Published : Monday, 20 October, 2014 01:35 PM
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‘Make in India’ campaign should revive ailing manufacturing sector
The launch of ambitious ‘Make in India’ campaign has once again brought focus on the manufacturing sector, which has not ‘taken off’ in a real sense despite successive governments since independence making efforts and policy interventions to push and expand it. At the outset, it would be wrong to assume that we have failed.
At roughly 15-16% of the GDP, India’s manufacturing output has indeed grown and created a small manufacturing base with few success stories like Tatas and Mahindras in the automobile sector and in generic drug production with global brands like DrReddys and Ranbaxy. What remains problematic, however, is that we have failed to capitalize on the existing base and unleash a manufacturing revolution in the country like other South-east Asian economies which are roughly at a similar stage of economic growth.
India needs to do a Great Leap Forward, which with our resources – both natural as well as human – is quite possible. Without shaking off stagnation in the manufacturing sector, it would be difficult for India to realize its true growth potential. Post-liberalization economic growth and advancement is the result of a boost in the services sector, currently contributing more than 50% of the country’s GDP output.
From an agrarian economic base, we have jumped straight onto the services sector and missing a crucial competitive manufacturing base, which serves as the engine of growth, at least from a classical viewpoint. With jobs shrinking in agriculture due to increasing mechanization and productivity, India will have to create new avenues to harness the workforce.
Services sector alone cannot provide these jobs and the manufacturing will have to pull a large part of that weight. According to various estimates, India will have to create over 200 million jobs outside agriculture by 2025. Not having enough jobs for the semi-skilled and skilled workforce would be a disaster in the making with enormous socio-economic consequences.
The ‘Make in India’ aims to increase the growth rate in the sector to 12-14% in the medium term to push the share of manufacturing to about 25% of the GDP by 2022 from the current 16%. But, if mere policy pronouncements and high-profile campaigns could change the fortunes, India would have long become a manufacturing hub.
To make success of ‘Make in India’ campaign, first and foremost conditions disincentivizing entrepreneurship must be removed. Many of these hindrances are well-known such as poor and creaking infrastructure, particularly in power and transportation, complex and tardy regulatory processes, rigid labour laws, and the last remnants of license raj regime. A lot of formulas like SEZs, export promotion programmes and others have been tried with mixed results.
Here, the current dispensation should avoid romancing with untested experiments and should focus on ideas that encourage and promote rapid investments in manufacturing. Time for dithering and procrastination is over as the development and gestation period for major manufacturing projects is long compared to services.
Making success out of ‘Make in India’ campaign would require the creation of an altogether new ecosystem. The Gandhian principles of self-help and dignity of labour could come in handy and serve as the guiding philosophy. Education system must be geared towards promoting innovation and independent ideas instead of a culture of rote learning.
Aptitude vis-à-vis different professions must be promoted with a heavy thrust on the applied side of learning. A liberal and open mindset towards skill upgradation and focus on applied side of various technical trades must be pushed to engage maximum workforce in the production cycle.
Major points to remember
- Manufacturing output stagnates at 16% of the GDP
- Small manufacturing base a laggard and retards economic potential
- India will need 200 million jobs by 2025
- Manufacturing needs to pull its weight in job creation
- Share must increase to 25% by 2022
- Obstacles remain the same: red tapism, regulatory hurdles, archaic labour laws, and lack of skills in the workforce
- Education system must change; emphasis on technical learning
- Promote entrepreneurship and dignity of labour