Notwithstanding the Indian manufacturing industry’s current growth rate of 7 per cent and its paltry 17 per cent share of the GDP, India has the unquestionable potential to be a world manufacturing power.
A large number of companies are shifting their manufacturing base to India to make the best of its labor cost advantage, English-speaking work-force, democratic regime and other advantages. The country has the largest number of companies, outside of Japan, that have been recognised for excellence
in quality.
 |
Lately, the manufacturing industry has been witnessing a positive overall growth across spectrum. This can be said on the basis of the Industrial Outlook survey that was conducted by the Reserve Bank of India (RBI) for 2010 on the Indian manufacturing sector. The results showed positive overall business sentiment in
the year.
According to Confederation of Indian Industry (CII) - ASCON survey, 41 out of 121 sectors in the manufacturing industry are estimated to grow at 20 per cent or more in the current financial year as against 34 sectors that had reported such growth during the last financial year.
As per UNIDO’s new report titled ‘Yearbook of Industrial Statistics 2010’, India has emerged as one of the world’s top 10 countries in industrial production, while as per the report ‘2010 Global Manufacturing Competitiveness Index’, by Deloitte Touche Tohmatsu and the US Council
on Competitiveness, India has ranked second for its manufacturing competence.
The Mechanics of Change
However, the contribution of the manufacturing industry to the GDP is significantly low. For the Indian economy to successfully distribute wealth across its population, manufacturing has to grow from its current 17 percent share of GDP to a number closer to 30 percent (which is the standard for most developed economies). However, for that to happen, the industry needs to wean itself from its labor cost advantage and focus instead on markedly improving the efficiency of its operations through technology.
Currently, the manufacturing sector is merely warming up to the idea of technology but the adoption is slow in comparison to its counterparts in developed economies. Lack of awareness of global technologies, and trends in Manufacturing IT has also contributed to this low adoption.
 |
| Growth Drivers |
| • Significant increase in productivity and quality at the plant levels • Pursuit of worldwide competitive manufacturing strategies and operations • Successful integration into the global supply chains Government initiatives towards making the manufacturing sector more attractive: • Creation of National Manufacturing Competitiveness Council (NMCC) to help develop national strategies with regard to technology and acdemic leadership • Issuance of the new Consolidated Foreign Direct Investment (FDI) policy document with more leeway • Retained stability in indirect taxes leading to capacity building |
Today when most exporters are looking forward to unshackled growth, their first step has been to completely overhaul existing machinery, putting in place imported machines that offer productivity levels that are six or seven times higher than those of Indian machines.
This, however, is but a small step in the larger scheme of things. In today’s business environment, manufacturers must increase productivity through the entire supply chain - this necessitates that real-time data from the plant floor be made available to their ERP, SCM, and Manufacturing Execution Systems (MES) systems.
There is need for an Intelligent Networked Manufacturing (INM) vision, entailing an Ethernet to the Factory (EttF)solution that allows for the integration of plant floor data with business systems, providing employees with access to the information as and when they need it. While this improves business efficiencies and decision-making abilities on one hand, more importantly it enables manufacturers to obtain visibility to the factory floor without disrupting the production line.
By scaling business through innovative investments and practices, alongwith adoption of technology, Indian manufacturing is slated to become a hallmark of manufacturing prowess in the future.
Growth Barriers
FICCI estimates that the higher input costs for the Indian manufacturing sector as a result of cascading effect of indirect taxes on selling prices of commodities, higher cost of utilities like power, railway transport, water, higher cost of finance and high transactions costs puts the sector at a severe disadvantage as compared to its Asian counterparts.
To accelerate growth and improve competitiveness of the Indian manufacturing industry, the industry must allow entry of more private sector investors in important infrastructure sectors like electricity distribution, aviation, roads, railways, ports. A new bill for improving India’s labor laws including encouraging contract labour will serve the industry better.
Over and above more conducive government regulation, what the Indian manufacturing sector needs is a productivity boost. CEOs of some of India’s leading export firms on visits to China have come away impressed at the efficiency per employee and the dawning realization that current productivity of their factories is half to one third levels of what might otherwise be achievable.
Subscribe to this comment's feed
| < Prev | Next > |
|---|
