fe@campus, a collaborative and cynosure initiative taken by The Financial Express in sync with a variety of higher education institutes representing today?s youth, provides students an opportunity to pen their views on trends and trendsetters in the world of business. For this week, we put forth the topic: ?India excels in services sector, but not in manufacturing, where China is numero uno. What can we do to revolutionise our manufacturing sector?? Students of the Shailesh J Mehta School of Management, IIT Bombay, sent us their essays. Here are two of the best:
That China is the world?s factory and India the back office is an undisputed fact. The Indian and Chinese economy were almost the same size in 1980. India?s economic reform started in 1991, almost a decade after China?s. Today, the Chinese economy, at $5 trillion, is almost four times that of India?s. India can compete with China on the economic front only if there is a huge expansion in the manufacturing sector. If India wants a 9% GDP growth per annum, the manufacturing sector has to grow by 12-13%.
The first constraint to the growth of the manufacturing sector is the lack of investments in infrastructure. India needs over $1 trillion of investment in infrastructure, including roads and ports, in the next five years. The domestic capital available is insufficient to fulfil this need. We need investment in the form of FDI and trade partnerships. The key to attracting FDI are favourable and open-door policies. We need to strengthen our financial system and provide adequate cover for large projects. As opposed to China, which has a single-minded approach, the Indian bureaucracy has been slow in introducing and changing key investment policies.
The next deterrent to industries is the ease of doing business. India ranks 134 out of 183 nations in the ease of doing business. The case of Tatas exiting Singur is a prime example of the need to reform land acquisition laws.
Both India and China are blessed with abundance of natural resources and skilled manpower. However, there is a fundamental difference between the two countries. While China?s growth has been driven by a non-democratic, authoritarian state, India has nurtured the values of democracy and freedom even if it came at the cost of sacrificing growth. Today, we are at a unique juncture, where manufacturing sector, driven by good governance and effective policies, can rewrite India?s wholesome growth story.
The author studies at the SJMSOM