MAN FRACTURING INDUSTRY

June 22, 2011 6:47 am

The manufacturing sector is facing a chain of challenges in the form of unskilled labour, low augmentation of automation, corruption and lack of policy initiatives among others; acting as an obstacle towards the growth of this sector in the country.
 
Foreword
Manufacturing sector plays a vital role in the prosperity of an economy. As far as India is concerned, manufacturing sector contributes almost 16 per cent of the country’s GDP. India emerged as one of the strongest players and ranks 9th in the list of leading manufacturers of the world. According to the ‘2010 global manufacturing competitiveness index’ by Deloitte Touche Tohmatsu and the US Council on Competitiveness, the country ranks second in the world in terms of manufacturing capability. According to UNIDO’s report India is ranked as one of the world’s top ten countries in industrial production. The confederation of Indian industry (CII) – ASCON survey reports that 41 out of 121 sectors in the manufacturing industry showed excellent growth rate of more than 20 per cent in April-March 2010-11 compared to 34 sectors in 2009-10 which shows a marked improvement.
 
Journey so far…
The manufacturing sector is yet to gain a strong foothold in the country, in spite of major economic reforms being issued in the past. Considering this fact, achieving double digit growth in the sector still seems a distant dream. With the Seventh Plan (1985 – 90) coming into effect, a major revolution in the industrial development took place, segregating manufacturing from controls. The changes that preceded gave way for growth, modernisation and diversification in the sector with immediate effect. 
 
Moving forward, the average yearly growth of India’s manufacturing sector saw an upward trend which rose to 7.6 per cent in the period 1985 – 90 from 4.6 per cent in
1950 – 65.
 
India began following the policy of globalisation, liberalisation and macro economic restructuring and gradually took part in external competition. The sector also saw some drastic changes taking place which were advantageous to the related industries such as pharmaceuticals, petrochemical, electronics and electrical goods and chemicals among others.
 
Apart from that, the manufacturing received excellent response from the small scale sector too. By and large, it can be said that reforms in trade and industrial policies led to commencement of universal entrepreneurship in almost every sector.
 
Way forward
According to the government’s estimate, manufacturing sector aims to grow at a rate of about 9 per cent in the current fiscal. The country is expected to witness investments of nearly US$ 200 billion in manufacturing. The Government is also considering policy thrust of manufacturing not just as an economic imperative, but as a crucial social imperative that is integral to country’s inclusive growth agenda.
 
Manufacturing also plays a crucial role in generating employment for a country. The sector engages almost 11 per cent of India’s workforce and contributes to a fifth of GDP and nearly half of the exports. According to the commerce & industry Ministry, in the next decade 100 million people are set to join the workforce and the manufacturing sector alone holds the potential of providing gainful employment to these people.
 
FDI to boost manufacturing sector
Foreign direct investment (FDI) has opened many new vistas in the manufacturing sector. More and more multinational companies are venturing into Indian market with huge investment. That not only contributes to the economic prosperity of the country, but also plays a significant role in creating jobs and developing skills. The Indian government has issued the new “Consolidated FDI policy,” which came into effect from April 1, 2010. With an aim to make the country a global manufacturing hub, the government is also likely to set up national manufacturing and investment zones (NMIZs) to promote investments in the manufacturing sector and make the country a hub for both domestic and international markets.
 
Barriers – the MAN fracturing industry
Though the government aims for a higher growth in the manufacturing sector, it seems to be a distant dream as we do not see much positive development. Till now, we have hardly achieved double-digit growth except occasionally. Lack of skilled manpower, lower augmentation of automation and inadequate approach towards policy reforms are considered as major constraints for manufacturing industry.
 
Lack of skilled MANpower
Inadequacy of skilled manpower remains a prime concern for the manufacturing sector. The government in centre and across the states is to take a proactive approach in developing skill to support the anticipated manufacturing boom. Vocational training program with the participation of industry and educational institutions are to be encouraged more rigorously.
 
MANual Operations
In today’s industry, automation plays a key role in enhancing quality and quantity of production. Irrespective of any sector, automation finds its significance. In India, the adaptation of automation is much slower than the global average. Thus the industry lacks in competing with their global counterparts in terms of productivity.
Awareness about automation products within the sector is still negligible. The penetration of automation solutions has been restricted to the large-scale manufacturers only. Small and medium scale players could draw significant benefit by automating.
 
MAN – the policy makers
Despite having tremendous potential of excelling into manufacturing, India could not emerge as one of the top players to be reckoned with. China and India account to nearly 40 per cent of the world’s population and more than 800 million strong middle class drives the growth demand. But, today the country stands nowhere in terms of manufacturing growth in comparison to China. The manufacturing sector in India merely shares 16 per cent in GDP while it is nearly 45 per cent in China.
 
Inadequate infrastructure, credit constraints, low labour productivity and high overhead costs are the major roadblocks in the growth of manufacturing sector. Recent emergence of almost insoluble issues in terms of land acquisition and environmental regulations are further intensifying the troubles. The increasing intensity of public protest around these issues has been delaying the process of project implementation. Moreover, foreign investors are loosing confidence having serious doubts about the future prospects of large industrial projects in the country.
 
It has been observed, in many cases the issues are being created with vested political interest rather than going for real interest. However, the government needs to find out immediate ways for tackling such sensitive issues as it can have a huge impact on the growth of the manufacturing sector.
 
The procedural delay is one of the prime reasons for the dissatisfaction amongst foreign investors. The time-intense administration and compliance measures, bureaucratic layers and  numerous authorities from which clearances are to be obtained all add up to considerable business costs and management time, creating an issue of severe concern for foreign investors.
 
In the recent past, the Indian manufacturing sector has also become a victim of economic crime. Bribery and corruption within the sector is degrading the value system. A survey carried out by PwC reveals, “Bribery and corruption was by far the most prevalent form of economic crime in the Indian manufacturing industry, with 50 per cent of manufacturing sector respondents reporting fraud incidences, followed by 33 per cent respondents reporting one or more categories of accounting fraud”.
 
Conclusion
During the union budget 2011-12, in an aim to increase the contribution of manufacturing activities in the GDP to 25 per cent, the government has announced the implementation of a suitable manufacturing policy. It is learnt that the draft of this policy has got stuck in ‘red tapism’ within different ministries. However, the policy makers are expected to leave no stone unturned in effective implementation of a manufacturing policy and systematic approach in boosting the sector which is the need of the hour today; mere policy reform won’t be of any help. Significant structural transformation for the economy is expected in creating the country a global manufacturing hub.