Manufacturing growth key to revive the Indian economy
Zurvan Marolia, Head, Manufacturing Council, Godrej & Boyce shares insights
The COVID-19 pandemic has not only imperilled lives all over the world but also debilitated the global economy, which is facing its deepest recession since World War II. In India, the impact has been exacerbated by an already slowing economy. In addition, the migrant crisis arising from the nationwide lockdown has brought to the fore the perils of inequitable, urban-centric economic growth.
Prime Minister Narendra Modi stated that industry must focus on “Make in India” to create a self-reliant country thus reiterating that reviving the Indian economy was non-negotiable. In every crisis lies an opportunity and India could do well to seize this opportunity and transform itself into a manufacturing powerhouse to bring the country’s growth story back on track.
Make no mistake about the fact that the country’s manufacturing engine is not powered by big industry alone. There is a significant contribution by the large number of micro, small and medium enterprises (MSME), which account for around 33% of India’s manufacturing output and employ some 43 crore people in 6.3 crore units across the country (of which 20% is based out of rural areas), consistently growing at over 10% pa. The thrust on MSMEs could not only help fuel growth in the manufacturing sector but also usher in equitable growth. (As the migrant crisis has revealed, we need to disperse economic activity and wealth to semi-rural and rural areas). This will also relieve the pressure on our overburdened metro cities. We must strive to make the Indian MSME sector a critical growth engine. It must be stated here that we must not shy away from technological advancements in the form of automation – they will not necessarily take away jobs but would instead upgrade job profiles and enable manufacturers to be more competitive and enhance job opportunities.
There is no dearth of engineering prowess in the Indian Manufacturing Sector as is evidenced by the fact that our Engineering Sector holds its own in the “Design to build” segment. However, this is but a small segment of the manufacturing industry, the task for India is to be a powerhouse of manufacturing in the volume segment - in mass production. This is what needs to be our area of focus.
Undoubtedly, the challenges are huge to transform the country into a global manufacturing hub. Infrastructure development is critical for boosting manufacturing competitiveness. Consider this: The average distance covered by a freight truck in India is around 350 km/day – an increase of about 30% following the implementation of the goods and services tax (GST) compared with global benchmarks of about 700 km per day, with its attendant cost impact.
There is a collective necessity for the manufacturing industry to be innovative, technologically oriented, quality-conscious and play a key role in income and job creation to double the share of Manufacturing GDP to 25% of the National GDP and to touch $1 trillion by 2024, in alignment with the Government’s vision.
India is blessed with a huge captive demand, which had led to a tinge of complacency, partly shaken by the economic reforms of 1991. The opening up of the economy also meant that our markets became more accessible to global manufacturers. COVID-19 is a potential gamechanger as market sentiment drives customers to look for competitive alternative sources of supply. We will have to significantly enhance our competitiveness to grab a share of this opportunity.
It is important to understand that on our route to a self-reliant India we must not shy away from judicious imports, particularly that of raw materials and components which would contribute to the competitiveness of our products. The use of anti-dumping duties and tariffs to put up trade barriers could have the reverse effect of making the Indian industry complacent when it should be working on achieving higher quality and becoming globally competitive. A mix of global sourcing, part assembly and part manufacture will help us move up the global manufacturing ladder.
The Government of India has made a small but significant start by identifying three sectors (one of which is furniture) with the aim of making India a hub for supply to the world. Success in this effort will build industry’s confidence to take on a similar initiative in other sectors.
India is at a critical juncture today. Let COVID-19 be a wake-up call to unlock the country’s manufacturing prowess and empower MSMEs so that India’s high growth story can be back on track.