[Answered] Discuss the role of the manufacturing sector in expanding India’s middle class. How can large-scale manufacturing drive formal employment and contribute to the growth of a prosperous middle class?

India is moving towards being a significant global manufacturing centre and can export items worth $1 trillion by 2030. The manufacturing industry contributes significantly to India’s economy, accounting for 17% of GDP and employing more than 27.3 million people. The Indian government wants manufacturing to contribute 25% of economic production by 2025 through the execution of several programmes and policies.

What is the role of the manufacturing sector in expanding India’s middle class?

• Entrepreneurship: The manufacturing sector provides opportunities for entrepreneurship and establishing Small scale industries which are export-oriented, generate jobs and contribute to a rise in income in cities and towns. It helps people living in small towns to raise their incomes and thereby expands Indias’s middle class.
• Standard of living: Reports have suggested that manufacturing helps in raising the lifestyle of people as it helps in raising their disposable incomes and generates demand for consumer items.
• Skill Generation: The manufacturing sector aids in developing skills and drives innovation. This generation of skill sets leads to better prospects of jobs for citizens in foreign markets and leads to higher wages.
• High Economic Growth: Historical insights from countries of the Western world and China show that high economic growth is fueled by an increasing share of manufacturing in the country’s GDP.
• Employment generation: Manufacturing is a very important source of job generation in developing countries, particularly for the middle class. It eventually leads to upward mobility and income generation.

How can large-scale manufacturing drive formal employment and contribute to the growth of a prosperous middle class? 

• Formalization of the workforce: Informal sector is commonly estimated to account for 90% of employment, but generates only a third of the value added in the economy. Conditions in the informal sector affect the entrepreneurial spirit, have low productivity and reduce the chances of expansion of the middle class. Therefore, more formalisation of the workforce is needed combining with the benefits of labour laws, income by working with better tools, easy learning of new skills, getting the effort-multiplier benefit of teamwork, and accessing the full suite of reasonably priced and regulated financial services.
• Focus on training and productivity: Due to the nature of temporary or contract workers in the informal economy, employers are discouraged from investing in productivity-enhancing tools and providing training for workers to use them because the payoff time is longer than the workers’ tenure. Government and industry leaders should cooperate to provide training and incentivise productivity to contribute to the growth of the manufacturing sector.
• Finance: The need is to increase the domestic credit to GDP ratio for informal workers and MSME which is far lower than China and USA.
• Role of digital platforms: Higher-skilled occupations like carpenters, tailors, and auto mechanics when part of digital platforms should receive all benefits of formal employees and such platforms should contribute to raising productivity and income generation.

Conclusion

Historically it is seen that manufacturing is the well-defined path to economic development. Government programmes like Make in India, Skill India, and Start-Up India, are crucial through which formal jobs and genuine middle-class expansion can take place.