By Sonia Mathur, India Correspondent
“Come, make in India!” That was the call from Indian Prime Minister Narendra Modi in his first ever Independence Day speech.
It’s a tradition that dates back to 15 August 1947. On that day, the first Prime Minister of independent India, Jawaharlal Nehru, made an iconic speech. The speech is often remembered for its memorable line: “…at the stroke of the midnight hour, as the world sleeps, India will awake to light and freedom.”
Since then, every year, on August 15, the Prime Minister, unfurls the Tiranga (Tricolour) at the ramparts of the Red Fort in Delhi and outlines the programme for his government. Quite like the Queen’s Speech in the UK.
This year that speech was Narendra Modi’s to make. He spoke for sixty minutes, without any notes, giving the country a taste of his exceptional oratory skills, as well as a sense of what he has in mind for the future.
Modi won a commanding victory in this year’s general elections. A country that had elected coalition after coalition, this year chose the Bhartiya Janata Party with a landslide majority and Mr. Modi as the PM.
During the election campaign Modi promised to restore high economic growth to India. He referred to his track record in the Indian state of Gujarat, where he was the Chief Minister for more than a decade, and was successful in attracting investors.
When in May this year, Mr. Modi took the oath of office, as the fifteenth prime minister of India, hopes were high.
His supporters want him to use his mandate to push through politically risky changes, like restructuring subsidies for fuel and food and lifting caps on foreign direct investment in important sectors like defence.
His first major policy announcement came a few weeks before Independence Day, where Modi indicated change would come — but slowly.
In July, Mr. Modi’s Finance Minister, Arun Jaitley, presented the new government’s budget in Parliament.
It was a budget that outlined a gradualist policy rather than a rush for change. The aim is to bring growth in the economy up to 6% or 7% over the next three or four years. It has been just below five percent over the last two years.
While a growth of 6% sounds remarkable from a British perspective, where the economy grew by almost 2% in 2013, it’s still a far cry from the heady days of 9-10 percent growth in the Indian economy.
Investors have got some items on their wish list. The government pledged to bring down the budget deficit more rapidly and press ahead with much needed tax reform.
The budget also promised to improve the country’s inadequate infrastructure and support manufacturing to create more jobs.
And this pledge for the manufacturing sector was what was echoed in Narendra Modi’s Independence Day speech slogan.
India’s manufacturing sector has a long and checkered past. During the British Raj, raw materials from India were sent to factories in England and Wales to make products that were then sold in the Indian market.
Like most other colonies, industrialisation wasn’t encouraged in British India. The country was seen simply as a source for raw materials and then a market for the finished products.
After Independence, building a foundation for manufacturing by industrialisation took up most of the fifties and sixties.
Things took a dip during the 1970s and 1980s as the License Raj (the rule of permits – everything at the time was controlled by the government and industry needed to secure licenses and permits to operate in any and every sector) dampened the sector’s growth in red-tape.
The 1990s and the naughties did see some liberalisation in this sector and it has been growing at its fastest rate over the last 10-12 years.
In fact, in 2013, India was ranked the fourth most competitive manufacturing nation in Deloitte’s index.
Today the manufacturing sector contributes to 15% of India’s GDP and 50% of the country’s exports. It employs almost 70 million people.
Studies have estimated that every job created in Indian manufacturing has a multiplier effect, creating two to three jobs in the services sector.
But in the last 12 months there has been a slip, and manufacturing output declined by 0.2%, compared to 1.1% growth the previous year, dragging down the overall economic growth.
The manufacturing sector’s slowdown is blamed on high interest rates, capped consumer spending and slow decision-making by the previous government.
Nonetheless, some Indian companies are making strides. Tata Steel, for instance, improved its output per worker by a factor of eight between 1998 and 2011, largely by adapting its operational and management practices. The company also reduced the number of managerial layers to five, from 13.
It is to indigenous companies like Tata Steel and foreign investors that the Prime Minister Modi made his plea.
He promised investment in infrastructure projects to lay the ground for a successful manufacturing sector.
He wants to make India the destination for those who want to make things. His message and that of his government’s first year seems clear: Come, make in India.