abhishreshthaa
Abhijeet S
CAUSES OF STAGNATION OF
INDIA’S MANUFACTURING SECTOR
1. LACK OF INFRASTRUCTURAL DEVELOPMENT: The sheer speed with which infrastructure projects get implemented in China is commendable. Financial Times rightly commented (January 21, 2004) "if thousands of villagers have to be moved to make way for roads or power stations, so be it: investment in infrastructure underpins China's success."
Eg. The way the giant Three Gorges Dam has come up in China,in contrast to the Narmada Dam project is an example of how the infrastructure projects in India are frustrated by misguided individuals going to court. This is how democracy has been used in India to hinder growth.
Agitation, endless court cases, environmentalists, and other manifestations of a democratic, rule-of-law society have not only delayed implementation perhaps by a decade, but also added enormously to the costs while direct cost escalation is perhaps only a small part of the total cost to the economy. One can only imagine the output lost because of the delays in the starting of the project.
2. OUTDATED LAWS: China is ahead of India, in labour-intensive manufacture. Indian labour laws, which protect existing employment, but at the cost of creating new jobs, have created a bias in favour of capital-intensive investments.
An Ambani prefers a refinery, in which the only comparative advantage comes out of the duty structure, to manufacturing, say, toys in billions and exporting them to the world.
3. PROTECTIVE TREATMENT TO PUBLIC SECTOR UNITS: China does not seem to be treating its PSUs that is the state owned enterprises (SOEs) protectively . Millions of jobs in state-owned enterprises have been lost in preparation for world competition.
But new ones keep getting created in larger numbers. In contrast, India not only condones over-manning, but also keep thousands employed in factories that haven't produced anything for decades. As a result, resources are short for the much-needed investments.
4. STEP MOTHERLY TREATMENT TO MANUFACTURITNG SECTOR: Wherever there is a tug-of-war between agriculture and manufacturing, the government always takes the side of agriculture. The price of cotton, sugar cane, fertiliser policy are only a few examples of this short sighted approach.
5. DEPLETION OF RESOURCES: India consumes almost thrice as much energy as any average rich developed country produces. Generally, the rich countries use less oil per unit of output than the developing countries. This is because of variety of reasons like better capital stock and modern infrastructure.
For Example, the fact that the rich countries are less dependent on manufacturing also ahelps them to conserve energy. This is where india’s energy-inefficient ways stand out. China, whose economy is powered by manufacturing, is less energy-intensive than India.
India’s energy intensity is almost 24% higher than china’s despite the fact that both the countries are at around the same level of development.
INDIA’S MANUFACTURING SECTOR
1. LACK OF INFRASTRUCTURAL DEVELOPMENT: The sheer speed with which infrastructure projects get implemented in China is commendable. Financial Times rightly commented (January 21, 2004) "if thousands of villagers have to be moved to make way for roads or power stations, so be it: investment in infrastructure underpins China's success."
Eg. The way the giant Three Gorges Dam has come up in China,in contrast to the Narmada Dam project is an example of how the infrastructure projects in India are frustrated by misguided individuals going to court. This is how democracy has been used in India to hinder growth.
Agitation, endless court cases, environmentalists, and other manifestations of a democratic, rule-of-law society have not only delayed implementation perhaps by a decade, but also added enormously to the costs while direct cost escalation is perhaps only a small part of the total cost to the economy. One can only imagine the output lost because of the delays in the starting of the project.
2. OUTDATED LAWS: China is ahead of India, in labour-intensive manufacture. Indian labour laws, which protect existing employment, but at the cost of creating new jobs, have created a bias in favour of capital-intensive investments.
An Ambani prefers a refinery, in which the only comparative advantage comes out of the duty structure, to manufacturing, say, toys in billions and exporting them to the world.
3. PROTECTIVE TREATMENT TO PUBLIC SECTOR UNITS: China does not seem to be treating its PSUs that is the state owned enterprises (SOEs) protectively . Millions of jobs in state-owned enterprises have been lost in preparation for world competition.
But new ones keep getting created in larger numbers. In contrast, India not only condones over-manning, but also keep thousands employed in factories that haven't produced anything for decades. As a result, resources are short for the much-needed investments.
4. STEP MOTHERLY TREATMENT TO MANUFACTURITNG SECTOR: Wherever there is a tug-of-war between agriculture and manufacturing, the government always takes the side of agriculture. The price of cotton, sugar cane, fertiliser policy are only a few examples of this short sighted approach.
5. DEPLETION OF RESOURCES: India consumes almost thrice as much energy as any average rich developed country produces. Generally, the rich countries use less oil per unit of output than the developing countries. This is because of variety of reasons like better capital stock and modern infrastructure.
For Example, the fact that the rich countries are less dependent on manufacturing also ahelps them to conserve energy. This is where india’s energy-inefficient ways stand out. China, whose economy is powered by manufacturing, is less energy-intensive than India.
India’s energy intensity is almost 24% higher than china’s despite the fact that both the countries are at around the same level of development.