Manufacturing Sector : Suggestions – UPSC GS3

  • Potential of India:
    • a large potential market
    • a large workforce to produce for the world market.
  • Comparison with china:
    • Both India and China have more than 1 billion population.
    • In 1990, India’s manufacturing sector was comparable with China’s; Since then, it’s manufacturing sector has grown almost ten times larger, and it’s capital goods and machine-tool by 50 times
    • China has also developed high-tech manufacturing capabilities in electronics, telecom, power equipment and machine tools.
Concerns with Indian manufacturing sector:
  • Lack of sufficient depth in the Indian manufacturing sector: which results in three challenges:
    1. Lack of security against foreign threats.
    2. Poor competitiveness in international markets.
    3. Insufficient wage growth for workers.
  • Issue of promoting protectionism policies through Atmanirbhar Bharat and Make in India.
Improvements needed in Production Linked Incentive (PLI) scheme:
  • Incentives must be tied to progressive increases in value addition: within the country and not just assembly of various parts. (which provides fewer incentives for low-level manufacturing)
  • Incentive should be defined on a minimum threshold: so that companies with track records of growth get benefits. (Currently determined by the percentage increase in production over a base year)
  • Research and development (R & D) should be incentivised as it essential for the absorption of technology and acquisition of sustainable competitiveness and results in greater return on investment.
  • Reserve 50% of the incentive for domestic companies: to ensure that both Foreign Direct Investment (FDI) and domestic industries are equally promoted.
  • A company or a country must become faster learner to catch up with their Chinese counterparts, to ensure sustainable competitive advantage.
Conclusion: India’s policymakers must also become much faster learners, and not remain stuck in the theoretical paradigm of free trade that has not served India too well.
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