A Study on the Influence of Make in India Initiative on Economic Growth: An Empirical Assessment based on OLS Model

Abstract

The "Make in India" initiative, launched in 2014, represents a transformative policy aimed at revitalizing India's manufacturing sector and enhancing economic growth. This study explores the theoretical underpinnings and empirical impacts of the initiative, linking it to key economic frameworks such as structural change theory, endogenous growth theory, and the export-led growth paradigm. This study investigates the effect of Make in India on Economic Growth in a system including FDI growth, imports, exports, and gross fixed capital formation (GFCF). Using a robust regression model with Newey-West HAC standard errors, the findings highlight that GFCF growth is the most significant driver of GDP growth, emphasizing the importance of productive investments. The Make in India policy dummy also shows a statistically significant positive effect, confirming its role in stimulating manufacturing and economic growth. While current FDI growth exhibits an insignificant effect, its first lag is negative and highly significant, suggesting short-term adjustment costs. Trade variables, including imports and exports, are largely insignificant, with delayed export effects reflecting external vulnerabilities. The results underline the efficacy of targeted policy interventions and the critical role of capital formation in sustaining economic growth.