McKinsey for export-led growth plan

In a marked departure from the belief that growth comes through import substitution, consultancy firm McKinsey & Co has prescribed that an export-led growth could help register a 0.5 per cent rise in the gross domestic product (GDP) through an incremental four per cent hike in the industrial growth.

The Confederation of Indian Industries (CII), the apex body of Indian industry, has appointed the consultancy firm to chart out a roadmap to be followed by the industry, especially in the manufacturing sector, to prop up the GDP growth.

The study will be unveiled on October 8 at the manufacturing summit of the CII in Mumbai.

Jamshed N Godrej, chairman and managing director of Godrej & Boyce Manufacturing Company, and the past president of CII, confirmed the McKinsey prescription.

He said the CII would discuss the report with the Centre and would urge it to take up a time-bound programme.

Providing a significant boost to the manufacturing-led exports should be recognised as one of the most important economic priorities, the report said, adding that the government should remove four key barriers for that.

The barriers are: reduction of indirect taxes and import duties, improvement of infrastructure and acceleration of labour reforms, the report said.

He said McKinsey arrived at the conclusion after studying the export opportunity in automobile components, textiles, electronic hardware and specialty chemicals.

The report said India should aspire to grow much faster and become one of the three largest exporters of manufactured goods among the low-cost countries by 2015.

This would imply aiming at expanding India's overall manufacturing size from $0.5 trillion to $1.4 trillion and to achieve an almost 10-fold growth in manufacturing exports from $40 billion to $300 billion.

The combined impact of the domestic and export led growth would have remarkable results for the economy: a sustainable increase in GDP of one per cent a year; the creation of 25-30 million jobs in the manufacturing sector and 50-75 million jobs in the allied sectors, the McKinsey report said.

According to the report, the next wave of manufacturing offshoring will be driven by skill-intensive industries, namely automobile components and pharmaceuticals.

India would enjoy cost advantage due to the combined effect of large domestic demand, engineering skills and huge raw material.