TI Corridors

Channel: Industry

Tuesday, April 26, 2011
India in top 10 manufacturing nations

After showing its prowess in service Industry, it’s time for India to repeat the same feat in manufacturing and the country is well on course to do the same. It has secured a place among the world’s 10 largest manufacturing countries as per UNIDO report.This has happened despite the fact that many major industrialized economies have not shown a robust performance in the manufacturing in the last decade.


India’s manufacturing output in the last 10 years stands at 1.8% of the global manufacturing output and it occupies 9th position among the leading manufacturing countries.Efficient use of energy, helped by enhanced labour productivity and increase in exports of manufactured goods has helped the country secure its position among the top 10 industrial producers.The US tops the list of 10-top industrial producers followed by China, Japan and Germany. Brazil was at the bottom of the list.


Industrialized countries account for more than two-third of the world industrial output, but the share of developing countries is rising from 20% in 2000 to 32.1% in 2010.As per the UNIDO report, in the last decade, share of major industrialized countries such as the US, Japan and Germany in the world manufacturing has fallen. As per report manufacturing output of three developing countries -- China, Brazil and India -- has grown by almost 10% on an average in the last decade.


India’s growth in manufacturing sector is not unusual. Rather the surprising factor has been its lackluster performance in the sector despite presence of some key attributes for growth. The abundance of cheap labor force in India is amajor factor for manufacturing growth.In the last two decades India has moved from agro-based raw material to processed items. Some of the major manufacturing sector items in India include Gems & Jewellery,Engineering goods,Textiles,Readymade garments,Chemicals,Leather goods etc.


Looking at India’s current manufacturing positionit would be pertinent to move towards preparing a national manufacturing policy.The vision formulated bythe Department of Industrial Policy and Promotion, under Ministry of Trade and Commerce sets a target of increasing the contribution of manufacturing sector to 25% of GDP by 2022, doubling of employment in this sector, increasing the competitiveness of the sector and making India a global manufacturing hub.The new policy will have special emphasis to make India the workshop of the world, especially in the emerging green industries such as solar power.To achieve this India will have to take a slew of measures which will include setting up of dedicated manufacturing and Investment zones,smooth regulation,green technology,skilled manpower, smooth exit mechanism,access for fund for the sector and many more innovative steps.


Despite lagging on multiple parameters, India has performed nicely in manufacturing sectors like auto components and pharmaceuticals, computer hardware, consumer durables and engineering products.Encouraged by an increasing presence of multinationals, scaling up of operations by domestic companies and an ever expanding domestic market, the sector has registered quite impressive growth(table 1)and has even passed beyond 10% for few quarters.Many of India’s manufacturing companies lead the global production in their category and so are the prides of Indian manufacturing (table 2) sector. Buoyed by skill advantage these industries have been benefitted by cheaper wage rates, good engineering skills, well set-up raw material bases, a growing suppliers list and evolving domestic demand. The growth factor is due to both internal as well as external demand.So while India continues to be a second league manufacturing player, its potential as a global market cannot be ignored and it has led the corporate to push for India’s manufacturing overhaul.


The manufacturing industry is the backbone of any economy since it helps in the overall growth of productivity, employment, and it also strengthens agriculture and service sectors. The astronomical growth in worldwide distribution systems and Information Technology, coupled with opening of trade barriers, has led to stupendous growth of global manufacturing networks, designed to take advantage of low-waged yet efficient Indian work force.


The incentive for the government to push for a reform agenda in manufacturing is also very strong.The growth in the sector is answer to India’s woes on Economic inclusiveness. Despite growth in GDP which has been mainly led by Service sector,the income disparity has grown in India.It not only compels India for an unsustainablesocial spending but is also creatingsecurity concerns for the country. The growth in the naxal problem in the country cannot be isolatedfrom the lack of employment for semi and low skill set people.Moreover,the growth in manufacturing sector will also help India ease concerns on capital flow as rise in exports can help India tide the trade deficit wave.


So while the silver lining is India’s growing clout in manufacturing sector in the world,there is much more to be done.As Costs are rising in China,companies are now looking for a second best manufacturing destination and so India will need to position itself well in that bracket.Manufacturing sector may well be an answer to India’s some of the longest and toughest problem and so there is immediate need for renewed focus on this sector.


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