SRINAGAR — Reserve Bank governor Raghuram Rajan has previously said that instead of 'Make In India', the government should focus on creating an environment so that businesses 'Make For India' because an export-led growth or import-substitution may not work in current times.
On Thursday he said that this programme should be utilized to create world class Indian firms and not worry about higher exports.
"It is a worthwhile ambition to make in India, to produce in India. Let us not think too much where do we sell. Let us create the conditions both for manufacturing and service jobs. We may end up with world class service firms, a few world class manufacturing firms and a few extraordinary domestic firms which are focused on domestic market," he said.
Rajan was replying to questions from students of Kashmir University's business school in Srinagar, where he is on a two-day visit.
Rajan's comments come as economic growth remains slow in Europe, one of India's main markets for export. To focus just on export-led growth might not work in such an environment, and selling in the domestic market might be a better move.
"By all means we should try our best to produce for the world but if the world is growing slowly, there would not be as much demand as when the world is growing fast," he added.
Prime Minister Narendra Modi launched the 'Make In India' campaign in September last year in the hope that more companies will start manufacturing units in the country, creating more jobs. However, India's manufacturing index has actually dropped since then, slipping to a five month low in March, indicating that manufacturers are not ready to expand operations just yet.
Rajan said a major constraint is existing labour laws. "Deputy Chairman of Niti Aayog has often argued that because of our labour laws we have firms that are too small. They tend to be too small that they don't want to grow too big to be subjected (themselves) to labour laws and that make them inefficient," he said.
Also, the conditions that promote manufacturing industries, such as good infrastructure — including power, road connectivity — are not yet there. " The mix of good regulation, good infrastructure, good human capital has not been present in this country. The end result we have is that we have underperformed on manufacturing," he said.
After addressing these issues, manufacturing might find itself in a conducive environment, he said, and entrepreneurs should be allowed to decide what they want to do.
Rajan has previously said that encouraging only one sector like manufacturing might not work in the current economic scenario. "I am also cautioning against picking a particular sector such as manufacturing for encouragement simply because it has worked well for China. India is different, and developing at a different time, and we should be agnostic about what will work.”
(With agency inputs)