The Hindu : National : India set for leap in manufacturing exports: study

Online edition of India's National Newspaper
Monday, Oct 25, 2004

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India set for leap in manufacturing exports: study

By Our Special Correspondent

NEW DELHI, OCT. 24. `Made in India' is all set to become the next big manufacturing export story after services, according to a Confederation of Indian Industry (CII)-McKinsey study on manufacturing.

It highlights India's potential to increase manufacturing exports from $ 40 billion to about $ 300 billion by 2015, implying an annual growth of 17 per cent, compared to the historical growth of 11 per cent.

The study says that the global trend to manufacture and source products in low-cost countries (LCCs) is likely to gather steam over the next 10 years, particularly in the skill-intensive industries, where India has a significant competitive advantage.

If India has to take advantage of this particular trend, manufacturing exports from India could increase from $ 40 billion in 2002 to $ 300 billion by 2015, leading to a share of about 3.5% in world manufacturing trade.

It will also create 25-30 million jobs in manufacturing by 2015 and two to three times this number in the allied sectors such as construction, education and entertainment due to the multiplier effect, it notes.

The aspiration, though ambitious, is attainable. India has several advantages in skill-intensive industries, such as auto components and pharmaceuticals, where the next set of off-shoring opportunities will arise.

Apart from low wages, these advantages include engineering skills (process, product and capital engineering), established raw material bases, a mature supply base and a growing domestic demand.

The study has also found that out of the $ 300 billion of total manufacturing exports, $ 7 billion to $ 90 billion could be captured from just four sectors — apparel, auto components, speciality chemicals and electrical and electronic products.

Need for global mindset

But the study says achieving this acceleration in manufacturing exports would require that Indian players adopt a global mindset and rapidly develop India as one of their top three sourcing hubs.

The vast majority of India manufacturing companies today are largely domestic market-focussed and sub-scale, and pursue mostly undifferentiated business models. To fully capture the potential from manufacturing exports, the export focus would need to get broad-based across sectors and across companies within a sector, it says.

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