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At a time when manufacturing grew 0.9% in the first ten months of the current fiscal, Boston Consulting Group (BCG) today said the rate must rise to 14% to meet the goal of National Manufacturing Policy (NMP).
The policy aims to increase the share of manufacturing in India's GDP from around 15% at present to 25% over a decade.
In a report on Indian manufacturing competitiveness, released today, BCG blamed poor labour productivity for low manufacturing growth.
“The Indian manufacturing sector has a low share in India’s GDP; quite lower than its peers. There is a low preference for manufacturing sector among job seekers. India’s manufacturing sector is growing at one of the lower rates, unable to keep pace with inflation and labour costs, when the services sector has improved its GDP share with its focus on training and productivity”, the report said.
Labour productivity and global GDP share go hand-in hand, the report said. According to the report, though India has a young and booming demography, and labor cost competitiveness, the labour productivity in India is lower ($3,000 per employee a year) than that of developed nations or even other BRICS nations. In United States, the labour productivity is $1, 55,000 per employee a year, and in Japan it is $1, 04,000.
The report said that while the government needs to invest in training, manufacturing companies should look inward to give more importance to training.
“Raising the manufacturing sector share of the GDP from 15% to 25% will only happen with an increase in labour productivity. Low labour cost alone will not do. China if you look at the last 10 years, the labour cost has increased by 10-15%. But, the productivity has increased by over 15%.”, said Arvind Pandey, the partner and director of the Boston Consulting Group, India.
In January, the Index of Industrial production had registered a growth of 2.4% with the manufacturing sector growing at 2.7%.
