Reserve Bank of India Governor Raghuram Rajan on Thursday said it was a 'worthwhile ambition' to pursue Make In India campaign but cautioned that the whole effort should not be made towards producing for overseas markets as global slowdown could create problems.
The RBI chief also underlined the need for creating conducive regulatory atmosphere and infrastructure for promoting manufacturing and services sector.
"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.
The RBI governor, who is on a two-day visit to Kashmir, was replying to questions of students from Kashmir University's Business School at SKICC here.
"The beautiful thing is that you do not have to choose who we produce for. What we need to do is build up the infrastructure, work on simplifying business regulations and build good human capital," he said.
Rajan, however, added that the Modi government's flagship scheme should not entirely focus on outside markets.
"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 had launched Make In India campaign in September last year to make the country a hub of global manufacturing and create jobs for growing population.
Rajan underlined the need for modifying labour laws to promote manufacturing and encourage companies to grow large.
"... another concern has been 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.
Rajan said once the atmosphere is conducive for manufacturing in the country, it should be best left to young entrepreneurs to decide what they want to do.
"There is lot of debate... should we do this or should we do that. My point is let us make the basics, create appropriate regulations," he added.
The conditions that promote industry, he said, include decent infrastructure, power, connectivity, human capital, good business regulation.
"...that 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.
As India is a huge market of 1.2 crore people, most companies focus on domestic consumers, he added.
"We ourselves are giving thrust to manufacturing. We are quite a big country. We are a big country because on the GDP basis, we are $ 2 trillion economy ... we look at purchasing power parity, we are five to six trillion in size. If you look at number of people, we are 1,200 million people. So we have a big market ourselves. Therefore the notion is if we can sell in India, let us sell in India," he added.
He further said it has been easier for service companies to do business as they do not rely much on infrastructure.
"Many service companies can work without being subject to whole lot of business regulation," he said.