Thursday, July 6, 2017

MANUFACTURING MAY YET TURN OUT TO BE INDIA’S SAVIOUR

In today’s Business Standard, eminent commentator and analyst, Mr. A. V. Rajwade has written on the above subject drawing attention to the fact that without rapid expansion of this sector. Fast and consistent growth of Indian economy is unlikely in the near future if manufacturing does not take off.

Notwithstanding our signal success in the services sector, the greatest major current requirement is job creation. Adding to the worries is the prospect of IT industry which seems to be hazy. So, we need to explore how best we can build on our existing strengths to “grow with jobs”. In the last 70 years, no Asian economy has grown fast and consistently without expanding the its manufacturing sector. The government rightly wants to increase the contribution of the manufacturing sector to 25% of GDP by 2025, from the present stagnant level of 16%.

There are some negative developments in India’s manufacturing sector.  General Motors has recently announced closure.  Lafarge, the international cement giant, has sold its holdings in India. Carns UK is in the grip of tax disputes and may not be investing much hereafter. Nokia also left India because of tax issues.  Posco and Arcelor Mittal seem to have given up the idea of investing in Indian manufacturing. As for the big Indian manufacturers, they seem to be terribly investment shy. Project investments have declined sharply in the first quarter of 2017 – 18.

We, at present, rank 130 out of 193 countries in the World Bank’s rankings in the ease of doing business category. The recently introduced GST might help here in the long run. In the short term, as admitted by the Finance Minister, there may be disturbances in the manufacturing sector with a possible fall in output.

There is also urgent need for larger investment in infrastructure, which are highly capital intensive. They will need public funding. The progress is not very encouraging. The other problem is the decline of bank lending or bank credit going to industry. The main reason is said to be the corrective measures taken by the government with regard to nonperforming assets. Measures like the privatization of loss making public enterprises like Air India needs to be speeded up.
All in all, a total fresh look on the subject needs to be taken collectively by the centre and the states. We may just be running out of time.


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Prof. K. K. Krishnan
Chairperson - CCR &
Prof. Centre for Insurance & Risk Management
Birla Institute of Management Technology

1 comment:

  1. India lacks high calibre skills are needed for the organised manufacturing sector. SMEs can contribute to manufacturing sector to a significant level.
    IT sector may be hazy for a short period. The Industry lobby group NASSCOM says the sector is expected to hire 150,000 people this year, with the top two firms.

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