Make in India? Manufacturing fails to take off

India’s poor show in manufacturing results from the fact that the country fares poorly in terms of ease of doing business.

In India, manufacturing has failed to take off.

Through the past decades, the sector’s share in gross domestic product (GDP) has remained stagnant at about 15 per cent, compared with a share of about 30 per cent in China, South Korea, etc. 

Of the 11.5 per cent of the labour force engaged in this sector, a large segment is employed in the unorganised space, though various studies have shown productivity per worker in the unorganised segment is much lower compared to the organised sector. 

The lacklustre performance of the sector is reflected in its contribution to exports - its share to total exports fell from 77 per cent in 2001 to 66 per cent in 2009.

Within the sector, the sharpest decline has been observed in the textiles space (from 25 per cent in 2001 to 11 per cent in 2008-09). 

It is often said India’s poor show in manufacturing results from the fact that the country fares poorly in terms of ease of doing business, as well as in the global competitiveness index.

This, it is said, prevents companies from setting up manufacturing bases here. On the index of the ease of doing business, India ranks 134th, while on the global competitiveness index, its ranking slipped from 50th in 2008-09 to 60th in 2013-14.

So far, a project management group set up to ensure quick clearances of projects has cleared 17 projects worth $102 billion; 288 projects, totalling $262 billion, haven’t been cleared yet. 

Significant hurdles such as land acquisition, labour laws, environmental clearances, lack of reliable power and the absence of complementary infrastructure continue to impede growth of the manufacturing sector.