{"id":238634,"date":"2023-04-19T19:50:20","date_gmt":"2023-04-19T14:20:20","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=238634"},"modified":"2023-04-19T19:50:20","modified_gmt":"2023-04-19T14:20:20","slug":"two-apples-of-our-eye-manufacturing-vs-services-is-a-false-binary-for-india-we-need-both-but-why-we-need-them-is-not-properly-understood","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/two-apples-of-our-eye-manufacturing-vs-services-is-a-false-binary-for-india-we-need-both-but-why-we-need-them-is-not-properly-understood\/","title":{"rendered":"Two Apples Of Our Eye – Manufacturing vs services is a false binary for India. We need both. But why we need them is not properly understood"},"content":{"rendered":"\n

S<\/strong>ource<\/strong>: The post is based on the article\u00a0\u201cTwo Apples Of Our Eye – Manufacturing vs services is a false binary for India. We need both. But why we need them is not properly understood\u201d <\/b>published in The Times of India<\/strong>\u00a0<\/b>on\u00a019th April 2023<\/b>.<\/p>\n

Syllabus<\/strong>: GS \u2013 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.<\/p>\n

Relevance<\/strong>: About the reasons to prefer manufacturing or services.<\/p>\n

News<\/strong>: The India visit of Apple boss and two recent data points have re-ignited a simmering debate on manufacturing vs services. India has seen a dramatic 55% increase in the exports of electronics finished products.<\/p>\n

On the other end, there has been a significant rise in the export of services not only from the IT sector alone but also from legal, medical, and MNC back-offices. So, experts have said India should focus more on services. This raises debate on what India should focus on, manufacturing or services?<\/p>\n

Why India should prefer manufacturing or services?<\/h2>\n

Manufacturing is not a massive job-creator<\/strong> like Services<\/strong>: China, the largest factory in the world, with a manufacturing output of $5 trillion, employs around 83 million workers in manufacturing. In China, despite its monster manufacturing capacities, half of its workers are employed in services.<\/p>\n

In contrast, India, with a manufacturing output of around $500 billion, employs between 27 million and 62 million workers.\u00a0 A study has found that manufacturing employment declined from 51 million in 2016-17 to 27 million in 2020-21.<\/p>\n

Another study found that hi-end jobs, especially in the hi-tech sectors, have a much bigger multiplier effect on jobs created than low-tech jobs. In short, services industries tend to create more hi-tech jobs than relatively low-tech, low-skilled manufacturing assemblies.<\/p>\n

Manufacturing is crucial to keep the trade deficit low<\/b>: High-performing services and limited manufacturing will lead to the trade deficit. This is because most services are non-tradable in nature and the country will depend on imports largely for manufactured items. So, countries that have limited manufacturing capacities also tend to have structural current account deficits (CAD).<\/p>\n

For example, The UK and the US. Since they are developed they have enormous access to a reserve currency and more policy options to deal with structural CAD. But this is not feasible for emerging markets (EM) like India. CAD forces a trade-off between economic stability and income growth.<\/p>\n

What India should prefer, manufacturing or services?<\/h2>\n

India needs both manufacturing and services. This is because,<\/p>\n

To reduce CAD<\/strong>: India\u2019s CAD has been a perpetual policy constraint for the country since its independence. Despite the record growth in service exports and the spectacular emergence of electronics exports, India ended 2022-23 with a CAD of around 2% of GDP.\u00a0 So, India needs to have larger manufacturing capacities with market access to do away with CAD constraints.<\/p>\n

To reduce risks of supply chains<\/strong>: India’s high dependence on China for API (a key ingredient in pharmaceutical manufacturing) or rare earth minerals (critical for a range of industries) or industrial intermediates for strategic electronic products presents large, un-diversifiable risks. Even during Covid, the developed countries ringfenced vaccine supplies. Hence, India should focus on manufacturing along with the focus on services.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on the article\u00a0\u201cTwo Apples Of Our Eye – Manufacturing vs services is a false binary for India. We need both. But why we need them is not properly understood\u201d published in The Times of India\u00a0on\u00a019th April 2023. Syllabus: GS \u2013 3: Indian Economy and issues relating to planning, mobilization, of… Continue reading Two Apples Of Our Eye – Manufacturing vs services is a false binary for India. We need both. But why we need them is not properly understood<\/span><\/a><\/p>\n","protected":false},"author":10311,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10496],"class_list":["post-238634","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-times-of-india","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704871995},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/238634","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10311"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=238634"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/238634\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=238634"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=238634"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=238634"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}