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The manufacturing sector’s contribution to the country’s GDP has more than halved in the last two decades, and it may get worse if steps are not taken to fix it, said Satish Marathe, Director, Central Board of the Reserve Bank of India.
Delivering the keynote at the BusinessLine Countdown to Union Budget 2019, Marathe said India needs to focus on MSMEs to improve local manufacturing and truly kickstart the ‘Make in India’ initiative.
“India imports everything, from a pin to a piano,” Marathe said. “In the past 20-25 years, the share of manufacturing in the overall GDP has been constantly going down, and nothing much has been done to boost it. We need to relook our trade and tariff policies to boost manufacturing,” he added.
Marathe said the organised financial system has largely ignored the micro, small and medium enterprises (MSMEs) in the country, which should have been the backbone of India’s manufacturing growth story.
“We have over 60 lakh MSMEs in India, but only about 16 per cent of the credit has gone to them. India can’t be like the US, which imports a majority of its goods. We need to start manufacturing locally to save precious foreign exchange from flowing out,” Marathe said.
He also questioned the way public sector banks function in India, and urged for a relook at their operations.
“It is high time we asses whether the current ownership model is working for PSU banks. I don’t think privatisation is the only solution. We need to look at other means,” Marathe said.
Moreover, he added that the private sector is increasingly becoming risk-averse, impacting the overall growth of the economy.
Rural income growth
While he praised the government’s Jan Dhan Yojana, Marathe stated that despite all efforts, there are still more than 50 crore people in the country with no access to the organisational financial system.
Suggesting ways to boost the economy, Marathe said a more concerted effort is required to improve farm output and look at various ways to increase farmer income to boost the economy.
“Unless we increase the rural income, we cannot expect to see substantial growth in overall economy. Today, the Indian farmer is much more aware and educated, so the overall production has increased. But the farmer does not realise that prices are decided at an international level. He needs to be educated on how prices are decided and what he should cultivate,” Marathe said.
The RBI Director insisted that the government needs to promote animal husbandry in agriculture to add to the farm income. “A large part of India’s population is non-vegetarian. Animal husbandry can support that demand and add to the rural farm income,” he said.
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