Not another meeting

Nothing short of deep reform will help manufacturing

The high-level committee on manufacturing, headed by none other than Prime Minister Manmohan Singh, on Tuesday said the country should raise its steel output to 300 million tonnes per annum by 2025 (it's expected to be 120 million tonnes at the end of the current financial year) and grow its textile exports 30 per cent this year. This is meant to give a fillip to manufacturing in the country, which has gone into a downward spiral. Dr Singh admitted at the meeting that Indian manufacturing is at the lower end of the value chain and while we export raw materials and primary goods, our imports mainly comprise manufactured goods. He has called another meeting of industrialists later this month to suggest ways to arrest the decline in Indian manufacturing.

For industry, it will be yesterday once more. Several such meetings have taken place in the past in which the highest authorities have been told about all the problems that ail Indian manufacturing. Industry associations have made innumerable presentations on the issue. Another meeting will not help. It does not take an expert to recognise what ails Indian manufacturing: it's a combination of problems related to land acquisition, environmental clearances, rickety infrastructure, inflexible labour laws and, increasingly, the yawning skills gap. India is almost at the bottom of the heap when it comes to ease of doing business. And this is not a new revelation, except that the government doesn't seem to have woken up to it. All the insights, wisdom and grievances are already known to it; why does it need another meeting to figure out what's wrong?

But it doesn't seem the government is really serious about fixing the problem. After the flip-flop on special economic zones, it had announced grand plans to set up national investment and manufacturing zones across the country where industry could plug in and straightaway start production. But there hasn't been much progress on the ground. India, the government must realise, has already begun to lose investments to other countries. The advantage that many believed would accrue to India in the wake of rising labour costs in China has proved to be elusive so far. Several Indian businessmen have chosen to set up factories abroad to feed the Indian market. Industry finds it economical to manufacture abroad and sell in India even after the rupee has fallen below 60 against the dollar.

Manufacturing is critical if India wants to provide jobs to unemployed people, especially those who are semi-literate or semi-skilled. Manufacturing provides jobs to 28 per cent of China's working population, 28 per cent to Germany's, 19 per cent to Japan's, 18 per cent to Brazil's and only 12 per cent to India's working population. The sector contributes just 15 per cent to the country's GDP, which is way below that of Thailand (40 per cent) and China (34 per cent). The National Manufacturing Policy wants to raise it to 25 per cent by 2022, but that looks like a pipe dream so long as the government pays only lip service to the sector's problems. The time for meetings is long gone; the government needs to get cracking on various fronts. To start with, it could focus on labour laws, single-window clearances and skills development.