India may become 5th largest manufacturing nation: BCG

Discussion in 'Economy & Infrastructure' started by Daredevil, Mar 20, 2013.

  1. Daredevil

    Daredevil On Vacation! Administrator

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    MUMBAI: India may become the fifth-largest manufacturing nation - from ninth position at present - if the country is able to increase the share of manufacturing in GDP to 25 per cent, a Boston Consultancy Group report has said.

    The National Manufacturing Policy envisages that India's manufacturing sector should increase its share of GDP from 15 per cent at present to 25 per cent by 2022, in line with global peers.

    It will help India become the fifth-largest manufacturing nation, said the BCG report.

    However, despite high potential, the Indian manufacturing sector has not been able to achieve the requisite growth and its share of GDP has remained relatively flat for over two decades because of poor productivity, BCG-CII said in the report titled `People productivity-Key to Indian manufacturing competitiveness'.

    An improvement in `people productivity' can be beneficial across all levels of an organisation, it said, adding that it is critical for the Indian manufacturing sector to work toward enhancing people productivity.

    It is also important to attract quality talent to the sector, said the report. A survey of placement committees across the top domestic educational institutes suggested that poor job offerings, lack of glamour quotient and lack of awareness concerning potential of manufacturing jobs were some of the reasons behind students' less preference for manufacturing companies, it said.

    Apart from brand building, student-connect and awareness activities, in the longer term the manufacturing firms need to work on developing a more conducive working atmosphere, providing better employee experience, and repackaging job offerings to suit students' expectations, it said.

    With China's manufacturing competitiveness losing sheen fast, challengers are aggressively vying for a bigger piece of the USD 8.8 trillion1 global manufacturing pie. India, with its large working population and low labour costs (or substantial labour-cost competitiveness) is at a distinct advantage, and can grab a lion's share, the report added.

    India may become 5th largest manufacturing nation: BCG - Economic Times
     
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  3. mylegend

    mylegend Regular Member

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    This is not going to happen unless there is infrastructure and productivity. One of distinct advantage China enjoy over other low wage country are higher producitivity and better infrastructure. For the very least, the electricity is always working for the factory.

     
  4. badguy2000

    badguy2000 Respected Member Senior Member

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    well, until CHinese per capital nominal GDP arrive 20K USD ,CHinese manufacturing will still have cost and productive edge on India and southesat Asia, with its much better infrastructures ,higher literacy and strict discipline.
     
  5. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    For that Chinese will have to manufacture young human labour in their factories which is not possible..
     
  6. badguy2000

    badguy2000 Respected Member Senior Member

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    the simple way to deal with the perhaps shorage of labour is to induct cheap labours from poorer countries ,such as Southeast Asia, South Asia and Africa.

    those inducted cheap foreign labour will do those dirty,low-incoming and dull jobs such as housekeeping,construction workers and street cleaners ,which Chinese labours doesn't want to do.
     
  7. roma

    roma NRI in Europe Senior Member

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    i thiot india was aiming for #2 and niot #5 ?????
     
  8. Yusuf

    Yusuf GUARDIAN Administrator

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    Immediate goal is to increase percentage of manufacturing in overall GDP. 25% is the target. What position that takes us depends on overall growth and overall GDP. If we able to achieve and maintain a 25% manufacturing share in GDP, we will surely get to #2 in due course.
     
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  9. JBH22

    JBH22 Senior Member Senior Member

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    It seems you don't want to acknowledge that Chinese do these in African countries construction of sewerage projects in Mauritius, stadiums in Congo etc.
    No shame in that but don't try to overstate your living standards :)
     
  10. Yusuf

    Yusuf GUARDIAN Administrator

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    India will have to solve a lot of problems to actually achieve this. To promote manufacturing in te country the first thing that needs to be taken care of is the bloody red tape. Half of Indias problems will get solved if te question of red tape is resolved. Ease of doing business, internal bottlenecks, cheaper credit, labor issues etc. infrastructure can be built in no time if the will is there. Roads in India are now of high quality. But the will to make them had to be shown and it came 10 years ago and today we see good highways in India. The process is ongoing. All airports in India have already been modernized and many more are being modernized. Ports are also being modernized and many more being added. Electricity is a sore point in this all with extreme shortages. That has to be addressed and dramatically at that.

    Indian manufacturing needs to modernize too. India is always slow to adopt latest technology and invest capital in technology upgrade. Probably because of credit being expensive. Cheaper credit will help.

    Export promotion is only in name. To get rebate, one has to get through to hell and pay bribes. So how is that promoting export? China at one point use to give 15% rebate on exports. Exporters use to under quote and live off the subsidies. India will need major policy initiatives to realize the potential that does exists in the global context. We have to expan our horizon.
     
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  11. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    For such a populious country that China is, importing low work labour from the neighbouring countries is going to be unamangiable. Besides it would create a Mexican problems for The CCP... it will have effects on Chinese culture and politics. Dictetorship would harden and internal fissures would be problematic.
     
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  12. roma

    roma NRI in Europe Senior Member

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    you wrote solid stuff there

    good news is some of it has happened - even better news will be to hear the momentum is being maintained

    to take farmers and other unemployed off their failures and into the mfg workplace is something that shd hv been realised a looong time back

    but im glad it is at least a work in progress !! - hope "Good M " gets elected - he might help speed it up ( not sure Vince would be able to contribute much as he has not said a word on the topic so far ! )
     
  13. badguy2000

    badguy2000 Respected Member Senior Member

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    the wage of Chinese workers is times mroe than that of Africa local workers.

    However, the efficiency of Chinese workers are dozens of times more than that of African local workers..

    Besides, Chinese workers are much more displincipled.

    so,overall, Chinese workers has better costperformance than African workers ,that is all,.
     
  14. badguy2000

    badguy2000 Respected Member Senior Member

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    well, There are already over 200K illegal African workers in Guangzhou city....

    the illegal immigrants is already a big problem in coastal CHina...
     
  15. mylegend

    mylegend Regular Member

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    That is why I believe India should have put nationalism aside for the very least at their electricity equipment industry. They impose hefty tariff on Chinese equipment while provide no alternative plan to boost domestic one. My point is either don't impose tariff at all because that is only small segment of the industry but critical for entire economy or come up with doable plan to boost its own electrical equipment firms to be able to compete while before putting up tariff. For the very least Indian government could have done is to divert all the tarriff income from import of Chinese equipment to subsidized its own. However, due to its political motivated natural of the tariff, Indian government failed to adjusted economic side of the problem. The tariff will make the public and domestic equipment company happy but sacrificing broader economy.
     
  16. mylegend

    mylegend Regular Member

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    Badguy2000, I disagree with your assertion that importing labor would be the future to maintain competitive edge for China. It will not. The only way is to increase productivity level. So far, it is the choose of many medium size and large size factory across China. I worked for clothing manufacturing business. From my experience, what I can tell is rapid adoption of fully automated machine that 1 trained worker can manage from 4 to 8. Those machine produce significantly better quality product than average labor and right now only cost about slightly off compare to semi-automated and manual machine. Machine does not make mistake, human does. Machine will always perform up to spec. Furthermore, machine can produce more complex pattern at a quality level cheaper than manual labor.

    Those fully automated machine cost around 500,000 yuan around 2003 when we had to import from Japan or Germany. Now domestic one that is able to have 95% of Japanese import capability cost around 200,000 per machine. The price will drop to close to 150,000 from various people worked in the industry I have worked with pretty soon. When we bought the machine from Japan in 2003, we were able to command around 40-50% price premium over manual labor one to cover the cost. Now, no one will pay over 20% premium for fully automated product because so many factory have bought them. Automated machine manufacturer such as 慈星Cixing even goes public to stock market. Then, the bigger worry for China is employment. Foxcon is a example of electronic industry trying to do the same, and once those robot replace human. Productivity and quality will increase dramatically.

    However, the textile industry recently have gone through trouble because lower global demand and stiffer competition from country like Bangledash due to extreme low cost there. However, if we can manage to export those machinery, the profit margin will be much higher than the textile industry. The problem now is lack of financing support from Banks in China for global expansion of machinery firm. Those machine cost as much as car, and are capital intensive product that require financing help to increase sell volume, much of customer of those machine often finance those machine in high interest rate currently. Chinese state own Banks are incompetent to provide helps for the industry due to interest rate restriction, most company had to borrow at interest rate of 20-30% a year!!!!!! Bank insider have profit off from claboration with 担保公司, they give relative interest rate to those company and those company charge high interest rate to others want to borrow from them. Bankers earn billions of dollar from Bribe given by those 担保公司 that they or their family member are part of.

    The best solution will be allowing industry to build its own financing arm. However, that will hurt the interest of the very top and member of dirty CCP.
     
    Last edited: Mar 21, 2013
  17. mylegend

    mylegend Regular Member

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    To further expand my argument why the electrical equipment tariff is purely political motivated, one must see that the bill offer no solution on fighting capacity shortage, It offer no plan on enhancing domestic manufacturer capability and on how to make up for the lose of Utility firm.

    Government policy should be more comprehensive, like the last time when US government raise minimum hourly wage, the bill include tax refund for industry that rely heavily on low cost labor.
     
  18. JBH22

    JBH22 Senior Member Senior Member

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    Agreed but then don't come and post BS like Chinese don't want to work in primary sector (manual) jobs.
     
  19. badguy2000

    badguy2000 Respected Member Senior Member

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    what a good report from the workshop experience!

    however, robots can replace labour on assembly line, ,but they can not replace some jobs like housekeepers and cleaners....

    just according to my personal experience, it is very hard to find a proper babysitter,if monthly salary is less than 500USD.

    however, a monthly salary of 500 USD is enough to hire quite well-trained domestic helpers from Southeast Asia.

    So, it is quite possible that Chinese families will have to induct domestic helpers from poorer countries in Southeast Asia or South Asia
     
  20. badguy2000

    badguy2000 Respected Member Senior Member

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    BTW,I work for a bank.....banks in CHina also meet many troubles now....which is mainly Non-performing loans (NPLS) ,caused by the liquid shortage under strict monetary policy
     
  21. mylegend

    mylegend Regular Member

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    Yes, I heard of that. Many people I know have to borrow 过桥贷款 bridge loan to pay back their loan so they can borrow again. Bridge loan often have annual interest rate over 24%. Some time, maybe part of bridge loan are borrow at 48%. Luckly you paid only between 2%-4% usually, because you paid back those loan in a month. Well run, guarantee company 担保公司 are immensely profitable. It is extremely hard to borrow for small and medium company these day, high interest loan is their best way to go. Some company I know send all of their profit last few year to those financial institution. Bad time indeed.

    Bank are only willing to lend to state run enterprise and public company because fear of default. What I'm feeling is government should let Bank have greater flexibility on interest rate so all of those money are not earned by 担保公司 people live off usury. I'm sure bank are more willing to lend out loans for small and medium size company at interest rate between 12-20%.
     

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