PERSPECTIVE
Manufacturing ecosystem in India: Lessons from China Developing a manufacturing ecosystem in line with Indian conditions is the need of the hour. It is important to understand what China did right while developing the roadmap ahead.
I
ndia’s share in world manufacturing value added (MVA) was merely 2.84% in 2018. The share of manufacturing in GDP is 17%, in spite of the vision statement of increasing the share to 25% by 2020 (Niti Aayog, 2018). India, with its domestic market base, does have opportunities to enhance its manufacturing performance. This requires a policy framework that is in line with ground realities. As such, it is important to question what made China a manufacturing hub and why India was not able to achieve the manufacturing targets it set for itself. China’s emergence as a global production hub is primarily on account of developing the manufacturing sector and focusing on manufacturing & exports. Its share in world MVA increased from 11.6% in 2005 to 24.8% in 2017 (CIP UNIDO, 2018). Manufacturing exports of China as a share of the global total increased from 0.8% in 1980 to 17% in 2018, the highest in the world, outpacing the US, Germany and Japan. As such, China acquired
the first rank in Global Manufacturing Competitiveness Index (Deloitte 2016) and as per the recent UNIDO data on CIP, it is ranked 3. In China, manufacturing accounts for over 40% of the GDP. China has emerged as the world’s factory by following a planned strategy. The MIC 2025 clearly highlights the future de-
velopments of industry, which are centred on high tech and emerging industries – electrical equipment, farming machines, new materials, energy saving, information technology, aerospace, railway and ocean engineering equipment. This is also in line with the future demand structure. Such foresight is also necessary for India.
THE MADE IN CHINA (MIC) 2025 CLEARLY HIGHLIGHTS THE FUTURE DEVELOPMENTS OF CHINESE INDUSTRY, WHICH ARE CENTRED ON HIGH TECH AND EMERGING SECTORS LIKE ELECTRIC EQUIPMENT, FARMING MACHINES, ETC.
A CUSTOMISED APPROACH In all these, innovation has defined the competitive advantage. The targets are clearly set in MIC 2025, where the focus is on strengthening microelectronics, aerospace, computing, robotics and renewable energy. The government’s developmental initiatives – industrial regions with concentrations of assembly plants, skilled workers and material and component suppliers, provide immense scale economies. Imbibing from China is not the answer, but developing a manufacturing ecosystem in line with Indian conditions is the need of the hour. The focus should be on sectors that
12 | India Business & Trade • Jan - Mar, 2021
