Indian manufacturing export has the potential to touch $ 300 billion by 2015, growing at an annual rate of 17 per cent as against the historic growth of 11 per cent, states a study released by the Confederation of Indian Industry (CII) and McKinsey on manufacturing.
“The global trend to manufacture and source products in low-cost countries (LCCs) is likely to gather steam over the next 10 years, particularly in the skill-intensive industries, where India has a significant competitive advantage,” states the study.
The study asserts that if India could take advantage of this particular trend, it would lead to the creation of 25-30 million jobs in manufacturing by 2015 and two to three times this number in allied sectors like construction, education and entertainment due to the multiplier effect.
The aspiration, though ambitious, is attainable. The CII -McKinsey study states that India has several advantages in skill-intensive industries, such as auto components and pharmaceuticals, where the next set of offshoring opportunities will arise. Apart from low wages, these advantages include engineering skills (process, product and capital engineering), established raw material bases, a mature supply base and a growing domestic demand.
The study has also found that out of the $ 300 billion of total manufacturing exports, $ 70 billion to $ 90 billion could be captured from just four sectors — apparel, auto components, specialty chemicals and electrical and electronic products.
In apparel, global trade could grow from $ 200 billion in 2002-03 to over $ 300 billion by 2015. Of this, India could grow its exports from $ 6 billion to $ 25 to $ 30 billion by 2015. It could thus become the second largest LCC exporter with an 8 to 10 per cent share of world trade, adds the CII-McKinsey study.
The study also points out that in auto components, LCC offshoring is poised to take off and could reach $ 375 billion by 2015. “India should aspire to capture $ 20 to $ 25 billion of this by 2015 as compared to exports of just over $ 1 billion in 2003,” states the study.
In electrical and electronic products, world trade has already exceeded $ 1 trillion and countries such as China, Taiwan, Malaysia and Thailand all have a significant lead. Offshoring business from developing countries is expected to increase from $ 345 billion to at least $ 600 billion by 2015. “Of this, India should aspire to capture $ 15 to $ 18 billion, as compared to exports of $ 1.2 billion in 2002,” states the study.
India’s chemical, engineering and cost-innovation skills could also make the country one of the top two LCC exporters with a potential $ 12 to $ 15 billion in exports, the study finds.
The study, however, points out that achieving this acceleration in manufacturing exports would require that Indian players adopt a global mindset, carefully select product segments and rapidly develop India as one of the top three outsourcing hubs.
It adds that the government should also implement key reforms in taxation, infrastructure, clusters (SEZs), labour and skill development to help unlock India’s manufacturing potential.
Source - The Tribune
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