How to ‘Make in India’
The Prime Minister has quite rightly launched a concerted drive to arrest the declining share of the manufacturing sector in India’s GDP by pushing the growth button. Currently, the sector contributes a measly 16 per cent to the national GDP of US$ 2.1 trillion. In comparison, manufacturing accounts for 32% of China’s massive US $ 10.2 trillion GDP. Consequently, India’s industrial output is a meager US $ 320, ten times less than China’s US $ 3.3 trillion.
China’s stats should come as no surprise, given the enormous zeal with which it has built its manufacturing muscle: that nation possesses 25 to 50 per cent of global manufacturing capacities in industries ranging from steel, cement and aluminum to automobiles, pulp & paper and petrochemicals. It is justifiably referred to, therefore, as the “world’s factory. “
Propelled by its giant manufacturing bases, China has created huge employment opportunities and a large pool of skilled and trained manpower. Beyond this the per capita consumption in the country has risen dramatically since it began its programme of massive and rapid industrialization.
The process of urbanization gathered momentum as the industrial capacity was built across the country. In this direction, China has taken full advantage of its large domestic market and the consequent economy of scale. In its initial phase, China simply focused on commodities and volumes and did not bother about building Brands.
It held back on this front until the launch of the second phase of its manufacturing blitz. During my recent visit to China as a part of the PM’s business delegation, it was evident that China was fully ready and at the cusp of launching the Phase-2.
China has started acquiring iconic global companies or parts of them to push into the zone of leading global brands. The standout examples of this strategy are its complete or partial acquisition of companies like Volvo and Lenovo (formerly IBM PCs & Servers) and Motorola. Other than helping the nation boss the brand markets, the acquisition of such global companies will place in its hands well-oiled distribution channels across the universe.
It is quite evident that China’s global domination strategy is well-defined and is being executed with clinical efficiency with a series of purposeful, determined and well-orchestrated steps. The Chinese are acutely aware that in modern times if you want to conquer the world, you can do it only with your economic might and not with military muscle. The latter is to be seen only as a deterrent capability!
India with its dismal consumption levels even of basic goods and services and low living standards has a huge scope and propensity for growth of its industrial economy. We are blessed with bountiful reserves of every natural mineral to make our industries self-sufficient and then of course like China, we have the advantage of a huge domestic market to build globally competitive scale.
India has a huge pool of young engineers who have enabled the nation to build world-class capability in IT. A focused thrust on manufacturing built around IT and communication is the surest way for us to secure a place among the world’s leading manufacturing nations. We should never forgot that the route to prosperity of every economic power be it Japan, Germany, Korea, France, the US or China has been through the manufacturing sector.
For its industrial sector to grow rapidly India would need much more than mere slogans. The country needs a well-articulated strategy. We need to facilitate, support and protect our industry against unbridled competition from countries like China, Korea and Japan. The steel industry is one grim example of what the government needs to do in every sector of manufacturing that we wish to focus on!
In a freely trading world of which we are a member, we may not be able to indefinitely ring fence local industries from competition with tariff and non-tariff barriers. It is clear, therefore, that most of the industrial growth has to be piloted and achieved by world standard private organizations and entrepreneurs. Given this, the government will have to confine its own participation to a few strategic sectors like space and defence whose ownership cannot be handed entirely over to the private sector. In all other sectors the government must play the role of a facilitator, which builds an enabling hard and soft infrastructure.
The policy framework calls for serious reforms aimed at flushing out antiquated laws and statues, which impede the growth of industry! India has promised a golden path to investors both at home and abroad in the past too but the time to deliver is now pressing and clearly upon us.
If we do not do it now then our promises in the future will carry little credibility and are unlikely to be taken seriously. We hope that our government would go beyond words and install functioning mechanisms to achieve our cherished goal of industry contributing 25% to the national GDP. And this journey will be a success if and only if the government treats the private sector as an equal and trustworthy partner
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