RED SPOTS ON THE SHOP FLOOR Living with Low Growth
Growth rate in most manufacturing sectors fell sharply, slipping into negative zone in many cases, reversing the wheels of industry from May this year
cent of the GDP,” says Pawan Goenka, president- automotive, M& M. “For this, emphasis should be given on exports in a big way, even as we resolve issues of land, labour, input costs and skills.” Recent reports said foreign carmakers Proton, PSA Citroen, Kia and Chery have deferred their plans to come to India. French firm Citroen was to set up a Rs 4,500- crore project in Sanand, Gujarat. Manufacturing in India employs 48.5 million people or 11 per cent of the country’s workforce, but its share in India’s GDP has remained stagnant at 15- 16 per cent for over three decades. In October 2011, the Government cleared the National Manufacturing Policy to create 100 million skilled jobs and take the sector’s share in the GDP to 25 per cent by 2022, but many feel the progress on this is slow. “Low growth in manufacturing is not surprising, since India ranks very low in the ease of doing business, at 132nd among 185 economies, according to the World Bank,” says R. C. Bhargava, chairman of India’s largest car manufacturer Maruti Suzuki India. Agrees K. K. Maheshwari, managing director of Grasim Industries, the flagship company of the $ 40- billion Aditya Birla Group, which operates in 36 countries and draws 60 per cent of its revenues from abroad. “Growth in manufacturing is linked to providing the right infrastructure, power at reasonable cost, and the ease of doing business. We lack in these.”
Top bankers, who have large exposure to manufacturing, have raised an alarm. “We are worried about the state of manufacturing,” says Naina Lal Kidwai, country head, HSBC India, and president of industry body FICCI. “Today, around 25 per cent of India’s gross bank credit is in the manufacturing sector and another 15 per cent in infrastructure.” The Government, however, says it is committed to reviving the sector. “Boosting manufacturing is not only an economic necessity but a social imperative too,”
Commerce and Industry Minister Anand Sharma told INDIA TODAY.
The paralysis in the sector is equally evident among the lakhs of small and medium units in India, 67 per cent of which are in manufacturing. According to the fourth all- India census of Micro, Small and Medium Enterprises ( MSMEs) released in April 2011, out of 22.48 lakh registered MSMEs, only 15.64 units were opera- tional, 4.96 lakh units permanently closed, and 1.88 lakh units untraceable. Several small industries in Coimbatore, once a major manufacturing hub, have closed. In West Bengal’s Durgapur, it is a similar story, with the number of small scale units falling to just 100 from 400. Within the Thane- Belapur Industrial Estate near Mumbai, spread over 25 sq km, from 3,500 industrial units in 1980, the number dwindled to 2,800 in 2010, rendering thousands jobless.
The textile sector has been one of the most affected. In the early 1980s, as many as 80 large textile mills shut shop in Central Mumbai, once a major global textile hub, leaving 150,000 unemployed. The machine tools industry has seen a decline, especially with the slowdown in the automotive segment, which consumes
40 per cent of the sector’s products. From sales of Rs 4,076 crore in fiscal 2010- 11, machine tools sales declined to Rs 3,860 crore in 2011- 12 as orders fell and deliveries were deferred. Electronics is yet another neglected sector, where imports comprise a whopping 65 per cent of the $ 65- billion market in India.
In 2011, China became India’s largest trade partner, trade growing 14- fold over the last decade, from $ 4.77 billion in 2002- 03 to $ 67.83 billion in 2012- 13. Of this, $ 54.3 billion comprised goods imported from China and only $ 13.53 billion comprised exports to China, a trade deficit of $ 40.77 billion. Some believe plans for a free trade agreement with China can be detrimental. “Every country follows protectionist measures,” says M. V. Kotwal, president ( heavy engineering), Larsen & Toubro. “In India, we seem to be welcoming foreign supplies for our projects.”
The Government has initiated a plan by which the Planning Commission and National Manufacturing and Competitive Council will develop coordinated action plans with states that have witnessed slackness in investment in manufacturing. In July, Prime Minister Manmohan Singh chaired a high- level committee on manufacturing to formulate an action plan to boost competitiveness and output in the sector. On August 26, the Cabinet Committee on Investment cleared 36 projects with a total investment of Rs. 1.83 trillion in sectors such as power, oil, gas, roads and railways. The Government has made a start. But it seems to have come at the last minute, casting doubts on the seriousness of the efforts.