Skill development in manufacturing sector
Dec 25 2012
In recent times, the IT industry that is cutting across all sectors and service industries that are emerging from various domains, have become the backbone of several global economies and India is no exception to it. It is unfortunate that traditional sectors like manufacturing, which have always been in the main stream, just like agriculture, for the growing Indian economy, is currently under the shadow of fast growing IT, BT and IT services sector. They are giving attractive salary packages and offer state-of-the art working environment to their employees. The impact, as expected, is deviating engineering graduates in core disciplines like mechanical and telecommunications, which demand heavy work on the floors of industry and making hands dirty, with such lucrative jobs. This is very alarming because, as projected in a recent article in Mckinsey Quarterly, India’s manufacturers now have a golden chance to emerge from the shadow of the country’s services sector and seize more of the global market.
The McKinsey analysis shows that rising demand in India, together with the multinationals’ desire to diversify their production to include low-cost plants in countries other than China, could together help India’s manufacturing sector to grow six-fold by 2025, to $1 trillion, while creating up to 90 million domestic jobs. At present, the global economic growth is poised to create opportunities for low-cost manufacturers everywhere: by 2015, the market for manufactured goods from low-cost countries will more than double, to nearly $8 trillion a year. China will probably capture much of the growth. Still, the report estimates that up to $5 trillion a year would be available for India, as global companies seek to diversify production and sources of supply beyond China, both to address rising factor costs there and to chase domestic demand in other countries.
It is thus essential to carefully analyse the new National Manufacturing Policy (NMP) with its national investment and manufacturing zones (NIMZ). It comes at a crucial time when the country is facing negative trends in several aspects like lower gross national product (GNP) growth compared with the recent past, smaller net inflow of foreign investment, paralysis in domestic politics and a sharp devaluation of currency. This certainly has weakened our economy. Hence, improving manufacturing makes sense because manufacturing is not only connected to other sectors; it also strengthens them. The new NMP rationalises and simplifies business regulations through various path-breaking initiatives such as: abolition of irrelevant acts, decision to amend 90-year-old Boilers Act to allow internationally accredited private agencies to inspect and certify the boilers for safety, and systemising inspection and introduction of joint annual inspections with prior intimation.
If Indian manufacturing is to regain its right place by contributing significantly — around 20 to 25 per cent in GDP in few years — then central and state governments must eliminate four barriers that slow down the efforts of the country’s manufacturers to improve their capital and labour productivity. These barriers are in government’s larger ownership in marketing of products within and outside India, which lowers the productivity. What needs to be done, just like recent liberalisation in export of auto-industries, is allowing greater private and multinational participation which would trigger structural reforms in production process itself, removing distortions in the land market, liberalising labour laws by encouraging re-skilling programmes for workers, thus, making them useful for changed job profiles and expanding infrastructure in railways, roads, ports, and power-generating capacity. The recent decision on development of NIMZs hopefully would catalyse a focused approach in infrastructure development.
India is a young country with over 60 per cent of its population in the working age group of 15-59 years. We need to create 220-250 million jobs between now and 2025. Unfortunately, massive migration of labour from rural to urban areas would see rural population decreasing from about 70 per cent in 2010 to less than 63 per cent by 2025. This means about 50-60 million low-skilled people will move out of agriculture and related jobs and will be looking at alternate employment options. This task has to be addressed in affirmative manner if we have to cash on demographic dividend because one additional job in manufacturing sector creates four additional jobs in related activities.
The most crucial issue is promotion of large-scale development of skills. Our engineering institutions must become more flexible to bring fast track training mechanism for creating skills development programmes at various levels. Unfortunately, they still have an ostrich vision without seeing the global changes on the horizons of education. If they do not change, then manufacturing industry would very reluctantly follow the path adopted by the IT industry; establishing in-house training centres to promote vital manufacturing roles, including those of fitters and welders, machinists, maintenance engineers and mid-level manpower. To a certain extent, this is already happening. What would truly help are encouraging establishment of exclusive universities that address integrated approach of blending core knowledge and skills in very innovative manner. Government should give special incentives for such efforts through private initiatives.
(The writer is former chairman of UGC, former vice-chancellor of University of Pune and founder director of NAAC)