India's Manufacturing strategy
Last week, India government approved a national manufacturing policy that aims to create 100 million jobs in the next 10 years. During the press conference, Trade Minister Anand Sharma said that the policy is to create industrial zones that will offer lower taxes, faster permits, and easier labor laws to make India the next destination for manufacturing after China. India will set up seven special zones, including two in the western state of Maharashtra. The new manufacturing zones will have a minimum size of 5,000 hectares and ensure workers' benefits by setting up fund to provide training and compensate them to move to such area. The goal is to capture the global manufacturing share 25 percent by 2022 and create more jobs for Indian.
Mr. Sharma said that the government recognizes that the manufacturing sector has a multiplier effect in the creation of two to six additional jobs with each job in manufacturing sectors. Although it does not have the effect in create twelve to sixteen jobs with each job in the information technology but all of these in combination will be able to support 600 million jobs in the next ten years. The policy is an attempt by Prime Minister Manmohan Singh's government to create more jobs for the over billion people country. Today every government understand that job is the key factor for a stable economy as well as politics. Among the key target manufactured products are: automobile, electronics, clothing, and heavy industries such as aerospace, machinery and ship buildings.
According to several analysts, this is also another sign that India will compete directly with China in manufacturing after it has been successful in information technology. The succeed of IT outsourcing which bring in a lot of revenues to the country allows India to move into the manufacturing area without have to depend on foreign investments. Some analysts consider this is a brilliant strategy to grow a stronger and better economy by starting with the most lucrative business such as information technology. By starting with IT, Indian learn more about technology and management and by having a strong management and technology knowledge, India can rely on its own strengths and its own people when moving into the manufacturing area where it can support its unskilled and poor people.
This strategy is completely a reverse of what China did in the past twenty years. China started with manufacturing first to support its unskilled workers before moving into better business such as information technology. However, the weakness of this strategy is it does not have the technology knowledge to automate its manufacturing process for quality and efficiency. It also does not have the management capability to manage its own industry sector and has to rely more on foreign management. An analyst predicts that if Indian manufacturing has better quality, efficiency and better managed then there will be a major shift from China to India. That could bring devastating effect to an economy that over relying on manufacturing exports. However, it will take at least another five years until these special manufacturing zones take effect and many things can happen during that time.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
