Comments on: India’s re-emergence in Manufacturing

By: Anil Gupta

Anil Gupta — Tue, 21 Mar 2006 16:56:53 +0000

In Infrastructure there are numerous instances where Govt.does not have to invest and such options exist which have a direct bearing on the growth, to name a few in railway freight sector privatisation. What has railway done in the past is look to the west and do as the indians do. They wanted to make the freight wagons lighter, since 2001, trying to make them lighter by makign “steel design in aluminium” and not design in aluminium itself. If they wer eunable to do it they could have gone in for import or what they have done now is lease options. The world market works on leaes. IR were aware that lese rentals for such imported wgons/sagon bodies inaluminium would be lower than the maintenance /life cycle costs of steel wagons, they took 5 years to bringout this “still unclear” policy of leasgin or privatising freight corridor. Better late than never. This is the only possible way to have growth in freight traffic without any /some additional invstment.

By: R-Squared

R-Squared — Sat, 28 Jan 2006 05:03:51 +0000

I don’t understand why finance constraint of the government can be used as an execuse for lack of infrastructure investment. China didn’t have money, either, and they brought in private sector investment. Certainly, now their government has enough tax revenue to make public investment. But don’t forgot the increased tax revenues are brought about by the initital improvement in private sector. It is a virtious cycle.

By: Vivek G

Vivek G — Mon, 05 Dec 2005 14:34:30 +0000

Hi Reuben,, I understand what you are saying,,, but it will still be an academic question as to what has changed between the early 200x (2001- 2003) and now,, the growth rate seems to have broken out from the 6% range to an 8% range.

One can understand the growth in services due to the telecom, finance and IT but the growth in Manufacturing is puzzling.

The regressive labor laws have not changed, the reservations for SSI (small scale industrial sectors) are still intact. Only thing one can think of is a some manufacturing PSUs like Maruti Udyog are now in private hands.

In a few years there will be many papers explaining this, but it will be very interesting to know if there is any analysis available now.

By: Reuben Abraham

Reuben Abraham — Sat, 03 Dec 2005 19:03:26 +0000

Vivek,
It could be a result of the NDA reforms or the results of the earlier Congress government’s reforms. I don’t there is a way to isolate reforms and say reform V lead to X growth. I think if you look at the sectoral breakdown, it’s pretty easy to see what’s going on. Agriculture has not registered much change and services have maintained a rapid growth rate for a while now. The big improvement has come in manufacturing and industry, where perhaps scale is an issue and it takes time for firms to take advantage of reforms to grow rapidly. In addition, one could also argue that increasing incomes leads to consumption which in turn leads to growth.

The trouble is that manufacturing still only represents about 17% of the economy. If the size of this pie could be increased to about 25-30%, I think India will probably start registering growth in the 10% region.

By: surya satish

surya satish — Sat, 03 Dec 2005 12:50:15 +0000

i believe infrastructure management and commitment towards making india as a true industrial destination is lacking in present days government policies. most of the cottage industries are throttled by red-tapism and hierachial corruption(corruption in stages,depending upon the rank and the status) has paralysed indian cottage industries.i talk about cottage industries because they been the major money earners for majority of rural population and also because they have an ability to earn a distinct advantage to indigenious indian products at market place. master crafts men ,skilled technicians are continuing their great legacy under pathetic conditions. if these people are given enough support in terms of finances, modern day training and if government take the responsibility of providing a good platform to market their products a revival of indian manufacturing sector can be seen. i believe any change should start from the bottom because ultimately it is the strength of roots that is going to create difference

By: Alok Patel

Alok Patel — Thu, 01 Dec 2005 17:31:25 +0000

Infrastructure has always been a major stumbling block in India. It is only now that the government has woken up to the perils of inadequate electricity supply. Ofcourse, that doesn’t mean it isn’t acting fast.

Look at the power situation in Maharashtra, a once power-surplus state, it is now struggling with a supply deficit of 2500 megawatts in winter! It is going to get far worse in the summers. Ofcourse manufacturing is going to be hampered. Even other businesses get affected and in turn affect market growth.

Captive power plants are coming up in the Butibori Industrial Estate near Nagpur and at one near Thane. But there are few units at Butibori which will be able to take advantage. They were driven away due to poor infrastructure earlier. And it is unlikely that the tariffs are going to come down by any significant amount. And they are not going to solve the huge supply gaps this summer.

Railway freight: IR will harm itself more in the long term if it reduces freight costs right now. The Government isn’t keen on investing in IR anymore. Budgetary support is limited and the system is groaning under an ever increasing burden of a booming economy. In the meantime, the railway minister resorts to tokenist rubbish like reducing the fares by a rupee. Even avoiding the 1 rupee reduction would have provided enough funds over a year to increase capacity over a congested route, purchase 75 locomotives or 3000 wagons or 1500 passenger coaches.

Increasing passenger tariffs even by a few percent would help them a lot but doesn’t look like it will happen. In such a situation, reducing freight rates would spell disaster for a perennially short-of-funds organisation. Downsizing is important but again, it won’t happen. The communists need to get out of power for that. And despite everything, IR is still cheaper for bulk transporters. Until the highways get better, it will continue to be that way. And while the common perception is that privatisation would solve all of IR’s woes, it won’t. However, IR’s manufacturing units like CLW, DLW, ICF, RCF, RWF, etc. need to be privatised before anything else.

Solutions? More investment. But where does the money come from?

By: Vivek G

Vivek G — Thu, 01 Dec 2005 15:17:54 +0000

Is the current GDP growth a delayed effect of the reforms during the NDA government? In that case, are we likely to see it fizzle out if the present government does not keep up its end? The GDP growth rate for 2005-2006 is also estimated at about 8%. Does anyone have theories about what is driving this growth? What has changed between 2002-2003 and now?

By: Prashant Kothari

Prashant Kothari — Thu, 01 Dec 2005 05:23:18 +0000

Guru — a good place to start might be the list of online economics text (check the RHS sidebar on IEB)

By: Guru Gulab Khatri

Guru Gulab Khatri — Thu, 01 Dec 2005 05:20:17 +0000

Please provide me with a book or links to article regarding econometrics.
I am interested in seeing how data is collected when measuring large scale economies.