CII recently held its annual CII Manufacturing Summit in Mumbai, in collaboration with the Boston Consulting Group (BCG). Here, CII-BCG published a report entitled ‘Future of Indian Manufacturing: Bridging the Gap’ that assesses the progress of ‘Make in India’, while comparing states on their quality of manufacturing ecosystem, looks at global shifts, laying down imperatives for the industry.
According to the report, the outlook is broadly positive given the growth in IIP as well as clear uptick in the manufacturing FDI. The overall IIP grew 3.2% in the first quarter and 14 of the 22 sub-sectors showed positive growth. The report also notes the efforts on reforms related to land, labour, GST and procedural simplifications. However, only 20% of the executives surveyed feel that there has been an improvement in ‘ease of doing business’.
The report also highlights the declining attractiveness of China as a manufacturing base due to labour and yuan challenges, and emergence of new destinations such as Ethiopia and Vietnam, which are becoming competitive. In addition, the report notes that the adoption of advanced manufacturing technologies is disrupting the advantages of low labour cost.
In a positive development, several states are upping their game to attract manufacturing investments. The report calls for continuing action by the state and central government on reforms, simplification and infrastructure build-out. Speaking on the occasion, Jamshyd N Godrej, Chairman, CII Manufacturing Summit & Past President, CII and Chairman & MD, Godrej & Boyce Mfg Co Ltd, said, “Strength of services sector combined with the strength of manufacturing is the future. To reach our full potential though, we need close co-operation among a vast number of agencies, especially between people involved in complex system of manufacturing.”
As per Dr Arindam Bhattacharya, Senior Partner & MD, BCG, global manufacturing is in turmoil with low cost model of last 2 decades coming under pressure. He highlights, “China's competitiveness is eroding. Brazil, seen as one of the most competitive 10 years ago is becoming a high cost country. In contrast, the US, whose competitiveness had eroded has become one of the most competitive and is bringing back manufacturing capacity from offshore low cost countries. In contrast, India’s relative competitiveness has remained constant. This turmoil provides a unique opportunity to become a top 3 manufacturing player in the world, becoming a top 5 country manufacturing exporting nation from current 15th position.”
Dr Naushad Forbes, President Designate, CII & Director, Forbes Marshall, highlighted the problems to the growth of manufacturing when he said, “We rate 140 in the global ease of doing business market. We can quickly get into the first 80 by simply matching the best practices of different states in the country.” He further explained, “Growth is 10% dependent on law and 90% dependent on implementation. At an inter-ministerial level, there is a lack of clarity, an ambiguity that causes obstacles and delays in implementations of routine matters. We, as an industry, need to work closely with each other to take care of these issues. We can create a list of minor issues that are proving obstacles and the industry and the government can work together on removing that.”