India wants to be China’s alternative, but it needs to address a major lacuna – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/policy/india-wants-to-be-chinas-alternative-but-it-needs-to-address-a-major-lacuna/articleshow/96104077.cms

Synopsis

Manufacturing currently forms 16% of India’s GDP and Pandey implored the need to increase it to around 25% in the coming years. He also said that this would lead to the creation of employment opportunities. Recent data shows that while India’s gross domestic product (GDP) grew at 6.3%, a sharp fall in the manufacturing sector has raised alarm bells.

India will need to increase manufacturing to become a viable alternative to China, as the world is looking to move their production away from the factory floor, DIPAM Secretary Tuhin Kanta Pandey said while highlighting the need to tap into the country’s potential in the coming decades.

“The world is looking to India to become the second support to them in manufacturing. The China-plus-one strategy, over the next decade, can become the India strategy. But for doing this, we need to increase manufacturing,” said Tuhin Kanta Pandey at the CII Global Economic Policy Summit on Friday.

Manufacturing currently forms 16% of India’s GDP and Pandey implored the need to increase it to around 25% in the coming years. He also said that this would lead to the creation of employment opportunities.

Recent data shows that while India’s gross domestic product (GDP) grew at 6.3%, a sharp fall in the manufacturing sector has raised alarm bells.

“We see signs of stress – ongoing and more to come,” said HDFC Bank Ltd. economists led by Abheek Barua. Pressure on corporate profitability due to elevated costs and lower exports weighed on production, he said, adding that a slowdown in domestic consumption is another worry.

Weak manufacturing activity plays against the Narendra Modi-led government’s efforts to attract global industrial houses to set up units in India and diversify away from China. The South Asian nation is poised to attract a large share of foreign investments, particularly in the electronics sector, and policies in the next few years should be geared toward that objective, Goldman Sachs Group said in a recent note.

“There have been certain laggards, particularly factory activity, that have been disappointing,” Upasna Bhardwaj, an economist with Kotak Mahindra Bank Ltd., said in an interview Thursday with Bloomberg Television’s Haslinda Amin and Rishaad Salamat.

“India needs to push harder to bring manufacturing activity at par with the globe,” she said.

A contraction in India’s manufacturing sector dragged growth down, underscoring the impact of rising input costs, though strengths in the services industry provided reprieve. Rajani Sinha, an economist at CareEdge, called the contraction “worrying.” High raw material prices cut into corporate profits, she said.

(With agency inputs)

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