It is heartening to note that West Bengal chief minister is making all out efforts to persuade investors in Munich meeting to bring in foreign investment in the state. Some sincere commitments in automobile, packaging and transport sectors have been obtained and it is expected that beginning of an industrial phase in the state is in the offing in the next few months.
Prime Minister Narendra Modi in all his visits abroad has all along been harping on the need to invite investors to invest in India especially in the major industrial segments. The flagship programme of the government, Make in India, focuses on creating fresh manufacturing hubs in the country with the help of foreign capital in defence equipment, power, renewable energy, automobile, roads, railways, airports, shipbuilding and real estate. The necessary policy support and guidelines with a genuine desire to create an enabling environment for investment by eliminating/easing obstructionist rules and regulations is diligently pursued. The good monsoon has raised the hope that agriculture production would be better this year with consequential impact on food prices.
The essence of this approach to aim for higher prosperity and wealth to the teeming population of the country is to enhance the role of industry in economic development in terms of employment, income and a decent livelihood. In a predominantly agricultural economy, the country chose the path of industrialisation in the early years after independence (1950s to 1970s) with a significant growth of medium and heavy industries.
The recurring food crisis in the subsequent years led to a change in the development process from investment in industries to agriculture and other emerging sectors in the economy like trade, banking, IT, tourism and communication. As a result the share of industry in GDP remained low and left stagnant (20-26%), while the country was passing through a crucial stage of a developing economy.
This is in sharp contrast to what is the experience of some of the advanced countries in the world in the past years when they were also standing at the threshold of advancement. For instance, the share of industry in GDP was 33% in the US (1953), 49 in the UK (1960), 41 in France (1970), 42 in Japan (1970) and 44 in South Korea (1992). Short of calling it as signs of deindustrialization, our country suffered in terms of growth, employment and per capita income in the intervening period.
Manufacturing sector contributing more than 75% to industrial output, therefore, rightly occupies the centerpiece of country’s economic growth and development in the current phase. The journey is challenging in the backdrop of lack of innovation, massive skill gap affecting productivity and cost competitiveness, poor logistics and infrastructure, high capital cost, stressed assets in the banks making them circumspect to grant credits to the industry and export disorientation. There are, however, a few sub segments under manufacturing that are comparable to their global counterparts, but the majority of them need special thrust and quality upgradation.
It is an established fact that unless all the activities relating to the development of a strong base in manufacturing and construction are launched in right earnest under an enabling policy framework, it would not be possible to unleash the full potential of the contributing segments like steel industry that had played a seminal role in the early part of industrialisation by supplying the core materials for development.
In the last four and half decades the demand from the consuming segments in terms of grade, dimensions, quality and profiles have undergone sweeping revisions, the Architectural and Structural designs and codal provisions have combined innovativeness, cost effectiveness and sustainability as the central ingredients of the choice of material. Indian steel industry by virtue of its long history of development, exposure to global state-of-the-art technology, investment in process and product development is well equipped to cater to the current and emerging needs of end using sectors.
Industrial growth in India has to leapfrog to regain its lost glory and occupy a predominant role to shape things according to its plan. The success of all the flagship programmes of the government in its entirety crucially hinges on a much larger share of industry in GDP and if this happens, the upward journey of steel industry in the country would remain unchallenged. The PMI in manufacturing at 52.8 in August shows a rising business confidence in industrial growth in the coming months.
The author is DG, Institute of Steel Growth and Development. Views expressed are personal.