TECH TALK: As India Develops: The Process

For all-round development of India, it is necessary for agriculture to become more efficient. This will increase rural incomes and free up labour for other kinds of production. The numbers of people involved in agriculture have to come down dramatically. This labour has to shift to production and services.

India is a large country. We cannot develop purely on the basis of services. People in India need to buy food, need homes to live in, and need vehicles for transportation. All of this has to be manufactured. Our population is too large to build an economy purely based on import of manufured goods and export of services. Domestic production needs to grow.

Writing for Bloomberg, Andy Mukherjee puts the challenge in perspective:

India’s 700,000 computer software professionals may be hogging the limelight as the biggest beneficiaries of the exodus of U.S. white-collar jobs to developing countries.

Yet, for those who believe India will catapult itself from poverty to prosperity on the strength of its knowledge” industries, here’s a sobering statistic: three-fourths of Indian workers, or 300 million people, don’t have high-school diplomas.

India’s educated elite is too small, and its purchasing power too limited, to lift the broader economy. What can really make India prosperous is something that will boost the incomes of workers who are stuck in low-productivity occupations — farmhands and housemaids — that pay the national average of $500 a year, or less.

And that something can only be manufacturing.

The services sector, and in particular the knowledge-based industries, is unlikely to provide opportunities to the poorly educated sections of our society,” say Sanjay Jain and Uday Bhansali of the consulting firm Accenture India in a study titled Making Indian Manufacturing Globally Competitive.”

Create more factory jobs, and India’s economic growth rate can easily accelerate to 10 percent a year, making it the fastest- growing major economy in the world, the authors argue.

Thanks to the blinkeredness left over from Soviet-style socialism of 1960s and 1970s, the Indian industry treats the local population, a large part of which earns subsistence wages, as the main source of demand for factory-made goods. Manufacturers go on producing large volumes of low-quality, low-margin products to turn a profit. Much of what they make, can’t be exported.

Where does one begin to break the vicious cycle? The surefire way is to force” Indian manufacturers to tap global demand, so they’re able to expand operations, and create more and better-paying factory jobs. As more workers find employment in manufacturing industries, they’ll have the spending power to demand better goods and services.

In a chaotic democracy like India, how does one draw out local manufacturers and make them go global? The easiest way is to open more of the domestic consumer-goods market to overseas investors. Competitive pressures, thus unleashed, would ripple through the supply chain and force even small manufacturers to look beyond the local market.

In short, Made in India has to go beyond software.

Tomorrow: The Process (continued)

TECH TALK As India Develops+T

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Rajesh Jain

An Entrepreneur based in Mumbai, India.