India needs to focus on domestic market to boost manufacturing: Crisil

The report, which comes days after India was ranked low in the global ease of doing business rankings, said manufacturing sector cannot be competitive in face of difficulties.

By: PTI | New Delhi | Published:November 3, 2016 5:40 pm
India manufacturing, Indian manufacturing sector, India manufacturing Crisil, Crisil India economy Even after the goods are produced, they face problems because of the inefficiencies in the system like logistical bottlenecks which results in higher costs, the report said.

Stressing on the need to focus on the domestic market to boost manufacturing, rating agency Crisil on Thursday said the country needs to do a lot more to encourage the high-employment sector. “India can nurture growth in its manufacturing sector only if it strikes a balance between export-led and domestic demand-led growth. And that will require relentless efforts on improving the competitiveness of our manufacturing sector,” it said in a report. The report, which comes days after India was ranked low in the global ease of doing business rankings, said manufacturing sector cannot be competitive in face of difficulties. These include inadequate physical infrastructure like reliable power and water, inflexible labour laws and an “opaque” land acquisition system, it said.

Even after the goods are produced, they face problems because of the inefficiencies in the system like logistical
bottlenecks which results in higher costs, the report said. It said the government will also have to ensure purchasing power across all sections for pushing the domestic consumption as well.

“Policy measures that ensure distribution of income growth to all sections will sustain domestic demand-led growth. This need not be achieved by merely subsiding the poor, but also by empowering them to participate in the growth process,” Crisil said. The report by Crisil’s research wing comes nearly two years after the then Reserve Bank Governor Raghuram Rajan stressed on the need to address the domestic opportunity and not focus on the exports alone as part of the ‘Make in India’ programme.

“The maximum possible growth for manufacturing sector can only be realised if it strikes a balance between export-led and domestic-demand led growth,” the report said. It said domestic firms will have to ensure that their goods are competitive in the global market, failing which there can also be a rise in imports as India is open to international trade. Crisil said the external environment is far less conducive to trade, and the country cannot do a repeat of the Asian tigers in the pre-1990s and China who successfully adopted an exports-led strategy to boost manufacturing.

It also said that the country has not been able to seize the opportunities in the global arena, pointing out that
countries like Vietnam and Bangladesh have been able to increase their share in global exports even as the overall
trade is falling. Stating that China is ceding space in the low-end manufacturing, Crisil said the country can target this segment but is lagging behind both Vietnam and Bangladesh in the race.