CASTE CENSUS FINALLY INCLUDED IN PARLIAMENTARY COMMITTEE’S AGENDA

“The day is not far when India will be the hub of industrial manufacturing and the world will be looking towards it,” Prime Minister Narendra Modi has said in his independence-day speech, but the challenges before India on this voyage will not be easily navigable. Numerous challenges remain in its path despite the tag of the fastest growing economy. PM Modi has given some reasons behind his optimism. World’s
biggest companies want to invest in India, he said, adding, “I have seen this after the elections, most of the people who are asking to meet me in my third term are investors … This is a very big golden opportunity. I request the state governments to attract investors.”

Why he was requesting the state governments to attract investors if according to his own word, investors are already willing to invest in India and it is a golden opportunity? One of the reasons may be lying in his conscience that his statement is merely political, and it is easier said than done given the challenges our industries are facing today. He said in his independence-day speech that due to his policies and steps taken,
India is emerging as a manufacturing hub.

“FDI reforms have also given us great strength. MSMEs’ have got a great boost. A new system has developed and due to that our manufacturing sector has become a manufacturing hub of the world,” he claimed during his speech. He also spoke about the government’s ambitious production linked incentive (PLI) scheme.

Nevertheless, the Economic Survey 2023-24, has enumerated several challenges our industry sector has been facing, and there are much more between the lines that is suggestive of becoming a manufacturing hub of the world to remain a distant dream, barring in production of a few items.

True, as per government data, industrial growth accelerated in FY 2024, with manufacturing and construction leading the way. However, such a temporary phenomenon needs to be sustained and this phenomenon in itself can’t do it. Industrial GVA at constant prices in FY 24 was 25 per cent higher than the pre-COVID FY 20, which only affirms a broad-based recovery from the crisis and a little consolidation over the complete shut down of the economy of the country. Only 25 per cent above such a lower base is not a big deal. India needs much more to realise the dream of becoming the manufacturing hub of the world.

It is noteworthy that India’s manufacturing landscape has been changing fast in the last decade. Some consumer-oriented industries such as automobiles, wood products, furniture and pharmaceuticals have made large gains in output shares. There have also some gains in production-oriented sectors like machinery, chemicals, non-metallic minerals, and rubber and plastic products. Even though the balancing of the growth dynamics remains challenging. Sectors like petroleum products and textiles has been witnessing gradual decline. Almost all key industrial sectors are facing challenges. Let us take example of some of them.

India is the second largest cement producer in the world, only after China and the industry has adequate capacity to meet the domestic demand. However, about 0.2 per cent of total domestic cement production
was imported in FY 23. It should further be noted that India’s clinker and other cement exports were rising until FY19, and then started declining except for other hydraulic cement on account of lower global demand and increasing competition from other countries. In FY23, India exported only a negligible quantity of clinker. Global demand for cement is likely to be flat during 2024- 2030. India’s capacity utilisation in this sector remains around 60- 65 per cent. Additionally, there are pressure to reduce emissions in this sector.

Steel sector achieved its highest levels of production and consumption during FY24. Though the sector started off as a net exporter in Q1, it became net importer in Q2 and Q3. This was largely driven by price
differentials between international and domestic prices of finished steel. Low price in the international market led to reduced profit margins for exports and made imports more affordable. Import dependence on
coking coal, an essential raw material for steel production went from 56.1 MT in FY23 to 58.1MT in FY 24.

Import at the cost of domestic industrial development has been a bane for India for quite some time. It still remains a challenge, as the steel, and several other sectors suggest. Reviving India’s ruined industrial base in many sectors will remain a million dollar question. Moreover, India is also dependent for its industrial
growth on imported raw material, the smooth supply of which depends on global conditions.

Perhaps for this reason, the Economic Survey talks about invigorating ongoing efforts to impart greater efficiencies, skill, and dynamics to labour-intensive segments like textiles, food processing, and MSMEs to lend greater balance to industrial expansion.

In this backdrop, the Economic Survey had to recommend incentivising R&D investment, greater formalisation of smaller manufacturers, alleviating their supply chain bottlenecks, facilitating market access and improving access to finance to foster further industrialisation. It also recommends further reduction
in the compliance burden for MSMEs for any considerable growth prospect.

Though conditions are ripe for industrial output expansion in the near term, the economic survey has
mentioned headwinds in terms of uncertain global demand conditions and prices of key inputs for which India is import-dependent.

The Centre has been drumming up about India’s industry sector performance for the FY 24 claiming acceleration at the rate of 9.5 per cent growth. However, given the last five year’s dismal performance record, we can conclude that it would be too early to say that the acceleration would be sustainable, which will depend on several domestic and global factors.

The average annual growth rate of manufacturing GVA has remained only 5.2 per cent in the last 10 years under PM Modi. Therefore, in the backdrop of dismal performance, the current statement of PM Modi may only be political, far away from the economic realities in the ground level. India faces stiff challenges in growing its manufacturing base, the Economic Survey has admitted.