India needs more manufacturing focus: JM Morgan vice-president

Anubha Ghosh & Kavitha Vivek

Bangalore, Jan 7: With an evidently successful China leading the race in the age of globalisation, its clearly a call for India to transform itself to a globally tradeable entity. According to JM Morgan Stanley Securities vice president Chetan Ahya, India needs to give the much-needed push to the manufacturing sector and sort out the basic issues if it is to compete with its strong neighbour.
But the story is in the way India uses its labour arbitrage
that will make all the difference, Mr Ahya said in an interview with The Financial Express. Excerpts:

Quite clearly you talk of a much-needed push for the manufacturing sector. This has already been taken note of by the industry and efforts are on to revive this sector. Have you noticed any revival at all with the ongoing efforts to re-kindle interest?
In the short term, I would say yes. There is a rising level of interest which has been noted since the quarter ended June 30 and we have already done a survey of key indicator sectors like the consumer durables segment reflecting the growth of interest in manufacturing.
What we are seeing is a cylical pick up. But on the long term, the prospect of a structured trend is not evident.

India has proved its edge over China in the IT services segment. Is making Indian ‘Intellectual Property’ a globally tradeable product the way forward?
While India is leading in terms of the services segment, there is an urgent need for the country to look at the other areas as well.
While IP from India could certainly make a mark in the global space, the focus at this point should be to make sure the economic reforms include a larger proportion of the population which can be achieved with a thrust on manufacturing.

Though a technology-focused stratgey will contribute to building the Indian brand name, in totality setting the basics right and involving human capital like China has done will be a crucial factor. Primary education coupled with higher education also needs immediate attention.

Since you are talking of India involving its human capital, is labour arbitrage the logical progression especially in the IT-enabled services, BPO segment?
Labour arbitrage is clearly going to be the story for the future that will impact the outsourcing of services to India, which is good.
The telecom penetration has increased while the cost of labour is still affordable in India.