By Devaansh Samant (MPA ’23)

For the past few decades, China and East Asia have used low-cost manufacturing exports as a path to prosperity, while India’s efforts to replicate that miracle have not worked. While industrial policy remains important, I argue that an education policy that directly links industry needs with secondary and post-secondary institutions will be crucial for economic growth in the 21st century. 

Nearly two years ago, after the COVID-19 pandemic broke out, global sentiments took an anti-China turn. Against this backdrop, many leading news outlets asked if India could replace China as the world’s low-cost manufacturing hub. However, the question of whether India can become the world’s “workshop” has occupied both headlines and policymaking agendas for many years now. “Make in India” was a major campaign issue for current Indian Prime Minister Narendra Modi as early as 2014. 

Eight years on, there is little success. In 2019, $31 billion of manufacturing exports to the U.S. shifted out from China to other low-cost Asian countries. Of this shift, 46% moved to Vietnam and 27% to Malaysia, compared to only 10% to India.  

So why is this happening and what can be done to fix it? Broadly, one can consider two thought processes: either India has not done enough to “succeed,” or low-cost manufacturing is not the growth escalator it used to be. There is some truth to both narratives: the ”Make in India” campaign had several fundamental design flaws, but manufacturing is not creating as many jobs as it used to either. 

On the path forward, there is already much debate on what India can do better in the manufacturing sector. Instead, I argue that there is untapped value in services, education, and technology, and the scope of industrial policy should be widened beyond manufacturing to include these areas as well. This new, comprehensive policy would be a productive growth policy, moving past the confines of so-called industrialization. 

The information technology (IT) sector has long fueled a service-driven growth story in India. However, India’s economy can spur even more jobs and growth from the service sector. The service sector is not a focal point of industrial policy, despite having driven most of India’s growth in recent years. The service sector is criticized for driving “jobless growth” or creating jobs with low productivity levels. However, research indicates that the service sector is not only driving growth, but also creating more jobs than manufacturing in many low-income countries. 

Investment in human capital is becoming increasingly important and should be included as a mainstream plank in any growth policy. Education is not just a critical component for service sector participation — skill-sharing is increasing even in the manufacturing sector. A comprehensive growth policy should establish clear linkages between industry requirements and upskilling and education.

What does a transition from “industrial growth policy” to “productive growth policy” look like? In the short term, a new unified policy agenda should be drafted instead of running separate industrial campaigns (such as “Make in India” and “Aatmanirbhar Bharat,” which translates to self-reliant India) and education initiatives (such as ‘Skill India’ and the 2020 National Education Policy). This should be done directly under the Prime Minister’s office, with an active focus on breaking down the artificial barriers between India’s multitude of ministries: Commerce and Industry, Skill Development and Entrepreneurship, and Education. In the long term, this approach can create sector-specific strategies in both manufacturing and service industries. 

Devaansh Samant (MPA ’23) is a staff writer for The Morningside Post studying Economic and Political Development with a specialization in Management. With a background in management consulting and product management, Devaansh hopes to go back to India after SIPA as an entrepreneur with a startup in the education space.