The task of creating 100 million jobs by 2025 is difficult but a plausible target for a population of 1.22 billion people providing a captive consumption and a potential production framework to meet their own needs - Naresh T Raisinghani, CEO and Executive Director, BMGI

Service sector dominates

Like most countries across the globe, India’s GDP growth has been fuelled by the service sector since 2000. While many may want to draw solace that India is bucking a global trend of service economy, in most developed countries during their developmental cycle, manufacturing and mining have formed a decent part of the GDP share in contrast to India. Even in emerging economies such as Thailand, China and Malaysia, the current manufacturing contribution towards GDP ranges between 30 to 40 per cent. But, in India, the manufacturing sector currently contributes to merely 16 per cent to our GDP.

At an operating level, the Indian manufacturing sector is exhibiting a dual characteristic with enormous potential for growth on one hand and facing economic uncertainty on several other manufacturing sectors. Emphasising further Naresh T Raisinghani, CEO and Executive Director at BMGI said, “While certain sectors like pharmaceuticals and automobile are showing great growth in the past few years, the core sectors of engineering goods, chemicals and other component manufacturing are not able to compete globally due to quality and cost issues. This is also evident from the fact that we are hardly exporting around 8 - 10 per cent of GDP and are a net imports society with a trade deficit of around $ 185 billion”.

He further added, “Interestingly at BMGI, in the past one year, we have been receiving calls from several manufacturing businesses and entrepreneurs to help them grow at 25 - 50 per cent year-on-year in 2-5 years timeframe, indicating the vibrancy and renewed interest in manufacturing”.

BMGI India is the Indian arm of BMGI Global consulting firm specialising in providing management consulting solutions to India and Asia Pacific region in strategy, innovation, problem solving and business transformation across all industries.

Manufacturing sector may contribute 25-30 per cent of our GDP

There are several positive trends indicating that the Indian industry is readying itself for setting a scorching pace in achieving manufacturing excellence. Though China was the preferred destination for the West for a long time; due to wage increases and other policy changes there has been a search for alternate manufacturing locations. Expressing his optimism Mr. Raisinghani said “India is being viewed as a senior contender for becoming a world class manufacturing hub compared to other potential eastern nations. Several western and interestingly even eastern companies have started setting up new facilities in India and those who have already invested are expanding their existing facilities in India to tap into the expanding markets”.

Some specific examples are ABB and Siemens in the power sector, Volvo and several major auto players are looking at India as one of the larger manufacturing hubs in the world, while Samsung and LG plan to further strengthen their various consumer goods manufacturing infrastructure, and Airbus and Boeing showing increased interest in India besides the HAL relationship. He further added, “There is also recognition of the contribution that Indian minds can make towards innovation and we see a shift by several MNCs such as GE, Philips, Unilever, John Deere, Airbus setting up world class R&D centres in India. If the government creates a powerful national policy favouring manufacturing, it should come as no surprise, that India increases its share of manufacturing sector to around 25-30 per cent of the GDP by 2030 from the current 16 per cent”.

Upgrade technology and skill sets on time

India has a teeming population of one of the youngest and hence logically an energetic and productive age group to enter the workforce, compared to China, Japan, Germany and US. However, Mr. Raisinghani observes, “Unfortunately the education system does not provide sufficient skill sets for the workforce to immediately be industry ready. This can be alleviated by aligning the education system by seeking continual feedback from the industry on the changing needs in technology and processes”. Likewise, to accelerate the rapid dissemination of required skills, substantial encouragement in terms of tax benefits and formation of education institutes with Public-Private Partnership should be initiated.

Government initiatives to enhance manufacturing growth

According to Mr. Raisinghani the following initiatives in the form of policy implementation can substantially help to accelerate the GDP towards 10 per cent with a larger contribution from the manufacturing segment:

    • Promoting competitiveness of the manufacturing sector as it is crucial to increasing productivity and securing larger share of global business
    • Domestic value addition to be the core endeavour of the policy
    • Clean technologies to be promoted while achieving the growth objectives
    • Promoting private sector as the main driver for the growth of manufacturing
    • Job creation through encouraging high growth industries and promotion of employment intensive industries
    • Promotion of high technology industries specifically from the long term national infrastructural angle
    • Further alignment and liberalisation of Foreign Direct Investments that would encourage development of domestic technological capabilities including innovation capabilities of a high order for ensuring long term growth of the manufacturing sector
    • Formalising the future role of the public sector
    • Identification of the role and creation of small scale industries clusters in the growth process as well as in innovation and technology development for enabling the manufacturing sector
    • Encouragement and setting of world class infrastructure National Manufacturing Investment Zones (NMIZs) of 50 - 100 sq km with world class facilities having pro- business approach, with rapid clearance systems and well supported logistics infrastructure

100 million jobs - difficult but plausible

Commenting on the scope of creating 100 million jobs in the next 10 years, Mr. Raisinghani said, “It is a difficult but plausible target for a population of 1.22 billion people who in themselves provide a captive consumption and a potential production framework to meet their own needs. A large set of the Indian population is still waiting to experience today’s new basic necessities such as car, television, computers, mobiles, etc creating a strong latent need for captive consumption”.

Macro enablers

“If the manufacturing sector is able to improve efficiencies with the government playing an enabling and supportive role, and in parallel the businesses in India focus on low cost products for Indian markets and globally competitive products using clean technologies for exports, India would be unstoppable towards this goal”, he predicts.

Operational Enablers

The urban setup is highly skewed with about 300 million people and expected to grow exponentially. According to Mr. Raisinghani, “To support a reasonably well balanced economy, the focus needs to be on creating jobs at local state level which is inclusive of rural areas, by encouraging setting up of plants in rural locations and creating skill enhancing institutes / virtual reach models of skill education in these interior locations”.

Underlying Enablers

Over and above the macro and operational enablers, two critical ingredients are: Tapping the latent desire of several competent and aspirational Indians by creating an enabling climate by the Governmental agencies for entrepreneurship; and encouraging technological innovation in the country to incubate future products.

“Pressing the levers on macro, operational, and underlying enablers, can definitely help achieve the ultimate dream of 100 million jobs in the next 10 years”, concludes Mr. Raisinghani.