Reevaluation of India's Manufacturing Sector
GS PAPER 3
THE HINDU EDITORIAL
Historical Priority on Manufacturing: India's political, economic, and business elite have long prioritized manufacturing as a key economic sector due to perceived benefits such as increased productivity, job creation, and GDP growth.
Claims Supporting Manufacturing: Advocates for manufacturing cite the Lewis two-sector model, which suggests that surplus labor from agriculture can transition to manufacturing, where there is greater scope for productive work. Additionally, claims are made about India's comparative advantage in manufacturing and the need for easing regulations related to worker rights and land acquisition.
Complexity of Agricultural Productivity: While some argue that India's agricultural sector is under-productive, data shows a rise in cereal yields and value added per worker in agriculture, indicating increased productivity. However, constraints such as capital and technological limitations also affect productivity.
Challenges in Labor Mobility: The ease of labor mobility between agriculture and manufacturing sectors has been questioned by economists like Raghuram Rajan, who noted the lack of qualifications among Indian manufacturing workers compared to global counterparts.
Effectiveness of Government Initiatives: Despite efforts like the "Make in India" push and incentives for foreign enterprises, data shows limited progress in manufacturing value added as a percentage of GDP, with persistent challenges like poor infrastructure, lack of skilled workers, and minimal R&D.
Alternative Focus on Services and Education: Some argue that redirecting investments from manufacturing to enhancing human capital in services and education could yield greater economic benefits. India's competitiveness in services, driven by an educated population, suggests potential for growth in this sector.
Emphasis on Design and Intellectual Property: There's a suggestion to focus on capturing a higher share of value addition through proprietary design technology, rather than just assemblage, to leverage India's emerging comparative advantage in design.