The index was based on factors such as talent availability, labour and material cost, Government policies, infrastructure and energy costs. India ranked low on infrastructure and legal systems, but ranked very high in labour cost and talent driven innovation.
The study also shows a strong correlation between growth in manufacturing GDP, and growth in overall GDP. This association was true regardless of whether manufacturing GDP as a percentage of total GDP was high (> 30 percent) or low at ( < 16 percent).
We have seen how in the last two years, India's manufacturing growth and GDP growth has declined in tandem. This reinforces the case for manufacturing, and points to the fact that only services led growth is neither possible nor desirable.
The World Economic Forum prepares an index that ranks the overall competitiveness of an economy. In its latest report it says, "Continuing its downward trend and losing 11 places, India ranks 71st.
The country's new government faces the challenge of improving competitiveness and reviving the economy." So we have three sets of rankings for India. Ease of doing business is 142, Overall economy is 71 and Manufacturing competitiveness is 4. Clearly the launch of the "Make in India" campaign by the Prime Minister is both timely and essential.
That brings me to the final section on what is it that we need to do to boost manufacturing. For a start we need to move away from generalisations and become more granular in our approach.
We should short list sectors based on national strategic importance, country strengths, etc, and then do whatever it takes to make each sector competitive. This will require both focus and hard decisions. The Make in India initiative has already shortlisted some sectors.
However, the criterion is largely based on import substitution. In the long run this will not be adequate. We need to be competitive in the international market, so that our products can be exported in the sectors identified. Exports can fundamentally alter the way we look at manufacturing in terms of costs and quality.
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