{"id":31474,"date":"2018-10-27T14:12:38","date_gmt":"2018-10-27T08:42:38","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=31474"},"modified":"2018-10-27T14:12:38","modified_gmt":"2018-10-27T08:42:38","slug":"the-manufacturing-muddle","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/the-manufacturing-muddle\/","title":{"rendered":"The manufacturing muddle"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/todays-paper\/tp-opinion\/the-manufacturing-muddle\/article22672615.ece\"><b>The manufacturing muddle<\/b><\/a><\/p>\n<p><b>Context:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Union Budget has reinforced the correction of the Inverted Duty Structure (IDS) which has adversely impacted manufacturing for decades.<\/span><\/li>\n<\/ul>\n<p><b>Inverted Duty Structure (IDS):<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Inverted duty structure is a situation where <\/span><b>import duty on finished goods is low compared to the import duty on raw materials <\/b><span style=\"font-weight: 400;\">that are used in the production of such finished goods. <\/span><\/li>\n<\/ul>\n<p><b>Key concerns:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Chinese\/other imports have swamped India\u2019s small- and medium-sized enterprises and large manufacturing companies, <\/span><b>raising the import-intensity of manufacturing as well as dampening job growth<\/b><span style=\"font-weight: 400;\"> by raising capital intensity.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The goods and services tax (GST), especially the IGST or Integrated GST component, has <\/span><b>begun to erode the advantage that the IDS was giving to foreign exporters in Indian markets.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Customs duties have been raised on <\/span><b>capital goods and electronics, and silica<\/b><span style=\"font-weight: 400;\"> for use in manufacture of telecom grade optical fibre.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">These have been among the sectors <\/span><b>adversely impacted by the IDS<\/b><span style=\"font-weight: 400;\"> in the past 10 years or so.<\/span><\/li>\n<\/ul>\n<p><b>Advantage for China:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">India\u2019s policy structure <\/span><b>failed to utilise its labour advantage<\/b><span style=\"font-weight: 400;\"> to grow labour-intensive manufacturing exports.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">As a result, while China reduced the absolute numbers and percentage of the poor in the population by absorbing surplus labour in manufacturing, <\/span><b>India\u2019s poverty reduction was much slower.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">While China\u2019s agricultural and rural income growth was much higher as it sustained consumer demand, it also <\/span><b>generated industrial jobs much faster.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">While India grew construction jobs very fast since 2000, all the way to 2011-12, <\/span><b>manufacturing output and employment growth left much to be desired.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Moreover, analysis shows that between 2004-05 and 2011-12, but much more between 2011-12 and 2015-16, the <\/span><b>growth of manufacturing jobs not only first slowed after 2011-12 but also became negative<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<p><b>Fall in agricultural jobs:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The share of the workforce in agriculture has been falling steadily, from 60% in 1999-2000 to 49% in 2011-12.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">But the fall has slowed sharply after <\/span><b>2011-12,<\/b><span style=\"font-weight: 400;\"> when <\/span><b>the pace of non-agricultural job growth slowed along with GDP growth.<\/b><\/li>\n<li style=\"font-weight: 400;\"><b>Since 2012,<\/b><span style=\"font-weight: 400;\"> the numbers leaving agriculture over <\/span><b>2011-12 to 2015-16 fell to 1 million per year,<\/b><span style=\"font-weight: 400;\"> as <\/span><b>non-agriculture jobs grew slowly since 2011-12.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It appears that as <\/span><b>GDP growth slowed after 2011-12,<\/b><span style=\"font-weight: 400;\"> youth who had benefited significantly from <\/span><b>jobs in manufacturing have suffered disproportionately.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">This dropped precipitously to <\/span><b>10.8%,<\/b><span style=\"font-weight: 400;\"> just as the share of all employment in manufacturing fell, between <\/span><b>2011-12 and 2015-16.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> The only sector with a significant increase in labour absorption, especially the young, <\/span><b>has been services,<\/b><span style=\"font-weight: 400;\"> where employment rose from 36 million in <\/span><b>2011-12 to nearly 52 million in 2015-16<\/b><span style=\"font-weight: 400;\"> for them, and for all labour from 127 million to 141 million.<\/span><\/li>\n<\/ul>\n<p><b>Way ahead:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The resolution of the<\/span><b> twin balance sheet problems together with the Insolvency and Bankruptcy Code<\/b><span style=\"font-weight: 400;\">, should now pave way for new manufacturing investment.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Policy must attempt to <\/span><b>close the loop between rising demand and supply through consumer demand<\/b><span style=\"font-weight: 400;\">, which the Budget attempts through its agriculture and rural infrastructure focus. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">More manufacturing policy initiatives, such as an <\/span><b>early announcement of an Industrial Policy by the Department of Industrial Policy and Promotion<\/b><span style=\"font-weight: 400;\">, must be sustained over 2018.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>The manufacturing muddle Context: The Union Budget has reinforced the correction of the Inverted Duty Structure (IDS) which has adversely impacted manufacturing for decades. Inverted Duty Structure (IDS): Inverted duty structure is a situation where import duty on finished goods is low compared to the import duty on raw materials that are used in the&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/the-manufacturing-muddle\/\">Continue reading <span class=\"screen-reader-text\">The manufacturing muddle<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-31474","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704899789},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/31474","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\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=31474"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/31474\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=31474"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=31474"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=31474"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}