Manufacturing Sector Expects a Boom
Posted : October 29, 2004 at 5:34 pm [IST]
The CII-McKinsey report “Made in India: The next big manufacturing export story” gives some possibilities and presents challenges for the manufacturing sector of India. With my years in manufacturing management and a natural bias for the same, I shall be giving here some salient features and follow up with some more entries.
” LCC (Low Cost Countries) are countries with wage rates less than a third of those in the US.
” LCC include India, China, Thailand, Poland, Mexico, Turkey, Brazil, Indonesia, Russia, the Philippines, South Africa, Malaysia, and Taiwan.
” $1,300-1,400 billion worth of manufactured goods were exported from LCC in 2002-3
” First wave of this offshoring constituted labour-intensive industries(toys, apparel, and footwear) and selected skill-intensive industries (computer hardware and consumer electronics)
” While world trade grew at 6% in 2002-3, LCC exports increased by nearly 13%.
” The global trend to manufacture and source products in low-cost countries(LCC) is likely to increase over next 10 years
” The second wave of offshoring will encompass skill intensive industries such as auto components, specialty chemicals, and industrial electronics.
” The offshoring to LCC is expected to increase to $4,000-4.500 billion by 2015 from the present level. The skill intensive industries will mainly drive the increase.
” US share of the total offshoring to the skill intensive industries of LCC could go up from 55% to 70%.
” India has a significant competitive advantage in skill intensive industries such as auto components and pharmaceuticals.
” Along with low wage rates, engineering skills (process, product, and capital engineering), established raw materials bases, a mature supply base as well as a growing domestic demand.
” India can and should aspire to become one of the three largest exporters of manufactured goods among LCC by 2015
” If India takes the advantage of the present trend, manufacturing exports from India could increase from US $ 40 billion (0.8% of world manufacturing trade) in 2002-3 to approximately $300 billion by 2015 (a share of approximately 3.5%). It is likely to create 25-30 million new jobs in manufacturing sector and add 1% to annual GDP growth rate of India.
” Approximately $70-90 billion of the manufacturing exports could be captured from just four sectors- apparel, auto components, specialty chemicals, and electrical and electronic products. The four sectors exported only $10 billion in 2002-3.
Apparel: While the global trade will grow to $300 billion in 2015 from $200 billion in 2002-3, India can grow its export from $ 6 billion in 2002-3 to $20-30 billion by 2015. India can become the second largest exporter of apparel in LCC exporters with 8-10% of world trade.
Auto components: In $ 175 of LCC offshoring by 2015, India can aspire to get a share of $20-25 billion, though that means a required growth rate of almost 30% a year from just over $1billion in 2002-3. India can do it as China and Thailand have done it in last 3-5 years.
Electrical and electronic products: LCC offshoring is expected to increase at least $600 billion by 2015 (world trade already exceeds $1 trillion) as compared to $ 345 billion in 2002-3. India can aim to capture $15-18 billion, though its exports were only $1.2 billion in 2002-3. It will make India a top 3-5 player with 1-1.5% market share of world trade. (Compare that with 5% market share of counties as Taiwan and China).
Specialty chemicals: While LCC share of less than $30 billion could increase to $110-120 billion by 2015, India can reach $12-15 billion exports with its exceptionally good chemical engineering and cost-innovation skills. India is already one of the two LCC exporters in segments like dyes and intermediates, active pharmaceuticals ingredients (APIS) and agrochemicals for plant protection.
Next: What are required to reach the goals in AAES (Apparel, Auto components, Electrical and electronic products, and Specialty chemicals)?
- Indra
Category: Manufacturing |
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