Focus Topic: ‘Make in India’
- Aim:
1.To increase the share of manufacturing from 16% of GDP to 25% by 2022
2.To create 100 million jobs
- So far under Modi government
a)Industrial growth has been weak
b)The investment rate has fallen
c)Formal employment growth has been miserable
d)Exports have stagnated
- Why such problems?
A. Land acquisition law has made land much more costly than in Asean competitors.
B. Wages have shot up since 2008, thanks in part to MGNREGA.
C. Monetary Policy Committee entrusted with a single-minded focus on inflation control is not going to bring down interest rates to Asean levels.
D. Electricity for industry costs twice as much as in Asean, because high industrial tariffs are used to subsidise farm and domestic consumption.
- Solution/s
1.Far better is simply to improve the ease of doing business, remove constraints in all sectors, and then leave entrepreneurs to decide which area should soar, which should plod along, and which should close.
2.Services will probably do better than manufacturing, and brain-intensive sectors better than labour-intensive ones
3.Service industries require less land, electricity, water, capital investment or working capital than manufacturing.
4.India’s service exports have risen so much faster than manufacturing exports, and hi-tech exports like auto and pharma have done much better than textiles and leather.
5.Some example
A.Chapter by C Veeramani and Garima Dhir, ‘Make What in India?’ in the latest India Development Report 2017.
A.They show that hi-tech auto exports grew by an amazing 34% a year during 2000-15, while labour-intensive apparel export growth was only 9%.
B.They find India is locked out of global value chains (GVCs), in which products are assembled from components produced in a wide variety of locations. Many Asian countries are part of GVCs, which culminate in the assembly in China.
B.‘Services for Indian Manufacturing’, Rupa Chanda
A.The case for emphasising more services embedded in manufacturing to improve competitiveness. This will include steps to slash India’s speed and costs of logistics: transport, warehousing, rail-road links, paperwork.
C.‘One Size Does Not Fit All’, Sunil Mani
A.This chapter is useful for emphasising the dynamism of hi-tech exports, which now include aircraft components and satellite launches.
WhatsApp