Strong infra crucial for growth

India uses only 4.3% of its GDP for infrastructure construction each year compared to China’s 20%. It’s time the government adopted aggressive policies to ensure development of manufacturing

June 10, 2022 06:04 pm | Updated 06:04 pm IST

The Indian government launched its ‘Make in India’ initiative in September 2014 to focus on the growth of the manufacturing sector. The main objective behind this was to promote India as the preferred destination for global manufacturing and to boost the design, innovation, and startup sector. The ‘Atmanirbhar Bharat’ campaign was proposed to further boost local manufacturing under its stated goal of making India economically self-sufficient. From 2014 to now, the Indian manufacturing industry has seen immense progress, especially in the past few years. It has emerged as one of the high growth sectors in the country.

With ‘Make in India’, the country is on a path to becoming a hub for hi-tech manufacturing. Most global companies have either set up or are in the process of setting up manufacturing plants in India. Global brands are targeting the Indian market because of its growing consumer reach and the increasing purchasing power of Indian buyers. As per the survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI), capacity utilisation in India’s manufacturing sector stood at 72.0% in the second quarter of FY22, indicating a significant recovery in the sector. The overall index stood at 134.0, as of July 2021. This rise in the index was supported by growth in the production of natural gas, steel, cement, fertilizer, coal, refinery products and electricity.

Tackling logistics

On the other hand, the infrastructure sector is a key driver of the economy. The sector is significantly responsible for propelling India’s overall development. The government should focus on easing the process and time for activities like clearance of goods and quick accessibility to ports.

India’s weak infrastructure continues to be one of the biggest challenges for the manufacturing sector. It is said that India uses only 4.3% of its GDP for infrastructure construction each year, as compared to China’s 20% of its GDP. Presently, the country’s surface transportation systems cannot meet the opportunities of modern high-speed logistics. This tends to be one of the biggest challenges for manufacturing in India.

India has come a long way in developments like digitalisation across state boundaries, building inter-connected expressways, better power facilities etc., but we are still far from other leading countries.

Another key challenge is poor and erratic electricity supply. Reports say that India’s annual power gap is more than 10% and it has among the lowest per capita power consumption in the world. The infrastructure development of China has helped them to become one of the leading manufacturing hubs of the world; India is still far behind in the race. The government needs to adopt more aggressive policies to ensure growth and development.

Welcome change

The relationship between infrastructure and manufacturing is in many directions. Infrastructure–manufacturing connection has changed from the 19th century to today; there will be further changes in the future but one cannot deny that both the sectors co-exist and are correlated. But the problem we are facing is the present infrastructure economic gap — there is a difference between the existing capacities and the actual requirements. It is difficult to quantify the demand for infrastructure; the demand depends on people’s consumption patterns. Both sectors need to work together in enhancing the demand-supply gap and fulfilling consumer needs. A second way to talk about the infrastructure problem is in terms of key stakeholders’ perceptions of the need for quality infrastructure. A lot of reforms are still required to streamline the process, although changes are happening in a positive direction. Changes are still to happen at the grassroots level in terms of speed of implementation of policies and introduction of new policies.

There is a very big opportunity ahead, given the existing crises in South East Asian countries like China and Taiwan. The biggest challenge for the sector is finding a skilled resource, especially blue-collared people for various job profiles. Nowadays, people in these developed countries are not ready to work in factories; therefore this talent crunch can be a big opportunity for India. Companies need people to run factories; automation can go hand in hand. If we are able to cash in on this opportunity in India, we can see a very good year for the manufacturing sector.

The writer is co-founder and president, Technical, KARAM Safety Pvt. Ltd. 

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