaking rules. A similar lion in Mumbai was also removed as it violated local heritage restrictions.

The biggest irony, however, was reserved for the Rs 3000 crore statue of Sardar Vallabhbhai Patel that was commissioned in Gujarat. It is to be the tallest statue in the world. The engineering giant Larsen & Toubro won the tender, but subcontracted the bronze-cladding to Jiangxi Toquine Company in Nanchang, China. The Gujarat government shrugged helplessly as it could not control who Larsen & Toubro subcontracted the work to.

Poor Sardar Patel. Little could he have imagined that his statue would be “Made in China”. Such is the metaphor for Modi’s “Make in India”.

Excerpted with permission from India Unmade: How the Modi Government Broke The Economy, Yashwant Sinha with Aditya Sinha, Juggernaut Books.