Question

The government initiated the ‘Make in India’ programme to attract global investment in the Indian economy. Explain the impact of this programme on the Balance of Payments account of India.

Answer 1

The goal of the “Make in India” program is to bring in foreign investment and increase manufacturing in India. This can have a good effect on India’s Balance of Payments (BoP) account in the following ways:

1. Increase in Capital Inflows: Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) inflows rise as global companies invest in Indian industries. This improves the Capital Account surplus.
2. Improvement in Trade Balance: By encouraging domestic production, the programme reduces dependency on imports and promotes exports. This leads to a lower trade deficit, or even a Current Account surplus.