The Economist on the relatively slow development of India’s manufacturing sector:
If India is to become “the next China” — a manufacturing powerhouse — it is taking its time about it. “We have to industrialise India, and as rapidly as possible,” said the country’s first prime minister, Jawaharlal Nehru, in 1951. Politicians have tried everything since, including Soviet-style planning. But India seems to prefer growing crops and selling services to making things you can drop on your foot.
Manufacturing is still just 15% of output (see chart), far below Asian norms. India needs a big manufacturing base. No major country has grown rich without one and nothing else is likely to absorb the labour of the 250m youngsters set to reach working age in the next 15 years. But it can seem a remote prospect. In July power cuts plunged an area in which over 600m people live into darkness, reminding investors that India’s infrastructure is not wholly reliable. And workers boiled over at a car factory run by Maruti Suzuki. Almost 100 people were injured and the plant was torched. The charred body of a human-resources chief was found in the ashes.
Yet not all is farce and tragedy. Take Pune in west India, a booming industrial hub that has won the steely hearts of Germany’s car firms. Inside a $700m Volkswagen plant on the city’s outskirts, laser-wielding robots test car frames’ dimensions and a giant conveyor belt slips by, with sprung-wood surfaces to protect workers’ knees. It is “probably the cheapest factory we have worldwide”, says John Chacko, VW’s boss in India. In time it could become an export hub. Nearby, in the distance it takes a Polo to get to 60mph, is a plant owned by Mercedes-Benz.
The initial demand for a domestic manufacturing base was more political than economic: it would serve to reinforce the newly won independence of India by showing that India could make its own goods rather than importing from the UK or other major manufacturing nations. It was also economic, in that it would provide relatively high-paying jobs for India’s rapidly urbanizing population.
Ironically, now that the manufacturing sector seems to be on the upswing, the one thing it isn’t going to do for India is provide lots and lots of jobs: as with the rest of the world, manufacturing “things” is being done with fewer workers every year (even when the total output increases, fewer workers are needed to produce that output).
