Factory factor
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Manufacturing growth isn't keeping up with GDP growth, indicating a problem that needs fixing
Taiwan, less than 0.4% the size of China, ensures its safety by making 90% of the world's silicon chips. It's indispensable, hence untouchable in a good way. That's the power of manufacturing. So, when you read India's GDP data for Jan-March, pay attention. The good news is that growth accelerated to 7.4%, better than China's 5.4% in the same quarter. But most of it happened in construction, especially govt-funded projects. Manufacturing grew at a modest 4.8% despite govt's PLI schemes for sectors like electronics and solar equipment, and the front-loading of orders by US importers anticipating Trump tariffs. Apple alone lifted five plane-loads of iPhones in the last week of March.
We are now in the third month of this fiscal's first quarter, and given the global uncertainty, it's time to assess manufacturing as a national priority. On paper, it has been govt's focus for years, yet its share in GDP is stagnant – 15% in 2014, 17% now04. Govt's 25% target remains elusive. In China, despite its 4.5x larger economy and five years of 'China+1' sourcing policies, manufacturing accounts for 26% of GDP.
India's GDP is projected to grow at 6.5% this fiscal, well below the asking rate of 8% for reducing poverty. Manufacturing is key to the required quantum leap. It's a political necessity to employ youth that GCCs and other white-collar operations can't absorb. After Op Sindoor, it's also a security imperative. A nation of 1.4bn should be making its own drones, planes and missile shield.
But assembling iPhones is only a step, not a goal, because it does not give us Taiwan-like manufacturing clout. We need more foreign investment, but also domestic R&D to get ahead in emerging technologies. PLIs won't get us there – half of India's phone-making capacity is unutilised. Tamil Nadu, the lone state where 25% of GSDP comes from manufacturing, got there by actively fulfilling industry needs of manpower, regulation and infra. If TN can do it, so can Gujarat, Maharashtra, UP and others. What's needed is political will.
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This piece appeared as an editorial opinion in the print edition of The Times of India.
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