As India embarks on a massive manufacturing mission that is high on quality and environmentally sustainable, there has to be a paradigm shift in the way the country handles the industry. In the last two decades, India’s share in global manufacturing GDP grew from 0.9% to just 2% and its share of global merchandise exports rose from 0.5% to 1.7%. The sector accounted for 15% of GDP in 1993; it remains about the same even today. Even the number of jobs in the sector remained low over the last two decades, increasing only 1.8% per year from 37 million to 53 million.
When seen against the performance of India’s peers, a lot needs to be done. Between 1993 and 2013, China’s share of global manufacturing GDP leapfrogged from 3.1% to 24.1%, and its share of global merchandising exports rose from 2.4% to 11.5%. At the current pace, it will be difficult for the sector to achieve 25% of GDP target set by the National Manufacturing Policy.
However, if the government’s Make in India initiative boosts investment and fosters innovation and technology development, manufacturing sector can create significant employment—about 60 million additional jobs over the next decade—and raise the sector’s share to 25% of GDP.
Skilling the workforce will be a key requirement as the demand for skilled workers far outweighs the available supply. Due to years of under-investment in employee skilling and training, India has one of the least skilled manpower among the top manufacturing nations. A Boston Consulting Group report says only 17% of those entering the workforce are skilled. And even those who are skilled, quality remains a major issue, as 5% of workers are highly skilled and a staggering 64% are associated with a very low level of skilling.