Manufacturing can contribute 22% of GDP by 2015, says Ficci study

The manufacturing sector’s share in GDP could cross the 22 per cent mark by 2015, up from 15 per cent currently, if the government addresses five key challenges...

The manufacturing sector’s share in GDP could cross the 22 per cent mark by 2015, up from 15 per cent currently, if the government addresses five key challenges, a Federation of Indian Chambers of Commerce and Industry (Ficci) study says. The challenges are: availability of skilled labour, infrastructure development, high transaction cost, labour laws reforms and incentives for R&D.

The study says that around 5 million people with basic skills will be needed, of which 4 million will be for the garment sector alone. To meet this demand, the study recommends expansion and modernisation of training institutes across the country on PPP (Public Private Partnership) basis.

Growth in key infrastructure sectors like power, ports and roads need to be scaled up to ensure higher growth in manufacturing.

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High transaction cost is another serious concern for Indian manufacturers. According to latest World Bank Indices of Doing Business 2007, the cost associated with the procedures required to export from India is $864 a container against $335 in China. Similarly, the cost of importing to India is $1,244 per container as compared to $375 in China.

The Ficci study adds that restrictive labour laws in India significantly impact competitiveness and growth in the country’s manufacturing sector. In all, there are 154 laws related to labour that manufacturers must comply with. As far as labour laws are concerned, the World Bank gives India a rank of 112 for its labour laws, way below China’s 78.

If the country is able to resolve these issues effectively, the study projects the manufacturing sector to grow over 14 per cent a year against an average of 9 per cent of overall GDP growth in the next 8-10 years (see table).