FE Editorial : The China opportunity
The Financial Express: Dec 19 2012, 00:47 IST
Given that more than half the world’s Deming awards (the Oscars for quality systems) have been won by Indian firms over the past decade, it’s obvious a fundamental shift is taking place in the cost competitiveness of the manufacturing sector—that’s why the share of engineering exports has increased from 15% of total exports in 2000-01 to about 22% in 2011-12. What comes as a surprise, however, is that while the National Manufacturing Policy (NMP) has laid out an aggressive annual growth of 12-14% and an increase of 100 million jobs by 2022, Indian manufacturing continues to slow every month. So while the policy envisaged the share of manufacturing increasing to 25% of GDP by 2022, the share has fallen to below 15% right now, the lowest since FY94.
The good news, as outlined in FE columnist Surjit Bhalla’s new book Devaluing to Prosperity, is that there’s a big opportunity for India. Bhalla spoke of how, thanks to the strengthening renminbi and a dramatic surge in China’s wages, India has a big gap to exploit—according to a CII-BCG study released on Tuesday, since 2009, Chinese wages have increased almost 15% per annum versus 1.8% for the US and 0.7% for the EU—not surprising then, that the world’s largest chopsticks factory is located in, if you please, the US. Indian wages increased 4% per annum. Which is why CII-BCG talks of a big opportunity for India to become the Germany of the East. At stake is $350 billion of incremental GDP and around
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