Manufacturing sector stutters in 4 years of Modi rule

Punching a hole in the Centre's claim to turn India into a $1-trillion manufacturing economy in the next four years, a report by its own think-tank Niti Aayog on Wednesday showed that the share of manufacturing sector in India's gross domestic product (GDP) has risen by barely half a percentage point in the over four years of Prime Minister Narendra Modi-led government.

The share of manufacturing in India's GDP was 16% in 2014-15, the year the NDA government came to power. It increased to 16.6% in 2017-18, according to Aayog's data tabulated in its 'Strategy for New India @75', unveiled by Finance Minister Arun Jaitley here.

In percentage terms, the Centre aimed at increasing the share of manufacturing to 25% of GDP by 2022, creating 100 million new jobs.

“The share of manufacturing in India’s GDP is low relative to the average in low- and middle-income countries. It has not increased in any significant measure in the quarter century after economic liberalisation began in 1991.

“Within manufacturing, growth has often been highest in sectors that are relatively capital-intensive, such as automobiles and pharmaceuticals. This stems from India’s inability to capitalise fully on its inherent labour and skill cost advantages to develop large-scale labour intensive,” it said.

The Aayog also said that only “suitably structured” mega public projects such as Sagarmala, Bharatmala, industrial corridors, and the Pradhan Mantri Awas Yojana (PMAY) can stimulate domestic manufacturing activities.

Separate data points have suggested that growth in India's labour-intensive sectors like gems and jewellery, engineering goods, leather and textiles has been stuttering. These sectors are the ones which employ an estimated 85% of the country's workers, paying them 20 times less than their counterparts in the formal sector.

The report suggested that India needed to generate 80-90 lakh new jobs annually to absorb the net addition to the workforce in the economy.

“To capitalise on its demographic dividend, India must create well-paying, high-productivity jobs,” it said..

Of India’s total workforce of about 52 crore, agriculture employed nearly 49% while it contributes only 15% to the economy. In contrast, only about 29% of China’s workforce are employed in agriculture.