Mains Practice Questions

Introduction

According to the Economic Survey 2023-24, manufacturing remained at the forefront of the Indian industrial sector achieving an average annual growth rate of 5.2% in the last decade employing 11.4% of India’s total workforce.

• However, the sector faces multifaceted challenges that hinder its full potential in the global market.

Body

Challenges Faced by India's Manufacturing Sector in Global Competition:

• Infrastructure Constraints
  • Inadequate power supply and frequent outages: Many manufacturing units face regular power cuts, leading to production delays and increased costs due to diesel generators.
  • Poor transportation networks and logistics: India's logistics cost (14% of GDP) is significantly higher than in developed countries (8-10%).
    • The National Logistics Policy 2022 aims to address this, but implementation remains a challenge.
  • Limited access to modern ports and airports: Despite improvements, India's port infrastructure lags behind global standards.
    • The average turnaround time for ships at Indian ports is 2.1 days affecting export competitiveness.
• Skill Gap
  • Shortage of skilled workforce: Only 4.7% of India's workforce has undergone formal skill training, compared to 96% in South Korea.
    • This leads to lower productivity and quality issues in manufacturing.
  • Mismatch between industry requirements and available skills: The rapidly evolving manufacturing sector, especially with Industry 4.0 technologies, faces a shortage of workers with relevant skills in areas like robotics, AI, and data analytics.
  • Inadequate focus on vocational training: Despite initiatives like Skill India, the enrollment in Industrial Training Institutes (ITIs) has not kept pace with industry demand.
• Regulatory Hurdles
  • Complex labor laws: The implementation of four labor codes (Code on Wages, Industrial Relations Code, Social Security Code, and Occupational Safety, Health and Working Conditions Code) has been delayed since their release, creating uncertainty for businesses.
  • Land acquisition challenges: The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, while protecting farmers' rights, has made land acquisition for industrial purposes more time-consuming and expensive.
• Limited Access to Finance and Technology Adoption
  • Challenges in accessing credit for MSMEs: Only 16% of MSMEs have access to formal credit, hindering their growth and competitiveness.
  • Low R&D investment: India's R&D expenditure as a percentage of GDP is around 0.7%, significantly lower than China (2.4%) and the US (3.1%).
    • This impacts innovation and competitiveness in high-tech manufacturing.
• Inadequate focus on innovation: India ranked 40th in the Global Innovation Index 2023, indicating a need for greater emphasis on fostering innovation in manufacturing processes and products.

Strategies to Enhance Competitiveness:

• Develop a Comprehensive National Manufacturing Strategy: Create a long-term vision (20-30 years) like Ireland for India's manufacturing sector, focusing on emerging technologies and future global demands.
  • Develop smart manufacturing hubs with integrated 5G networks, IoT ecosystems, and advanced logistics facilities.
  • Create a national data infrastructure to support AI and machine learning applications in manufacturing.
• Revolutionize Skill Development: Develop a national skills database to match industry needs with available talent in real-time.
  • Integrate gig economy platforms with manufacturing to allow flexible, project-based skilled labor deployment.
• Foster a Culture of Innovation: Establish sector-specific innovation challenges with substantial rewards to solve critical manufacturing problems.
  • Develop a patent box regime to incentivize commercialization of innovations in manufacturing.
• Enhance Financial Ecosystem: Develop a manufacturing-focused venture capital fund to support high-risk, high-potential manufacturing startups.
  • Create a dedicated manufacturing bond market to provide long-term, stable financing for capital-intensive projects.
• Strengthen Global Integration: Develop specialized emerging technologies zones focused on integrating with specific global value chains (e.g., semiconductors, electric vehicles).
  • Create a 'Vocal for Local-Local to Global' brand strategy, emphasizing quality and innovation.
• Promote Sustainable Manufacturing: Develop a comprehensive carbon pricing mechanism for the manufacturing sector to incentivize green technologies.
  • Create a national circular economy platform to facilitate industrial symbiosis and waste exchange.
  • Establish green manufacturing standards and certification processes aligned with global best practices.

Conclusion

India's journey to manufacturing excellence is not just about overcoming current challenges, but about seizing the future. The proposed strategies represent a paradigm shift – from playing catch-up to leapfrogging into leadership. This transformation is not merely an economic imperative; it's a pathway to technological sovereignty, job creation, and sustainable development.