A Cause for Concern: Slowdown in the Indian Manufacturing Sector
A Cause for Concern: Slowdown in the Indian Manufacturing Sector
The manufacturing sector of our country may appear as the Achilles heel of the Indian economy to some, but it is a potential for unlimited growth if it is tapped in the right direction. It is a sector which needs adequate support and effective policies if it has to grow in a healthy way. The fall in investment in the manufacturing sector is dragging the Indian economy into a deep pit. Recovery is only possible if Indian manufacturers are given a chance to develop and expand in their field. Estimates of the Central Statistics Office (CSO) suggest India’s overall GDP growth in the span between 2013 and 2014 is going to be around 4.9%. This is a marginal increase from 4.5% observed in the period from 2012 to 2013. What is not so positive is the growth rate of the manufacturing sector. Manufacturing output declined to 0.2% this year between 2013 and 214 compared to 1.1% in the previous financial year.
This significant fall in the percentage is what is causing many economists to predict that this may be the worst year for Indian manufacturing since 1999. The manufacturing sector was quite healthy in the period between 2005 and 2011. During this time, it has a growth rate of 10% CAGR. The manufacturing sector also lacks in performance in current months due to changes in domestic demands and patterns. From metals to capital goods and consumer durables, the situation is grim. A massive factor influencing the fall in the domestic demands have been the high interest rates. Stalled projects due to land acquisition issues are also harming the Indian manufacturing sector. This has also influenced the fall in capital expenditure in the sector. It is not just the consumer spending which has damaged the manufacturing sector. A fall in confidence levels has also influenced and impacted the Indian manufacturing sector in an adverse manner.
The Confederation of Indian Industries (CII) has indicated that the production of important consumer durables such as refrigerators have declined towards the end of 2013 as compared to the months of September, October and November. The production of machine tools also reduced during this year due to lower capital expenditure. New investments and projects in the Indian manufacturing industry also experienced a dip during this year and the end of 2013. Manufacturing is an important sector. It has the potential to create a huge number of jobs. This is especially important if India has to progress as the leader in key economic fields. It is also essential if our country has to reap the benefits of India’s demographic dividend. India is on the cusp of a change as the upcoming elections are in progress.
It is important to remember that a slowdown in a key manufacturing industry also influences ancillary industries. The impact of the manufacturing sector on the GDP cannot be underplayed either. The manufacturing sector has a crucial role to play in the growth and development of the nation. Clarity in government policies is not the only cure. Proper implementation of the policies is also equally essential. A particular deterrent for the growth of the Indian manufacturing sector has been the Information Technology Agreement with the WTO. Electronics manufacturing companies have suffered because foreign companies imported a number of electronic products in our nation. It has not been easy for Indian manufacturing firms to compete with outside companies which have access to superior technology and more investment friendly climate. India’s manufacturing sector needs to be nurtured and supported at this stage.
Our manufacturing companies face hardships such as demands for grafts and bribes as well as challenges such as lack of required infrastructural facilities. India has to move further in protecting key industries in the manufacturing sector from foreign competition till they are ready to take on rivals. Some amount of protection for the Indian manufacturing sector could contribute to its significant growth. The Indian manufacturing industry deserves a fighting chance. Hopefully, India’s leaders and policy makers will see the manufacturing sector for what it is- a possible goldmine which can yield rich benefits for India’s working population and economy. With such a huge percentage of the Indian population being of working age, any growth in the manufacturing sector will spur much needed job creation. This is essential if India has to advance in the coming years and attain superpower status. As with everything else, key sectors such as manufacturing in India are linked to the bigger picture. Jobless growth has been the bane of the Indian economy in the past few years. The mantra of the government should now be to create more jobs by spurring growth in the domestic manufacturing sector. One positive outcome will simply lead to another.
