The world’s largest contract electronics manufacturer , Foxconn, is holding trade union “elections” at its gigantic factories in China which employ 1.2 million workers. This is a radical change demanded by an increasingly restive workforce. The company had moved from Taiwan to Shenzhen at the end of the 1980s. They are beginning to reverse the process and are now opening factories in Brazil and Indonesia.As wages rise and China evolves into a high-cost economy, will India be able to fill the vacuum to become the global centre of manufacturing? The alarming news is that India’s GDP growth has hit a decade low of 5% with manufacturing PMI at a 50-month-low in May, demonstrating that India’s industrial recovery is moving sharply into reverse.While in China, Brazil and South Africa the manufacturing sector has grown at higher rates than the GDP, in India the share of manufacturing in GDP has stagnated at 15% and accounts for a mere 12% of the workforce. However , manufacturing contributes almost 50% of India’s exports and every job created in manufacturing has a multiplier effect creating three jobs in the services sector.The new manufacturing policy envisages a rise of manufacturing’s share in India’s GDP to 25% by 2022 and the creation of an additional 100 million jobs in the manufacturing sector. Earlier, a study by BCG had highlighted the imperative need for creating 220 million jobs by 2025.Achieving this will require a single-minded commitment to growth, with emphasis on job creation rather than job protection strategies. India will have to radically transform its manufacturing sector by focussing on largescale labour-intensive factories producing exportable goods, reducing the share of employment in agriculture from the present 58% to 25% by 2030, with industry doubling its labour demand.

What does India need to do to usher in a manufacturing revolution ? First, if the sector has to grow in the region of 12-14 % over the medium term, exports have to play a critical role and they must accelerate at a much faster pace and achieve growth rates of 20-25 % in real terms.



Secondly, small and medium enterprises (SMEs) account for 40% of India’s workforce and contribute to 45% of India’s manufacturing output. SMEs play a significant role in generating millions of jobs. India needs to enhance their scale of operations, ensure better adoption of technology, provide innovative financing and a mechanism for upgrading skills of workers. Thirdly, labour-intensive sectors like food processing, apparels & textiles, leather and footwear contribute to over 60% of SMEs’ employment. Greater focus on growth of labour-intensive sectors will enable absorption of growing surplus of unskilled labour particularly in UP, Bihar and Jharkhand.



Fourthly, as energy costs have a major bearing on the manufacturing sector, India needs to get its power sector cracking by removing constraints on coal and gas. Fifthly, given that freight and logistics’ costs are enormously high and 70% of container transportation is through roads, a modal shift from road to rail is necessary. The Eastern and Western Dedicated Freight Corridors should lead to radical reduction in freight costs.



Sixthly, port infrastructure needs a radical overhaul as the average turnaround time in India is 3.5 days as against a mere 10 hours in Hong Kong and 16.5 hours in Colombo. Such lack of worldclass physical infrastructure has led to the IMD World Competitiveness Survey rating India at a lowly 54th among 57 countries in infrastructure facilities.



For large-scale manufacturing to take off, India must be transformed into an attractive investment, defined by easy availability of land, labour and capital. Starting and closing businesses and getting clearances must become less time-consuming , expensive and cumbersome. Enforcing contracts in India takes twice the time it takes in OECD countries and costs almost 40% of the contract signed. India’s archaic labour laws are the most rigid in the world. They protect workers not jobs and adversely impact economies of scales and investment. No wonder , in the World Bank’s Doing Business rankings, India was 164out of 183 in starting a business and 134in case of doing business.



India needs to really focus on development of industrial clusters where it can create an ecosystem of supply-chain responsiveness , lower logistic costs, availability of labour and technology upgradation. These clusters will converge the advantages of higher innovation and employment generation for smaller firms with scale and cost advantage of larger organisations. Their advantages are already visible in auto and auto ancillary clusters in Tamil Nadu and pharma clusters in Andhra Pradesh . These clusters will provide cost and productivity gains and drive India up in the manufacturing chain.



Lastly, we need to vigorously pursue FDI in manufacturing, in defence, telecom, transportation and power. Japanese companies invested heavily in China during the last three decades but now feel they are overexposed in China. India needs to ensure that it emerges as an alternative destination for these companies. In general, over the next two decades, there will be a huge shift of manufacturing capacity from the developed to the emerging economies. India needs to capture a disproportionate share of this shift to create jobs for its very young population.



(The writer is CEO & MD of the Delhi-Mumbai Industrial Corridor Development Corporation. Views are personal.)