Strategy to boost manufacturing competitiveness

Chennai: In order to take better advantage of the opportunities being thrown up by globalisation, the Indian manufacturing sector should improve its competitiveness. According to V Govindarajan, member secretary, National Manufacturing Competitiveness Council (NMCC), government of India, a high level committee on manufacturing headed by the Indian prime minister is meeting sometime next month to discuss the macro economic initiatives required to make the domestic industry globally competitive.

Addressing the captains of industry at the Confederation of Indian Industry (CII) southern regional council, Govindarajan said that the country is unable to build and maintain competitive strengths needed to meet the global challenges as well as develop a larger domestic market through low cost production. "This is one of the major reasons why the share of manufacturing has been stagnating at a low level of 17 per cent of GDP for over two decades."

He said that if the nation's GDP has to grow at a balanced 8-9 per cent per annum, the manufacturing sector has to grow by over 12 per cent per annum over the next decade compared to less than 7 per cent growth in the last two decades. The growth target of 12 per cent in manufacturing would create about 1.6 to 2.9 million direct jobs annually and two to three times indirectly, Govindarajan added.

According to Govindarajan even with a 12-per cent annual growth, the contribution of the manufacturing sector to the GDP may reach only 23 per cent by 2015. However, the long-term goal should be a much higher contribution of manufacturing in the GDP to over 25-35 per cent.

He said that though import tariff, taxes, cost of capital, infrastructure bottlenecks and others affect the competitiveness at the national level, the industry must strive to enhance the firm level competitiveness by adopting modern management practices and technology.

He said that the NMCC does not argue for subsidy or protection but aims at gradually reducing an estimated 15 per cent cost disability faced by Indian manufacturers on account of taxation systems. The council will also take initiatives to simplify various government related procedures in order to reduce the transaction costs.

He said that government would need to deal with ensuring macro-economic stability including containment of core inflation. It must strengthen education and skill building and enable speedy development of infrastructure while industry must come forward to invest in R&D and technology and show a continuing commitment to skills development and knowledge enhancement.