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View from India: India poised to become one of world’s top manufacturing destinations

Globally, India is poised to emerge among the top three leading manufacturing countries by 2020. Over the last few months, the groundwork has been strategically laid out towards this end. While the nation is working towards this goal, the initial stages are expected to yield outcomes in 2017-2018 in a phased manner. One of the most anticipated results is that of employment generation at the micro and macro level, along with increased opportunities for growth in existing areas.

A case in point is mobile handsets. India is among the world’s fastest-growing smartphone markets, yet feature phones continue to remain a second choice, as they comparatively offer better durability and battery life than smartphones. It simply means that there’s a demand for both smartphones and feature phones. Given this premise, the entire mobile phone segment is expected to generate millions of jobs through manufacturing and assembly units and service centres.

Considering the manufacturing sector, the government of India has been promoting sector specific parks like electronic manufacturing clusters and agro-based food parks in order to boost large-scale manufacturing. Apart from that, the creation of smart sustainable and clean cities is another effort in this direction.

“The world is moving towards a cleaner future and undergoing what we term the fourth Industrial Revolution with the Internet of Things (IoT), services and people. So technologies which render efficiencies, decouple carbon emissions from growth and better integrate renewable have greater degree of connectivity will be key differentiators,” said Akilur Rahman, CTO, ABB India. “Tangible improvement in quality and productivity of industrial manufacturing and production through digitalisation needs to be targeted. This needs holistic approach of not only analysing the problems and improvements, but finally fixing and installing them in the production environment.”

While there is a push towards decongestion and declogging of India's cities, there is also a move towards developing industrial corridors to bolster the industrial-manufacturing sector. The Delhi-Mumbai Industrial Corridor (DMIC) is being developed as a global manufacturing and investment destination, as well as emerging as an economic growth driver.

Interestingly, the whole manufacturing sector is slated to move to the next level through smart manufacturing, with the accent on creating scalable, sustainable, replicable green products with zero defects. This is where Big Data, smart tech solutions and IoT will come into play in order to create prototypes and products in real time. Of course, the manufacturing sector is expected to get a fillip when the Union Budget 2017-18 is presented on February 1 2017.

As per a CRISIL Economy Quick Byte survey launched in January 2017, the Union Budget should focus on sectors that can immediately push job creation. That’s because 1.5 million people are entering the labour force every month, nearly all of them seeking jobs. The long-term focus must be on alleviating structural constraints to employment creation.

For longer-term benefits, though, policies should have a three-pronged approach. Firstly, over-employment in agriculture should be reduced by providing opportunities outside of the farm sector. Secondly, the manufacturing sector should be given a push by emphasising on ‘Make for India’, along with improving export competitiveness. Thirdly, design policies should push growth in labour-intensive services sectors such as trade, medical and education services, community and social and personal services. These efforts will have to be complemented with education and skill development of youth.

Policies will, therefore, have to support sectors with large job growth potential such that absolute employment continues to increase. Additionally, the policy focus should also be in preparing the youth for new job opportunities.

A CRISIL study had found that four manufacturing sectors – textiles, food products, non-metallic mineral products and transport equipment – can drive employment creation over time, provided structural issues facing them are resolved. Meanwhile, the services sector can also contribute to the employment drive. The nature of activity in a large part of the services sector is such that it makes technology substitution for productivity gains either difficult or will take time.

Specifically, sectors such as education and health, trade, hotels and restaurants, and community, social and personal services could potentially be large employers. But here, the supportive role played by education and skill development will be critical.

Let’s hope India transforms itself into a clean world-class manufacturing hub.

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