CII – BCG Report on Manufacturing to be Released Today. Report Aims at 11 % Average Growth till 2025, Rs. 55 – 80 lakh crores of investments required by 2025, Exports growth will need to accelerate to 18-20% for the next 15 years

March 3rd New Delhi /IndiaPRLine.com/ Indian manufacturing has seen an impressive annual growth rate of around 6.8 percent over the last 10 years (1999-2009) making India one of the best performing manufacturing economies in the world. Manufacturing contributes ~15 percent of India’s GDP, ~50 percent of exports and ~12 percent of the workforce and has a multiplier effect in generating indirect employment. It is in this context, that the CII – BCG Report on Indian manufacturing addresses some key questions – What should be the growth aspirations of the manufacturing sector in the country given that India needs to generate nearly 220 million new jobs in next 15 years? How can India enhance competitiveness of its manufacturing sector? What are the impediments to achieving this aspiration? This CII – BCG report examines these questions, in the context of the major forces that are shaping global and Indian manufacturing industries.

To meet these challenges, the report sets out an aspirational, growth rate of about 11% p.a. over the next 15 years which will make India the fourth largest manufacturing economy in the world by 2025 (current ranking of 13th) and generate between 50-90 mn additional jobs by 2025.

The aspirations have several critical implications. Gross fixed assets will need to increase by Rs. 55 – 80 lakh crores by 2025. Exports growth will need to accelerate to 18-20% from the 11% seen in the last decade. India’s labour productivity will need to increase substantially and close the growing gap with China. Finally, India will have to produce many more ‘world beaters’ from the manufacturing sector with 3-4 fold increase in the number of Indian manufacturing companies with annual revenue in excess of $1 billion from 25 today to 70 – 80 in 2025, and 4-5 firms with annual revenue in excess of $100 billion.

To achieve this aspiration, the report proposes a “House of Manufacturing” as a roadmap with three key pillars:
Developing Strong Enabling Infrastructure: Manufacturing sector cannot achieve its aspirations if India does not build a strong enabling infrastructure. The report outlines the three important components of this enabling infrastructure and the challenges in each (1) world class physical infrastructure that drives higher efficiency, with focus on better execution of infrastructure projects (2) strong human capital to ensure that manufacturing companies have access to high quality talent, specifically increasing focus on ‘employabiliy’ of the educated workforce beyond just an increase in number of qualified personnel and (3) simplified government procedures and policies and reduction of transaction costs and indirect taxes that will improve the ‘ease of doing business’
Exploring New Avenues of Growth : To achieve this level of growth, the Indian manufacturing sector will have to go beyond ‘business as usual’ and exploit new avenues for growth that are being created today. The report identifies and discuses three such high growth opportunities (1) rapid globalisation of supply chains and migration of manufacturing capacity to developing countries, opening up a large export opportunity (2) sustainable development and emergence of “Green Technologies”, creating opportunities in green products and services, as well as opportunities and threats from carbon costs and (3) India’s changing income demographics and opportunities among the “Next Billion” consumers segment, a global market of ~ $ 950 Bn where Indian companies can have a natural advantage since a substantial part of this segment is in India
Driving Higher Productivity and Competitiveness: Productivity is a key driver of cost competitiveness. Given increased volatility in factor costs, shifting demand patterns and a more aware and educated labour force, Indian manufacturing will require a new wave of productivity improvement. The report identifies and describes three powerful levers of productivity enhancement (1) exploiting the power of clusters, which drive more competitive economics because of increased supply chain responsiveness, decreased time-to-market, superior access to talent, and lower logistics costs (2) leadership in innovation and new technologies, through higher R&D spend and effectiveness, and especially leveraging India’s traditional areas of strength such as IT and software and (3) More flexible manufacturing and lean 2.0 practices to drive down costs and improve productivity through a strong shared aspiration, engagement model and capability building across levels and an underlying cultural transformation

Government policy has played and needs to continue to play a crucial role in achieving India’s manufacturing aspirations. In the report, four policy themes have been identified and discussed: (i) Focus on Export-led Growth – India has a lower share of global manufacturing trade than many other RDEs and manufacturing exports are a smaller share of its GDP. Should India change its current policy framework and become much more aggressive in promoting export led-growth of the manufacturing sector? (ii) Balancing scale and depth across industries – While India’s manufacturing has grown its scale driven by the growth of consumer demand in many sectors, it has not built desired ‘depth’ of value addition and capability in several critical industries. Depth is important for multiple reasons – retaining control over critical industries, capturing greater share of value along the chain and reducing vulnerability to global shocks. Should Government policy focus more on building ‘depth’ in Indian manufacturing going forward? (iii) Labour Policy for Manufacturing Industry – India has strong labour laws protecting worker rights. However, these same rights are seen to constrain the growth of large scale manufacturing and also introduce rigidity in the labour market. If India has to achieve its growth aspirations, it is critical the policy interventions be made in labour laws be revised to facilitate higher scale, productivity and flexibility while protecting worker rights. (iv) Driving the right ‘industrial structure’ for India – India is a large country, with dispersed population and large number of stakeholders. It faces many issues in developing its industrial infrastructure ranging from acquisition of land to growing aspirations of the local population to have a share in the benefits development. What should be the right industrial structure for India going forward that balances the benefits of building large scale operations with many advantages of having small scale and dispersed entrepreneurial businesses that give greater stake to local population?

Indian manufacturing has the potential to be the driving force in India’s economic development over the next two decades. Success, however, will require strong commitment, careful planning and willingness to make bold moves on part of both the Government and industry to break the constraints and exploit the opportunities. The report lays out a comprehensive roadmap to achieve the ambitious aspirations it sets out for the country.

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