Why Manufacturing Is Important ?
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Why manufacturing is important ?

Goldman Sachs coined the worn out phrase BRIC - the emerging economies of the world. While Brazil and Russia are poised to become economic powerhouses due to thier natural resources like Oil and Gas, India has been in the news for their rapid strides in Knowledge driven business(IT and ITES) while China has set new global benchmarks in competitive manufacturing at low cost. People believe that there is an inherent and hidden element of state subsidy in China's ridiculously low cost of production- I also share this view. But the mass production techniques of Communist China has sent shivers down several spines in developed economies. Despite this fear and despite the economy is state controlled more and more Multi national corporations invest in China more than they do in India.

While I do not want to dispute the fact that the explosion in IT /ITES sector has opened up opportunities to the youth of india, I would like to question the rationate for adopting the service led growth stratagy on two counts. As Vijay Govindarajan observes, IT/ITES are largely an urban phenomenon and they increase the divide between rural and urban India. The intangible output in IT/ITES sector which demands Intellectual protection, will have hardly any meaning if such output does not change the quality of life of people on a larger scale. this is only possible by a boost to manufacturing activity creating tangible output. We have Tata Steel the low cost producer of Steel in the world, we have NALCO the lowest cost producer of alumina in the world, We have many world class companies in the Detroit of india, Chennai catering to auto majors over the globe- TVS group, Rane Group to name a couple of them. We had traditional advantage in textile, which we believed will increase our share in world market when quota regime came to an end. But this has been taken over by China, Bangaladesh and such low cost producers. We have a world class textile manufacturing Company LMW in india yet they find now their market share is slipping to Chinese competition despite questionable quality. BHEL lost a few orders to Chinese Power Companies. the Government as usual is acting like Rip Van Winkle reeling out statistics about our 9% growth rate - largely skewed in favor of Services mostly IT/ITES which is again an arbitrage opportunity. We have technology modernisation fund and we need to do more to help the manufacturing sector for it can create jobs for millions in our rural areas. We should expose China at WTO negotiations to share with the members the hidden subsidies they offer to local manufacturers. the cost distortion has to be fought more with China than with developed world. Our fiscal policies are dictated by US and IMF whereas China's policies are shaped and implemented by a strong leadership. It is here where Ratan Tata, Kumar Mangalam birla, Venu Srinivasan, Bajajs are to fight unanimously for the cause of Indian manufacturing sector.We can conquer the world only when we have world class manufacturing companies.

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