India should attract manufacturing firms moving out of China: Arvind Panagariya

The NITI Aayog Vice Chairman said movement of workers out of agriculture to non-agriculture is much slower and that is where the manufacturing is crucial link

In order to create jobs on a large scale, India should emerge as an attractive destination for big manufacturing firms that are moving out China because of rising wages and demographic transition, NITI Aayog Vice Chairman Arvind Panagariya said.

"It seems that there is going to be massive shift in the large scale firms (from China). India ought to be the destination (for them). It is very good time for India (to attract these firms)," Panagariya said addressing a CII conference.

"The demographic transition (ageing population) in China is opposite of that in India. The workforce is declining in China. So the labour intensive industries move out of China and go somewhere else," he said.

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"Today you observe that wages in China rising and already these are about two to three times. In manufacturing if you convert these to Indian rupees then the average wage is about Rs five lakh (every year)," he added.

 

Citing an example of Foxconn which employs 1.3 million workers, he said: "In its single establishment, you see 20,000 workers. These are the kind of firms that are moving out (of China). There is a question. Where would they go? Right now some are going to Vietnam, Bangladesh, Sri Lanka and some are coming to India also."

Panagariya was of the view that if India wants transformation then it needs to bring workers into non- agriculture areas.

"If you talk about transforming the workforce of 500 million with half of it in agriculture, then clothing, food processing, footwear and electronic products are the segments where India need to succeed," he added.

Auto parts, machinery sector, chemical industry and petroleum refining are the industries on manufacturing side which are successful but don't create a lot of jobs, he said.

The services sector provides jobs to skilled workers not to those who don't have skills. Thus these sectors are very skill intensive, he added.

Panagariya said: "The transformation of workers is much slower in India in terms of their movement out of agriculture to non-agriculture and that is where the manufacturing is crucial link."

The output share of agriculture (in Indian Economy) has come down to about 16% or 17%, which used to be half of GDP when we got independent, he said.

Even in 1991, when reforms were launched in India, the share of agriculture was about 30% (in Indian Economy.)