'Government Must Revive Manufacturing First'
By Samiran Saha | Published: 25th May 2014 06:00 AM |
NEW DELHI: Reviving the manufacturing sector should be among the first priorities of the new government that will be installed on Monday, believes Indian industry. The government should revitalize the National Manufacturing Policy and do away with archaic laws that impede industrial growth in India; or else, the sector will pull down the entire economy, say industry leaders.
The manufacturing sector was the worst hit in 2013-14 because of weak industrial activity. The average fall in production was 0.1 per cent, raising serious concerns about a sector that contributes 16 per cent to India’s GDP. This was the biggest downturn since 1991-92, when the fall was to the tune of 0.8 per cent. Fall in industrial production is believed to be a combination of supply side constraints, high cost of capital, weakness in demand and consumption.
“A stable government will help revive the manufacturing sector,” says Maruti Suzuki chairman RC Bhargava. He wants the government to continue with excise duty cuts for the auto sector as this can create demand, leading to consumption. Maruti is not the only auto company feeling the pinch. Abysmal demand and swelling inventories forced auto giant Mahindra and Mahindra to opt for a shut down for three days in May at its Chakkan plant near Pune.
SV Sukumar, partner and head of operation and supply chain at KPMG, says: “Boosting the medium and small enterprises (SME) segment in manufacturing should assume greater priority as these companies have been under severe stress for the past few years, and employ a large number of people.” Sukumar also feels that the government should focus, in the short, medium and long term, on improving road, rail and port infrastructure to ease the logistics bottlenecks faced by the manufacturing sector.
Baba Kalyani, CMD of Bharat Forge, says India needs structural changes in the manufacturing sector and wants local manufacturing to be encouraged. Others, like Ajay Shriram, president of CII, want the government to facilitate private sector participation in the defence sector to stimulate manufacturing. “Private sector participation in defence manufacturing will help create jobs and we can cut down our import bill by domestically manufacturing defence hardware,” says Shriram.
Sector experts also want the government to address and resolve the issues faced by the coal and mining sector as these two areas have a cascading effect on the economy as a whole. Between April 2012 and January 2013, India’s iron ore exports fell by 68.27 per cent to touch 16.35 million tonnes year-on-year. In April-September 2013, the mining sector contracted 1.6 per cent. It was negative in the two previous fiscals.
The mining sector has been severely hit by Coalgate and the pending amendments to the Mines and Minerals (Development and Regulation) Act that will allow private firms to engage in mining through competitive bidding.