Every since “Modi Sarkar” came to power, the common narrative across the nation is “Make in India”. Some people “Mock in India” but I am not here to debate about the cacophony of rhetoric, laden by the opposition parties.
So lets get it clear. We are cheap. Mobile phones work here, iPhones don’t. Whatsapp works here, snap chapchat doesn’t. Hatchbacks work here SUV’s don’t. We are not a market for Gucci’s and Versace. We are however a great market for amazom and facebook’s of the world. We are clearly a masses market and niche doesn’t work here. Period.
Now coming to “make in India”. Let’s look at the share of manufacturing Industry in India today. It contributes roughly, around 29.3% of the GDP (2017) while employing only 11% of workforce. Indian Government, wants to increase this share, so that we are close to perhaps where China. Chinese economy has a 39.8% manufacturing GDP vs 25.8% of India’s.
Indian Government also intrinsically, supports a agrarian economy with loan waivers of farmers and zero taxation policy.
Both, these strategies however cannot go hand in hand, because fundamentally, they are opposing forces. Manufacturing is productivity driven and farming is largely Luddite driven. Manufacturing wants to do more with less, while farming is less with more, because it has a problem of plenty (manpower). Unless, the farm lands, get rid themselves, of farmers, we cannot, bring about mechanizations and improve productivity in this sector.
There is no way, that India can compete with China on manufacturing. China is already low cost and now its productivity, is many times that of India.
India should, however, move away from farming. It should not focus on waiving loans of farmers, rather, provide enough opportunities to push them out of the this “dying” sector. In developed nation only <1% of employment is attributed to agriculture and it contributes only about, 1.2 % of GDP. In china 8.6% of GDP comes from Agriculture and it provides for 28.2% of employment. In India Agriculture, still provides 17% to GDP and 49.5% of work force. This means, circa 50% of the work force is producing just 17% of GDP while 28.3% of workforce, which is in “Services” is producing 51.7% of GDP. The fig below is dated but gives us a view of the screw we witness in terms of employment vs GDP.
Clearly agriculture is a industry of diminishing returns, where efficiency, better crop yield and automation are producing more, food than we can can consume! Thus per capita income of farmers is falling. And it will continue to fall, unless we move them to other sectors and reduce the load on this sector. The Govt has to move this work-force from farming to Service. Yes ! You might think that manufacturing is the right answer. But that is not so. Manufacturing is labour intensive initially, but its prone to automation and efficiencies of process and scale.
Service sector on the other hand is not prone to automation at the same rate as manufacturing. Service requires skill beyond mechanics of hands and feets, thus its a the final frontier of automation. Softskills are harder to master than hard skills. Computers are good at hard skills not soft skills.
Further India, is already a great service provider. Why don’t we play the role of being the services powerhouse of the world.Why do we have to move all these work force to manufacturing and then move them to service eventually. The western world is all Services today with 80% of their workforce and GDP being powered by Services. This is final destination.
We, should not only “Make in India” but it should build “Services in India”. We already have strength in the services sector. Should we operate in the zone of our strength or venture into areas of weakness ? We are not know for quality of products. We are know for quality of Service. It means powering sectors like healthcare, software, hotels, waste management, accounting and finance. Service has low Capex ( capital expenditure) and high Opex (operating expenses). Its easy to start service business unlike a manufacturing company which needs capital to start.
India should build “SERVICES” in India. Every developed nation is having a huge service sector. We have the potential to disrupt, this sector, with our large and growing “English” speaking population. None of the other Asian nations are good at skills that we inherently have, like speaking in english, hospitality and flexibility, key skills, associated with services sector.
Why not build on these skills that we possess and make a nation truly, the shinning glory of world.