Opinion

Manufacturing doesn’t get due attention

Biswajit Dhar | Updated on February 01, 2019 Published on February 01, 2019

Manufacturing Feeling the heat   -  REUTERS

This is of concern as over the past 4 years the sector hasn’t created enough jobs; its share in GDP has been virtually stagnant

The speech delivered by the acting Finance Minister, Piyush Goyal, while presenting the interim Budget for 2019-20 can be best be read as a statement of the National Democratic Alliance (NDA) as it gets ready for the hustings. However, unlike typical election manifestoes presented by the outgoing governments in which they publicise their achievements during their tenures and seek support of electorate through their promises, Goyal’s statement in Parliament spoke of the vision of the NDA government for 2030. The Budget Speech was, therefore, a blueprint of the government for the future, and it should be assessed using this yardstick.

While Goyal spoke of the programmes initiated by the NDA government in laudatory terms, the results of the ‘Make in India’ initiative, the first major programme launched by the government soon after taking office, did not figure prominently. Only once did the minister speak about the achievements of ‘Make in India’ when he reported that the mobile and parts manufacturing industry had increased from two to more than 268, and this provided huge job opportunities.

Mystifying assertions

It is not exactly clear how this figure of 268 units was reported, for the government reported at the World Economic Forum in 2018 that 72 new mobile handset and component manufacturing units were set up in the country in the previous two years. It was claimed then that “India has emerged as a mobile manufacturing hub”.

It is not clear how nearly 200 mobile phone units were established in the past year, for if they had been established, India’s imports of telecom instruments and electronic components would possibly not have expanded from under $24 billion in the first nine months of 2017-18 to over $26 billion in 2018-19.

In general, the manufacturing sector did not receive the same level of attention that other sectors did in Goyal’s Budget Speech. Given that the speech was presented as a somewhat longer-term plan of action for the NDA government, the relative neglect of this sector is an area of concern. This is because of a number of reasons.

The first is that the performance of the manufacturing sector during the NDA regime was not significantly better than that in the final year of UPA-II’s regime. Until November 2018, the manufacturing sector grew at an average rate of 4.2 per cent, while in 2013-14, this sector grew by 3.6 per cent.

Further, if one considers the fact that the UPA-II was struggling to get the manufacturing sector back on stream, the comparison of this sector’s growth in the two regimes becomes even more stark. Thus, despite the unveiling of the ‘Make in India’ initiative, the fortunes of the sector, which should be the leading player in the country’s growth story, have not changed for the better. The ‘Make in India’ initiative launched by this government had two laudable objectives, namely, to increase the share of the manufacturing sector to the gross domestic product (GDP) to 25 per cent by 2022, from just above 16 per cent in 2014, and to create 100 million new jobs by the same year.

In more than four years since its launch, the share of manufacturing in GDP has remained virtually stagnant; a far cry from its target. This also puts a serious question mark on the possibilities of job creation in this sector. This is especially so as the job-creating units in the manufacturing sector, namely, the micro, small and medium enterprises (MSMEs), have suffered the twin blows of demonetisation and the introduction of the Goods and Services Tax. This implies that the probability of manufacturing jobs being lost is quite significant.

One of the important ways in which a weak manufacturing sector has adversely impacted the country is in its external economic relations. For more than a decade and a half, India has been engaged in an intensive process of global and regional economic integration. This process requires the government to lower the import duties, especially in the manufacturing sector. The most demanding of these processes in which the government is engaged, are the negotiations for concluding the Regional Comprehensive Economic Partnership (RCEP). India’s manufacturing sector is finding it extremely difficult to accept such a free trade agreement, which gives Chinese enterprises free entry into the Indian economy.

In Goyal’s blueprint for India 2030, there is no credible programme that can help this sector to overcome its serious challenges.

The writer is a professor of economics at JNU

Published on February 01, 2019
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