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Manufacturing crisis the root of all evil
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Bikky Khosla | 06 Aug, 2013
These days, it's difficult to avoid talking about the economy. The government has got into a fire fighting mode to rein in current account deficit, but achieved little success. As they try to solve one problem, another one surfaces, raising question about their 'quick fix' approach, which has proved miserably inadequate to repair the fundamental flaws in the economy. I think the main culprit for rising CAD is our merchandise trade deficit and unless we increase our exports -- for which we must expand our manufacturing -- no real solution is possible.
According to a WTO working paper, our manufacturing-GDP ratio has consistently been around 15-16 percent, and our share in world manufacturing is around 1.8 percent only -- very modest when compared to that of China where manufacturing contributes 34 percent to the GDP and is 13.7 percent of world manufacturing, up from 2.9 percent in 1991. These statistics show how weak our manufacturing sector has been over the years. With the changing times, we should have emerged from the shadow of the services sector long time ago, but unfortunately, we haven't. This picture needs to be changed.
Now look at our manufacturing exports. In 2010-11, they accounted for 61.5 percent of our total merchandise exports, but again if we compare this number with that of China (93 percent), or consider the facts that our total merchandise exports account only for around 1.5 percent of total global exports, and that a major part of our manufacturing export basket is constituted by products from some labor-intensive sectors like textiles and gems and jewelery, the number looks insignificant. In recent years we have seen an increase in our medium-high technology intensive exports but dominance of low technology intensive exports still persists and when it comes to high technology intensive exports, our presence is only negligible.
Our National Manufacturing Policy aims at enhancing the share of manufacturing in GDP to 25 percent by 2022, but to reach that goal our manufacturing would need to grow 2-4 percent higher than the GDP. Considering that the implementation of the plan is still in early stages of development, the target looks difficult, and the government should speed up the process. In addition, comprehensive efforts are needed to increase the level of R&D in the manufacturing sector, push skill development, and attract FDI especially in export oriented industries for achieving a transition to mass manufacturing.
In addition, as our MSME sector accounts for around 45 percent of the manufacturing output and around 36 percent of total value of exports, friendly policies for the sector is a must for achieving the manufacturing goal. The central and state governments should act together to help the country's small manufacturers by easing credit norms and lowering interest rates, removing bureaucratic hurdles, and dismantling barriers for land and infrastructure, and above all, our policy makers need to get used to the idea that no lasting economic development is possible without accelerating the pace of manufacturing growth and manufacturing-led exports.
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Show this article to the honourable Finance Minister
Manish Chhabra | Fri Aug 16 09:17:22 2013
Please show this article to the honourable Finance Minister who continuously says that the economy is in good health and all is under control. This is simple economics which even a less educated person can understand, but our Government is simply overlooking, to the peril of industry and in the long run the people in all. After all all service, IT, banking sector will see doom if they don't have manufacturing to cater to. Its simple logic.
Importing from India
Saleem Khamissa | Sat Aug 10 07:18:24 2013
I have been an importer for past 5 years from China.In a recent India trade fair in Cape Town earlier this year,I was amazed at the quality of garments that are available from India. I found two suppliers whom I met, paid the required deposit and placed orders with during my first business visit to India. One supplier has already delivered my order and the other has not, although both orders were place the same time. The supplier said that he had a internal problem which should be resolved and that my goods will be ready for dispatched by Monday 5 July. To date I have not received a reply. If manufacturers could deliver goods as per their order books, than this will definitely have a positive effect on India's export figures. Perhaps my situation is an isolated case, and this is a bad first time experience. Is there an organization that i could put my case forward should i not get my goods at all As a South African Indian, i would love to do business with the country of my origin.
Difficulties in innovation in production
Rakesh Mahajan | Fri Aug 9 17:50:44 2013
All productions are based on either agriculture or mines. Sand is such a thing which is very important for construction of factories, hoses,roads and other infrastructure. This is also abundantly available on mother earth. This can not be overused,stocked or exported to other places. Recent action of he WOMAN IAS OFFICER just amounts to tat they will not do any thing to made AVAILABLE the sand to very genuine requirements of the general public and will also not allow others to do it. Lacs of workers will fall unemployed due to these corrupt ,useless and inefficient IAS officers's greed.
Who is responsible for manufacturing crisis
Shabbirhusain | Thu Aug 8 12:54:43 2013
Most Indians likes to be rich by not spending, utilise things to the extent possible. Manufacturer's estimates based on past trends gets setback. They make erroneous compromise on profit and competition, people get cheated by appealing advertisements. Therefore people as a whole are reluctant to work for national interest. For them the Govt. is like its enemy. In one or the other way there is a trend to avoid paying taxes, favoritism at all level of privileged class of people and so on is responsible for the manufacturing crisis
Crisis in the Manufacturing...
Jitendra Joshi | Thu Aug 8 06:34:25 2013
Well in terms of product development cycle by Indians at large are pathetic..No INNOVATION or improvement till MSME goes out of business...Also new innovative products for World market by MSME or Large 100% Indian Co....not heard since....our policy to safe guard from world has led us to this ...remember PM te great saying when economic crisis happened in west...we are not effected due to no outside market dependence....if the economists n in power people want this how can u expect a foreign looking firms to flourish...china even a ssi is foreign looking manufacturer...although does give importance to domestic market too...but incentive to sell overseas is more....where is it here????
Deficit of trust by govt on businessman is the core issue hindering the progress of manufacturing ...how many licenses??? n banks..forget it wants 150% collateral fro MSME....Under these u advocate progress??? Improve the conditions first...
Tax, regulation hurdles
Narendra Shinde | Thu Aug 8 05:13:44 2013
One more aspect is to reduce import. The technology & goods that we do not have expertise as of now should be only imported like high end atomic power stations, defence to name the few. For rest of the items like consumer products, machinery of Indian entrepreneurs should be promoted. This will generate local employment as well reduce import of unnecessary goods. To increase manufacturing same treatment should be given to this sector as that of IT. Wherever possible IT sector should also be taxed. This will increase govt. kitty. Till date manufacturing sector is paying maximum taxes to central government, state governments and local municipal authorities. The amount of hard work is too high in manufacturing sector. Today people in this sector are working as they do not have any other option. Given a choice, like software- where easy money is available, people will go to it. India is suffering due to negligence towards agriculture.Same story is being repeated in manufacturing. Govt has to take special effort to encourage SMEs, reduce tax burden on them and make their life free of various rules & regulations.
Manufacturing and Indian economy
PJ Thomas, s/o, V I Jacob (INA) Azad Hind. | Wed Aug 7 14:01:59 2013
Our 5 year plans since Republic of India was formed, has taken us to the present times with plenty of ups and downs.We are still existing as a vibrant republic,while USSR disappeared!As I understand our exchange value for the USD was around $1= Rs.1 in 1947. Now $1=Rs.61.80, why ?
Our planning and timely execution is to be improved in the industrial area.
Protection and high encouragement is very much needed in the MSEM area.
Corruption is to be eliminated at all levels, transparency is to be introduced for dealings at all business levels and all offices in Government should be fully glass cabins without blinds / screens.
Visual control must be established in all Government/ Private Offices for efficiency and public observers.
Allow every citizen to pay all forms of Taxes voluntarily in any shop dealing with Cell phone recharge, to ensure that the revenue collection is instant with the Aadhaar # as reference.Service Tax is already being collected this way, and the improvement in indirect tax collection in this category is substantial.
Once the internal revenue collection covers every citizen of the Republic of India,this will allow GOI to channelize the required funds to the manufacturing sector for domestic as well as international needs. Latest technology can be purchased to boost this sector to greater heights, and employment of our vibrant young workers and graduates.
Teach a subject "Anti CORRUPTION" right from LKG to Phd., in the next 20 years India will lead the world.
Kitchen Cabinet
Sid. | Wed Aug 7 11:01:32 2013
Right now the Indian Govt Is run by Mrs. S.G.'s Kitchen Cabinet. They would rather give money to poor as NAREGA then build skill development centers or give low interest loans to entrepreneurs. The education loan in Indian is much more than Auto loan interest rates. I like the editors article & yes the situation in India is getting worse the inflation is so high that a normal labour cant afford to sustain his family and so it is difficult to control the labor rates so the cost of manufacturing is increasing by 10-20% yearly. Which again is contributing to inflation. The P.M. & finance minister is only interested in working for FDI in retail so cheaper Chinese goods can be imported by big chains & slowly kill the local industry. They are not concerned how much employment MSME provides to the nation. This is the reason why Modi is getting so strong at least he has the vision & gives hope to not only small businessmen but also Industry leaders. I hope the Nations get over the politics of religion & truly becomes a democracy where only the actual poor get reservation not on religion or cast.
Economic dive
P.T SOLANK | Wed Aug 7 10:35:37 2013
No matter what figures are supporting the 'dive', this is all due to shortage of money siphoned from economy by great scams. Compare deficit and money thrown in Swiss banks.
More hurdles in manufacturing than in service
R. Krishnan | Wed Aug 7 09:58:26 2013
Today it is not attractive for an entrepreneur to put in money and resources in manufacturing. Manufacturing is too much trouble, requires lots of personal sacrifices, compromises and personal suffering for the entrepreneur. Governments are doing precious little to save the spirit of the entrepreneurs from vanishing. Every MSME has to face the various windows of the government agencies and financial institutions who only look after themselves and have very little concern and care for the budding entrepreneurs. No one is interested in viewing the from the side of the MSME venture. Path is much easier for the service sector and software than manufacturing sector. Promoters area also getting discouraged to put in resources in manufacturing. This is one of the main reasons for the dwindling manufacturing sector in my view. This has to be reversed if our country has to become truly independent of others and survive against all odds and do well in the turbulent markets.
Focus on development, R&D and other new initiatives is no doubt required, but even the burning issues of today are not getting addressed, so how there will be any attention on such long term items?
We need people to think deeply and get conviction and only then it will work.
Why is India performing less?
Bart | Wed Aug 7 08:16:13 2013
Hello,
this is Bart from Belgium. I own a company and distribute high quality goods for military and aerospace manufacturers.
www.anemo.eu
I've been working for now with Indian companies in order to import goods. I must say my first experience I had just this month was not that good. When I phoned to the company I wanted to import, the English knowledge was poor. Also many promises have been made in order to deliver the goods, (Indian's cannot say no) but it took almost a month more then what was originally promised. Furthermore I requested to deliver the goods economy instead of express, but that wasn't followed.
so a little advice:
1) assure good knowledge of English
2) keep on your promises
3) dare to say no.
I'm sure India will be stronger then China in the future, it will only take a couple of generations.
ps. look in your strengths: IT services globally English language understood by almost everybody in business (which is not the case in China)...
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Re: why is India performing less?
Bruno,S | Wed Aug 7 10:54:04 2013
Hi, Bart
thanks for your inspirational speech, and sound indication about Indian strength,
Its true Indians will blow the market in couple of years.
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Clean up their governance
Amar Seth | Wed Aug 7 07:28:11 2013
In this era of globalization if we want our manufacturing sector to take off we have to think in terms of competing with China. This means a solid and modern infrastructure, laws and regulations which are simple, transparent, rational and rigorously imposed. Unless India and that includes the big corporates clean up
their governance we do not stand a chance.
Oil sector and petrochemical industries
Kaushikk | Wed Aug 7 06:45:25 2013
Sir, I fully agree with you. At the same time, let us not forget that the vital oil sector and petrochemical industries after so many years of their existence in the country even to day we don't have technology of our own to manufacture the high cost catalysts, certain additives and the IITS or CSIR or the Ministry of Science and Technology has not given their minds to it so far. These vital chemicals drain our most of the foreign exchange every year and our oil industry cannot ru without it. The experts in the ministry has fix mindset and it won't be exaggerating to say that all their actions are inadequate. Or in other words the cricket world cup has to be won only with 11 players and the captain cannot go on placing fielders where ever the shot goes in the field. Most of our chemical industry now is solely dependent on import from China, and even than the cost of production in the country cannot go down due to irrational industrial policies. The oil or gas exploration is also at its lowest. We may get misguided by the jugglery of figures or distorted reports and try to pet our own back in self praise. Unless and until self reliance on certain key sectors are focused the economics don't see to improve. The huge manpower is not properly trained and there is no coordination among industries and universities/ IITs CSIR laboratories. I have been trying my best to bring some changes in this but it seems there is no climate for it yet in the country. Kaushikk
Corruption the root of all evil
Steven | Wed Aug 7 05:30:32 2013
Catchy caption - though incorrect. Manufacturing is suffering because the root of all evil is the unabated corruption at the highest levels of governance that percolate down the ladder and drain those precious Rupees that manufacturers need to carry on their business.
Why low growth of manufacturing sector
Chamanlal | Wed Aug 7 05:06:52 2013
(1) lack of infrastructure
(2) waste of national human resource by mindless vote oriented government policy to waste hard earned money in giving money to people who dont want to work and get free money, like food bill etc.
(3) top level leader in government are having no love for India and Indians, no patriotism, not human beings but big demons.
(4)lack of political will for progress of country.
(5) simplification of tax structure.
(6) finance minister and his advisors are mindless idiots who have no knowledge of simple mathematics eg. excise duty 12 2 1. why cant they simply say 12.5% or so.
(7) businessman are harassed unlimited by government departments for no reason, only fault of business community is they earn some money by hard work and skill.
(8)main reason is government's wrong policy to make doing business more and more complicated to extract more bribe from earning community by their officers.
eg. registration of exporter at all ports, why not one point registration local excise department is enough to export from all ports of country as excise and customs department is one all over the country. IT provides everything online.
(9)truly in politician's eye earning is biggest crime. If you remain beggar is preferred by all vote seeking idiots.
(10) true democracy needs to be at all political party leadership instead of by birth.
Talking enough but then nothing after that
SKBhattacharya | Wed Aug 7 04:11:13 2013
We have been talking enough but then nothing after that .The question is that how much amount of Tax payer's money is being pumped into the field of R&D on global market research to find out the potential product with know how detail, particularly under the umbrella of MSME. Let us do something while taking down this slogan "export oriented manufacturing " at each & every Engg. colleges in the Country which are producing more than twenty five hundred thousand of Engineers every day. Let us just not concentrate the national attention on the IITs only. But then who is there to listen with patience.
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Re: Manufacturing
Damian.S | Wed Aug 7 10:56:56 2013
Indians started Investing in R&D but not reached its strength, our faith it will reach soon.
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High rates of taxes for manufacturing
Manphool Yadav | Wed Aug 7 03:48:04 2013
Govt puts so high rates of taxes for manufacturing no expert discuss on this point as on record revenue becomes nil due to customers not taking bill and on record it is not available if we want to achieve the target first govt has to reduce the taxes on manufacturing units then only actual figure will come other wise our small units faces funding problem through banks and will not be able to get growth.
Suggestions
Parveen Jindal | Wed Aug 7 03:21:09 2013
There are two points I would like to discuss.
1. the manufacturing spirit in our country is very disappointing. We as entrepreneurs find manufacturing highly effort requiring activity. We find it difficult to find good and reasonable workers. The supply of electricity is random, the laws be it labour, pollution, excise, VAT are all too outdated and archaic and worst non uniformally ensured
the government support is half hearted and too insufficient and yet difficult to obtain due o red tapism . There is a clear lack of intent on all government efforts
2. There is a need for import substitution policy,
there should be a focus on ensuring that all high end technologies percolate to the grass root level . There should be export substitution zones where there should be tax holidays, huge incentives for modern technologies import, ensured electricity ,well manicured labour laws that are strictly enforced
it is always easier to win a game on home turf then on he foreign grounds ,the focus on import substitution has a edge over export promotion as it is a internal matter and is more likely to give results as our indigenous manufacturers have time ,place and volume benefits as compared to imported products
strict customs enforcements is another step to promote local industries against imports at undervalued imports ,which is worse than smuggling in earlier times.
If I were the PM ... on how to uplift the economy
Shaleen V Sahajpal | Wed Aug 7 03:10:51 2013
If I were the PM ...
1. Complete Ban on Gold Import ... though it may raise prices in domestic bullion ... but CAD will get reduced considerably.
2. Complete Ban on CAR Production (Petrol and Diesel cars. Production of Hybrid or E-cars only to be pushed further.
3. To encourage eventual Capital Formation through Household savings, Income Tax to be abolished ... only Sales Tax & Service Tax to remain (on selective basis)
4. No excise duty for 20 yrs from the date of setting up of an industry.
5. No INCH of Government land to remain uncultivated ... even road sides/rail sides to be used for growing Horti crops. ... ... ... etc.etc.
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You have forgotten many things
Rakesh Mahajan | Fri Aug 9 18:03:46 2013
Mr. Sahajpal, you have forgotten many things to mention. Reduction in population, refund of overcharged taxes within a week, making responsible the govt machinery to promote the production and not JST obstructing it, public transport cheaper,convenient and comfortable.
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Export in the only solution
Sushil Goel | Wed Aug 7 02:49:18 2013
Very useful information. Only solution for our economic growth is export. FDI is not the firm solution it is always volatile when market shakes people take there money back which is more dangerous situation. The only and only one solution to increase export by boosting real benefits for export. In India export benefits are not less but for getting the benefits is far away. Against export we get the duty free raw materials which is wrong. Benefits should get after export in cash which confirms that you have to export in any case if you want to get the benefits. When you get the benefits you can pass on to customers and you can sale more materials in competition of china. Once this cycle develop growth of manufacturing will accelerate automatically.
Well written article outside the acronyms.
George Smiley | Tue Aug 6 23:36:54 2013
I thought you were talking about Australia. Or it could be anyone. And they all want the same thing and imagine open slather re land use, deregulation is the way to achieve it. Just make it easier! But that also makes it easier for disasters like the Union Carbide mess or the Chinese melamine scandal which is only a tiny part of their major problems re safe food supplies, etc. and you better believe that this impacts on international business. You will have to bite the bullet and clean up bureaucratic culture to make it work instead of imagining its absence will set you free.
Made in India? Corruption is now our culture
Dilip | Tue Aug 6 19:44:01 2013
". . . to help the country's small manufacturers by easing credit norms and lowering interest rates, removing bureaucratic hurdles, and dismantling barriers for land and infrastructure"
You said it right. To make things in India is too complicated, get it from China and you turn around your investment in a month.
I tried to do packaging in Mumbai. Most units are shabby, overcrowded and dirty. The owners care less for quality or delivery. My potential buyers cared less that the item is made in India. They have buying offices in China and cared less buying India made my item though superior in many ways.
Good luck. We are married to Gandhi family and corruption is now our culture.
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