2014-15 Economic Survey Emphasises on Make in India and Skilling India and their Balance
Regrets India lags behind other nations in manufacturing sector
States share of Manufacturing and Productivity in National GDP declining
By TN Ashok Economics Editor
New Delhi, Feb 27: The 2014-15 Economic Survey, considered a road map for the union budget of 2015-16, tabled in parliament today highlighted the need for economic expansion and structural transformation by utilising the country’s most dominant resource – unskilled labour.
The survey regretted that India lagged behind other nations in productivity and manufacturing sector and that state’s share in national GDP was declining which needed to be arrested.
The survey, tabled in both houses of parliament by Finance Minister Arun Jaitley, discusses the Modi’s government’s flagship initiative of “Make in India” as a key policy instrument of the BJP led NDA administration and contemplates on “What should India make? Manufacturing or Services? “
The survey distinguishes registered manufacturing (formal sector) from the general manufacturing which covers informal sector as well. It recognizes registered manufacturing as having “the potential for structural transformation. “ Registered manufacturing exhibits high productivity compared to other sectors of the economy.
The Economic Survey observed that in manufacturing and productivity India lagged behind other nations. All Indian states exhibited declining share of manufacturing in the State GDP. In addition, the Survey identifies that registered manufacturing couldn’t bridge regional disparities in India. Registered manufacturing now in India has been identified as skill intensive which is not in line with the India’s comparative advantage in unskilled labour.
The Economic Survey identifies four factors for non-development of manufacturing as an engine of economic growth
• Distortions in Labour Market
• Distortions in Capital Market
• Distortions in Land Market
• Specialization not in line with India’s comparative advantage in unskilled labour
Certain subsectors of services – financial services and business services, exhibit higher productivity levels than registered manufacturing. However, these sectors being highly skill intensive (excluding construction) are out of line with the skill profile of the Indian labour force. They are unlikely to generate widely shared and inclusive growth. However, the survey observes that the service sector has the potential for domestic growth convergence across regions.
The survey redrafts the dilemma between manufacturing and service.
It posits that the real question should be whether we want to concentrate on non-skilled labour intensive sectors or the development of skill intensive sector.
The Economic Survey concludes that Indian growth should balance the nation’s comparative advantage in availability of low skilled labour with skill development required by future generations to take advantage of lost opportunities.
The registered manufacturing must be expanded to take leverage of India’s abundant unskilled labour. While “Make in India” occupies prominence as an important goal, the future trajectory of Indian Development depends on both “Make in India” and “Skilling India”, the Economic Survey says.
