Challenges and Opportunities of India's Manufacturing Sector

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National Manufacturing Policy aims to promote job creation. They intend to create more manufacturing hubs like Karnataka Industrial Areas Development Board (KIADB), Gujarat Industrial Development Corporation(GIDC) and State Industries Promotion Corporation of Tamilnadu (Tamil Nadu). The special focus is to industries that are employment concentrated, those producing capital goods, strategic significance and where India enjoys a competitive advantage (automobile, pharmaceuticals and medical equipment).

Labour Laws: A special aid to enterprise growth??

There have been many labour laws in protection to the large population of labourers in the country. Starting from Trade Union Act to Factories Act and Industrial Dispute Act.

There is so much fuss about Raising labour costs. The average Minimum wages for each man day worked are around INR 350.09 Out of which Employers spend in INR 261.97 on wages. INR 13.54 in Bonus and INR 46.4 in Provident Fund(PF) lastly INR 28.17 in welfare expenses. Companies with less than 20 employees are not required to comply with the Employee`s Provident Fund Act and do not have to pay pension, health and disability donations. Firms with more than 20 employees do have to contribute and although the tax segment remains relatively uncertain even for them. Another strategy for firms to escape stringent labour regulation, in particular has been to rely on “contract labour”, i.e. workers hired on a temporary basis or through a contractor can be paid relatively lesser than the full time employee for the same work with no benefits like the Provident Fund and bonus in line with the regular full time employees.

Training young professionals a new answer to improving Employability!!

Government has always been taking initiatives on the training and development of young processionals. Apprentice and various training facilities enable the young graduates to give hands on experience in the industry and be ready for the rising challenges in the manufacturing segment.

Many organizations including the PSU provide apprentice in reference to Apprentice Act 1961 to help employees to improve their skills, which will benefit the company in the long term. Although employers pay for apprenticeship training, the actual cost to company is minimal. The program includes both classroom and on-the-job training, so apprentices will be generating revenue for the employer while they learn. Apprenticeship improves productivity. The completion of an apprenticeship program results in highly trained professionals who contribute noticeably to the employers’ bottom line and ensures a high level of quality production.

Unreliable power supply: A key Input for Growth of Industrialization??

The large power supply shortfalls experienced throughout the country are a key factor in electricity Outages. This imposes high costs on the economy through the need for high-cost backup generators and investment in self-generation facilities. Frequent power cuts are especially costly for manufacturing firms. A business survey finds that 48% of firm’s experience power cuts for more than 5 hours a week.

There are huge losses incurred during the loss of Electricity, Loss of machine utilization and delays in material delivery. About two thirds of power generation comes from coal in domestic supply. In spite of large domestic coal reserves, the growing share of coal is imported underlining deficiencies. New means of power generations have taken place by planning Nuclear power plants in Tamilnadu and Rajasthan. Hydel power plants are too reliable on the amount of power generation. But the rising demands of largescale organizations and the increasing Micro Small Medial Scale Enterprises (MSME) have shown a large deficit.

Improving taxation: GST a new revolution to India Business?

The World Bank ranks India 156 out of 189 countries in Ease of Paying Taxes. Tax disputes have been frequent, involving for example the definition of what constitutes a service and should thus be subject to the Service Tax rather than the VAT. Uncertainty over tax reliefs for Special Economic Zones (SEZs) has also led to a declining interest in those enclaves. The indirect tax system is complex, costly to comply with and puts India’s manufacturing sector at a competitive disadvantage on international markets. The GST is expected to lift GDP by 0.9 to 1.7%.

With the Implication of GST, The taxation will be Central and Integral GST. The earlier CENVAT, VAT and Excise Duties will vanish by giving way to uniform tax with respect to differential taxes for each state.

Improving Infrastructure for better growth!!

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure creation of world class infrastructure in the country. Infrastructure includes power, bridges, dams, roads and urban infrastructure development. With these improvements many foreign investors keep their interest in investing. Better connectivity, Townships better roads for transportation and proximity to markets act externally for organizations and sub vendors to setup their facilities around them.

Thoughts and recommendation:

- The biggest challenge to manufacturing sector in India, over the years, is lack of R&D. It will not be possible to take it as a manufacturing leader without being technology leaders.

- In many areas, investment targets have not been met, leaving infrastructure in poor condition. Firms in India face frequent power outages and transport infrastructure is below par. This has an especially harmful effect on manufacturing.

- To create Consumer belief on the Indian Made Products are worthy to meet the standard specifications in comparison to global standards.

- Indian Govt policies to set up or expand the industry.

- The cheap imports from China is a challenge and hence the Indian industries need cost cutting.

- High cost of transportation and other logistics is an another problem. Factories of the same company at different states have to deal with different policies and rules. But now with implication of GST these can be a sigh of relief.

- The study shows that majority of the passed out students are not employable. This lack of skilled manpower is also a problem. Lack of political stability in different states