Column: Mending manufacturing

May 14 2014, 04:00 IST
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SummaryThe new government must work to maximise the potential of segments like textiles and electronics

As one of the most bitterly contested general elections ends, it was heartening to see that the major political parties spoke about reviving manufacturing growth, and creating millions of new jobs. Unfortunately, both the national parties were thin on details and showed less than desired appreciation that manufacturing growth and job creation do not always go hand in hand, as we saw in the last decade. If we do not ‘crack the code’, given India’s specific issues and challenges, we will end up fighting the next elections with the same good intentions but no action on the ground again.

Textile, as a labour intensive industry, is one of the leading segments in the sector for which we have to crack the code so that growth and job creation go hand in hand. In an industry where developing countries meet a significant share of global demand, India has an inherent advantage given that it has the largest production of cotton in the world, large capacities for polyester and other synthetic fibre production, low-cost labour and a large domestic demand. The sector has been a pillar of manufacturing growth and job creation in China, whose share of global trade in textile increased from less than 10% to nearly 35% in the last two decades—from $10 billion to over $150 billion. In the same period, India’s share of global exports has remained stagnant around 3-4%. It is not just our inability to emulate China or even Vietnam, which entered the global textile export market just a decade ago and has already built a share of close to 3% that is so worrisome, we also risk losing jobs in the sector as the larger firms replace low-cost labour with high-cost automation in modernising their factories, thanks to the shortage of skilled workers and the challenge of managing large workforce under the existing labour laws. An industry leader rhetorically asked me why he should set up capacity in India when he could do so in other countries where a container takes only a day to reach their plant from the port, and they can convert the cloth into garments and pack it into the same container and load it on to the ship before it sails, all inside one week compared to the week or more for the container to just reach a plant from the port in India?

The textile sector could have been a

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