#dnaEdit: Manufacturing a revolution

Prime Minister Narendra Modi’s mega meeting this Thursday with leaders of global industrial enterprises is, as they say, a necessary but not sufficient step for bringing about a manufacturing revolution in the country. The Prime Minister, in his recent Independence-Day speech, identified “Make in India” as one of his top priorities. He urged global manufacturers as well as Indian industrialists, to seriously consider India as a manufacturing destination. This is not the first time such an idea has been floated. The UPA government, too, had hit upon this strategy and set up the National Manufacturing Competitiveness Council. But the move had yielded no results.

Meanwhile, manufacturing, continued to languish. Going by the indices of industrial production during the last few years, manufacturing was stagnating without any growth prospects. 

Why is a robust manufacturing sector vital to the economy and productivity-linked growth? When India’s services sector was growing and pushing up the overall GDP to near double-digit levels, we smugly believed that India had already arrived at the post-industrial stage of a services-led economy. We perceived ourselves to have acquired a seat in the league of the advanced developed economies, dominated by the services sector. But that was clearly a mistaken notion. 

The lack of a vibrant manufacturing industry stymied job opportunities. Let’s not forget that it’s the manufacturing sector which primarily catalyses economic development. Britain became the world’s leading manufacturer after the Industrial Revolution on the back of steam power. United States developed its industry after finding abundant raw materials. Japan became a major economy after the Second World War on the strength of its manufacturing industry. South Korea developed into a specialised manufacturing hub and became a leader in ship building to automobiles. Last but not the least, China emerged as a economic super power rivalling United States because of manufacturing muscle. 

Modi’s intention to ‘ walk his talk’ by meeting global manufacturing industry leaders is surely welcome. But should he not have rather prioritised his meetings with state chief ministers, industry ministers and lower level bureaucracy and urged them to facilitate manufacturing units to operate or start new green-field projects. Industry leaders are only one part of the new manufacturing  project. Often eager to invest in India, industrialists retreat in the face of daunting red tape. Only recently, some company heads complained of the difficulties they encounter in operating their businesses in India.

The key to turning India into the next manufacturing hub lies in the hands of state governments. Enough policy reforms already exist on paper to attract investment in India. But investment projects are getting locked up in procedural and political tangles. 

Manufacturing is old-time real economy. It can only take off by meeting certain basic production criteria: land, labour, capital as well as entrepreneurs. Here in India, land acquisition continues to be difficult — not just for its shortage, but also for political reasons. The argument amply illustrated by the deadlocked Singur and Niyamgiri projects. Labour is surplus but often not skilled enough. Skill development, therefore, has to be a top priority.

India also has the unique advantage of having energetic entrepreneurs. But they are hemmed in by the red-tape of clearances. Environmental clearances mean running from pillar to post — from state to Centre. These are just some of the problems of setting up new manufacturing units in India. They need to be urgently sorted out. And the Prime Minister can initiate this process by first meeting the heads of states to straighten these knots before he can usher in a manufacturing revolution.