Making our manufacturing sector globally competitive

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 Making our manufacturing sector globally competitive

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• India's early years: In the 1950s and 60s, the politicians wanted India to become wealthy, strong and socialist, to eliminate poverty and deprivation. Rapid industrialisation was deemed essential also for employment generation.
• Reality in 2020: India isn't fully industrialised, and employment scene too is bleak. Socialism is on paper, as inequality is rampant. Effective solutions can only be found if the disease is diagnosed properly, not otherwise.
• Poor growth of manufacturing: It is surprising that politicians and civil servants failed to properly diagnose what went wrong. 

1. Many new industrial policies came about, and the 1991 liberalisation process too, but today manufacturing stagnates at 16% of GDP.
2. India remains dependent on imports hugely, including for manufactured products. 
3. Poverty and unemployment have continued.

• Reasons and analysis: India has failed to accept that for high growth, competitive manufacturing is essential. Policymakers were never oriented towards this truth. While 'Ease of Doing Business' is appreciated, the whole set of reforms that make a competitive system are still missing. 

1. Public sector firms are not oriented on cost control, productivity and resource-generation for modernisation.
2. Market competition hasn't spurred public firms to be better at their job. Their losses are subsidised. 
3. Private firms are hurt when the products of PSUs that act as inputs aren't competitively produced or priced. Examples - electricity or infra services
4. For global competitiveness, Indian firms need to minimise their costs. Indian governments affect costs in a big way. By reducing the time involved in the multiple interaces of industry and govt., these can be cut down sharply. 
5. Govt. employees try to control industry, instead of being facilitators. Tax litigation is a result, in a system already struggling with poor infrastructure.

• The issue of trust: India needs high trust between private industry, politicians and civil servants. In its absence, no one takes responsibility for making things happen. It's a teamwork after all, for manufacturing growth to be possible. 
• How to generate jobs: If the problem is looked at in silos, it won't be resolved. Look at it holistically. Formal sector jobs will largely come from manufacturing, and more of it will create more jobs. So instead of forcing firms to hire more, build more firms to generate overall more jobs.
• Product demand, price and cost: The demand for any manufactured product is dependent on its price, and lower prices mean more demand. Price depends on manufacturer's price plus taxes. India has often taxed manufactured products heavily, as "the rich buy them". That suppressed demand, and hence production too. So reverse this vicious circle first. As production will rise, economies of scale will lead to lower prices also. 
• Summary: Let all policymakers realise that without focusing hard on raising competitiveness, which itself is a moving goal, Indian manufacturing won't achieve its full potential.

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