Raising Manufacturing Employment report by CRISIL

CRISIL Research has come out with its report on 'Raising Manufacturing Employment'. As per the research firm, policy measures would have to focus on providing quality infrastructure and reforming labour laws to arrest the pace of decline in employment intensity.

Part I: Raising share of manufacturing to 25% of GDP

The composition of India's GDP has witnessed a major transformation over the past three decades. The share of agriculture nearly halved to 20 per cent between 1970s and 2000s, while that of services grew rapidly to 53 per cent (Figure 1). The manufacturing sector's share, however, increased only marginally to around 15 per cent in 2000s from nearly 12 per cent in 1970s (Table 1). Manufacturing growth has been constrained by two main factors - lack of sufficient and quality physical infrastructure and strict labour laws which discourage job creation.

The NMP seeks to boost manufacturing sector growth by addressing these two hurdles. Under the NMP, manufacturing units will enjoy single-window
clearance - a liberal exit policy including flexible labour laws, incentives including exemptions from capital gains tax and incentives for green
manufacturing and technology acquisitions. The incentives under the NMP will, however, be available only in the National Investment and Manufacturing Zones (NIMZs) like the Delhi-Mumbai Industrial Corridor (DMIC), and not nationwide.

Would these steps be sufficient to raise the share of manufacturing to GDP to 25 per cent by 2021-22?

Here, a comparison with other Asian countries that have seen a rapid expansion in their manufacturing sector might prove useful. In South Korea, the share of manufacturing in GDP doubled to 24.7 per cent by 2000s from 12.3 per cent in 1970s despite the sector's inability to maintain high growth, especially in 2000s. The share of manufacturing in GDP rose due to even lower growth of the service sector, the other major component of GDP. In contrast, China - the world's manufacturing powerhouse since 1990s - has been able to maintain high manufacturing growth; the share of manufacturing in the Chinese economy surged to nearly 41 per cent in 2000s from 25 per cent in 1970s.

Part II: Adding 100 million additional manufacturing jobs by 2021-22

The second principle objective of the NMP is to create 100 million additional manufacturing jobs by 2021-22. Creating jobs, especially quality jobs - those that are regular, salaried and more productive - is the only sustainable solution to reduce poverty. Fundamental to our ability to create quality jobs, however, is our ability to create jobs in the first place. What is the number of jobs that manufacturing sector can be expected to generate in the coming decade?

The implementation of the National Manufacturing Policy during this decade will coincide with a relatively unfavourable global economic scenario. CRISIL Research believes that in such an environment policy support will be pivotal to raise manufacturing growth as well as to generate significant employment gains. Policy measures would have to focus on providing quality infrastructure and reforming labour laws to arrest the pace of decline in
employment intensity.

Disclaimer: CRISIL Research, a division of CRISIL Limited (CRISIL), has taken due care and caution in preparing this Report based on the information obtained by CRISIL from sources which it considers reliable (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. This Report is not a recommendation to invest / disinvest in any company covered in the Report. CRISIL especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this Report. CRISIL Research operates independently of, and does not have access to information obtained by CRISIL

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