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

India Today - - THE BIG STORY - With Malini Ban­er­jee, S. Senthil Kumar and Kumar An­shu­man

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.

GUR­GAON, HARYANA Maruti Suzuki Limited’ The stock­yard of Maruti Suzuki Limited’s Mane­sar plant. MARUTI, WHICH HAD PLANS TO IN­VEST RS 14,000 CRORE IN A NEWPLANT IN GU­JARAT, HAS PUT IT OFF CIT­ING SLOW­ING CAR SALES.

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