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 the services sector. Now What can we do to revolutionise our manufacturing sector?? Students of the National Institute of Industrial Engineering, Mumbai, sent us their essays. Here are two of the best:
That India?s manufacturing sector contributes only 28% to her GDP is an appalling fact. A comparison of its statistics with the other Asian giant, China, reveals a different picture altogether. The Chinese economy is well augmented by its manufacturing sector, which contributes 46.8% to her GDP, while services constitute 43.6% to her GDP. The reasons for India?s poor performing manufacturing sector could primarily be attributed to factors like poor labour laws, untapped labour potential, lesser FDI, lack of proper infrastructure, energy shortages, etc.
The labour laws in India are strict and come into action as soon as the employee count reaches 100 and then a company cannot fire an employee without government permission. China boasts twice the labour force as compared to India, which still has a vast untapped labour potential, primarily employed in the agricultural sector, and the unemployed, which can be employed in various industries with some on-job training. Another big problem in the growth route of manufacturing is lack of proper infrastructure and energy shortages, whereas China has excellent infrastructure.
This is just the tip of the iceberg. A plethora of other factors add up to the woes of lagging growth of the manufacturing sector in India. High key rates, high export credits, along with an upper cap on FDI and entry route restriction of FDI in small-scale sector in India dampens the growth of the manufacturing sector. Multiple indirect taxes and duties are yet another reason for hindered competitiveness of the Indian manufacturing sector.
The problems experienced by the manufacturing sector in India could be sorted out only by strict measures by the government such as reforming labour and tax policies to ease the entry of bigger companies and attract more FDI, better credit policies to avail easy and timely access of funds by banks, etc.
The author is a student of NITIE