India Eyeing the Position of ‘Global Manufacturing Hub’

India Eyeing the Position of ‘Global Manufacturing Hub’

In the past decade, the growth of manufacturing sector in India has been rather slow, largely due to a number of policy issues, problems related to skill development and key labour management issues. Despite these hurdles, India has been developing as an economy over the years with manufacturing sector contributing around 15% of the country’s GDP. However, experts agree that the growth potential of the manufacturing sector remain unrealized due to a host of factors and an urgent need is felt for structural reforms to revamp the industry in order to change the status quo for the larger good of the economy.

It goes without saying that the government plays a key role in bringing about these changes and with an industry-friendly administration taking over the reins at the centre with a clear mandate in 2014, it does not seem such a distant goal to realize. In fact, PM Narendra Modi has already launched a massive ‘Make in India’ campaign, intended to initiate an integrated effort in order to revive the manufacturing sector by removing major hurdles in the direction. The campaign targets 25 key sectors with plans to come up with swift online project clearances, infrastructure and skill development to take up the GDP contribution of manufacturing sector to nothing less than 25%.

Some of the major proposals include:

  1. Development of smart cities, industrial corridors and infrastructure upgradation to create desirable conditions for business and industry growth
  2. Online environment clearances for industrial projects
  3. Faster processing of requests for issuance of industrial licenses and extension of licenses to a period of 3 years
  4. Improving intellectual property regime to achieve enhanced compliance with global standards

The whole initiative is aimed at creating a business-friendly atmosphere, remove regulatory hurdles and attract domestic as well as global investors for development of manufacturing sector. However, experts suggest that it seems more like a marketing tool and a number of fundamental changes must be effected for this goal to become a reality which would be difficult to achieve otherwise.

In a business meet titled, ‘Make in India: Ambitious or Realistic?’ organized at ITC Grand Central Mumbai in Mumbai, eight top industry leaders sat together to brainstorm on whether or not the campaign can achieve its intended goals. Some of the salient points brought up in the discussion included:

  1. An urgent need to reform taxation regime
  2. High cost of labour and regressive labour laws which affect labour-intensive businesses,
  3. Lack of skill development in certain sectors of the economy
  4. Need to promote industrial innovation for aggressive competitive capabilities

Notably, Ridham Desai, Managing Director of Morgan Stanley India added that, “China’s manufacturing boom cannot be repeated in India. Not because India is not capable of delivering world-class manufacturing, but because the world is not capable of absorbing the supply that may come with the surge in capacity.” This is of special significance, keeping in sight the fact that the current administration intends to work towards the goal of replacing China from its established position as a global manufacturing hub in the region while laying stress on the need to come up with a sustainable model of industry and business development tailored to meet the unique needs of India as a growing economy.