* Should provide greater value by virtue of better quality, design and innovation and not compete as low-cost location
* Domestic market to be the major driver of growth
* Labor laws, land reforms, other infrastructure and regulatory environment issues require immediate action by government
* Skill development requires greater interaction between the industry and educational institutions
Indian manufacturing should aim for a 5 percent global share, which is challenging but definitely achievable. This requires the manufacturing sector to grow at more than 10 percent annually. The innovation and entrepreneurial confidence of Indian firms has helped them leap frog in the process of discovery and market leadership. Going forward Indian companies need to take bold steps into uncharted waters. If we are able to sustain this growth rate till 2022, then we could reach a 5 percent share of the global manufacturing output. This growth is important even from the point of view of employment generation, according to a KPMG report titled ‘Manufacturing India @ 75’ released at a manufacturing summit organized by CII.
Speaking on the occasion Ramesh Srinivas, National Industry Director, Consumer Markets,
KPMG in India said, “The report envisions India at the forefront of global manufacturing and trade of goods, a leader in skill-intensive sectors and a global hub of Research & Development (R&D) and design. Exposure to external competition forced them to reinvent processes and product portfolios. However, protectionism has been deeply rooted in the Indian society and we have not yet been able to completely change that culture. This is one of the key reasons for low productivity in Indian manufacturing.”
Our share of global manufacturing has just crawled from 1 percent in 1995 to around 1.8 percent currently. This is primarily because the Indian manufacturing has grown on the back of growth in internal demand. When India turns 75 years, it will have a large middle class (by 2022 the Indian middle class is estimated to be 600 million strong or roughly 40-45 percent of the population) with a much greater purchasing power than the present. This will create a huge demand, both in quality and quantity terms, for manufactured goods in India. For India to be able to cater to this demand it needs to have a clear strategy.
The essential growth ‘enablers’ required to drive growth in manufacturing are, Infrastructure, People development, Regulatory environment, Communication and Technology. The Government needs to create an enabling environment for the manufacturing sector. This needs to be done by a periodical review of key laws/acts that affect the manufacturing sector.
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“However, the Indian manufacturing has learnt tremendously by being a part of a large domestic consumption space which is a low cost market to create low cost technology solutions. This can enable it to move away from the image of a low cost destination to a high value add, highly skilled manpower destination,” added Ramesh.
The demographic advantages of a large population under the age of 30 open up exciting another opportunities for India. To harness the potential of such a large workforce, where 90 percent are a part of the unorganized sector, there is a need for the manufacturing sector to play a pivotal role, as this sector of the economy has the ability to absorb such a large pool of semi-skilled and unskilled labor.
About KPMG:
KPMG is the global network of professional services firms of KPMG International. KPMG member firms provide audit, tax and advisory services through industry-focused, talented professionals, who deliver value for the benefit to their clients and communities.
The member firms of KPMG International in India were established in September 1993. KPMG in India has offices in Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Kolkata and Pune and services over 2,000 international and national clients. The firms in India have access to more than 2,500 Indian and expatriate professionals, many of whom are internationally trained.