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Battle for India
Modi's Million-Job Challenge

The Scooters India factory is a symbol of the messiness of India’s manufacturing sector. The facility is one of the largest industrial buildings in Lucknow, the capital of Uttar Pradesh, a state in northern India that is as populous as Brazil. “[The factory] is like an ugly sister to efficient private companies,” write Victor Mallet and James Crabtree at the Financial Times, “a monument to the folly of earlier government attempts to build a mass manufacturing economy.”

Scooters India employs 1,500 staff who churn out just 16,000 auto-rickshaws each year. Thanks to India’s restrictive labor laws, the employees at this state-owned facility are unlikely ever to be fired. “It never had a future, nor does it have one now,” one economist told the FT.

India’s manufacturing sector as a whole doesn’t have much of a future, according to some analysts, as long as things stay the way they are now. Mallet and Crabtree report:

A National Manufacturing Policy launched three years ago by the Congress-led government has so far failed in its aim to create 100m manufacturing jobs and raise manufacturing as a share of gross domestic product from 16 per cent to 25 per cent within a decade. Instead, the share declined further, to 15 per cent today.

Is Narendra Modi the man to change this depressing trend? He has a difficult task ahead of him. In part because urban industrial jobs are so hard to find, 12 million more Indians will be working agriculture jobs in 2019 than are currently employed in that sector, says one market research firm.

If there is one thing that the next Prime Minister must do, it’s enable India to emerge as a leading manufacturing economy. That will require reforming the laws governing land sales, labor, intellectual property, taxes, and a host of other issues—which will naturally be unpopular. But the payoff would be immense: A tsunami of growth would transform the life prospects of hundreds of millions of people and allow India to play a major global role.

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  • Andrew Allison

    The first three paragraph of the article linked to point to a further difficulty faced by India, namely that the labor content of much manufacturing has declined significantly. What is said to be the largest forge, in Pune, is run by hundreds of
    engineers, not tens of thousands of laborers. If India is to create unskilled jobs, they will have be in labor-intensive industries that are likely to remain that way. Agriculture and Infrastructure perhaps?

    • El Gringo

      Over half of all working Indians are employed in agricultural sectors, yet agriculture only makes up 17% of the Indian economy. The average size of landholdings is already less than 5 acres. The last thing Indian agriculture needs is more farmers.

      Infrastructure and heavy industry may be a solution but cutting through India’s green and saffron tape makes this an unlikely avenue. Take POSCO’s history-making $12 billion dollar investment deal inked in 2005 that has yet to break ground.

      • Andrew Allison

        Good point about agriculture; but perhaps if the farms were more productive, they would employ more labor. As I noted, heavy industry, which increasingly employs hundreds of skilled workers versus thousands of unskilled ones, is not the answer. What India needs is labor-intensive unskilled employment.

  • Anthony

    India remains a complex country: world largest democracy; parliamentary government; 28 states; 16th national election. Narendra Modi cannot be expected to work miracles that predecessors were incapable of. India and Modi will survive and adjust as the sub-continent has – Modi may be signal contrast to Singh.

    • El Gringo

      Modi and India will undoubtedly survive. But Indians in general, and the younger generation in particular, are getting very tired at merely surviving. They want more from life and they are going to start expecting more from their leadership.

      • Anthony

        The phrase used rhetorically and includes your stated position.

  • Jaldhar Vyas

    Troves of Roman coins have been discovered in the area of the Gujarati city of Bharuch (Barygaza in Latin.) When the Parsis fled Muslim persecution in Iran, they came to Gujarat. The Portugese established trading posts in Daman and Div which are Union Territories but geographically in Gujarat. The British soon followed and the East India Companies first HQ was in Surat in Gujarat. In my hometown of Rajkot there was until the establishment of Israel a synagogue founded by “Baghdadis” Jews from Iran and Iraq who took part in the diamond trade which is largely the preserve of Jain merchants from Gujarat.

    The point of mentioning all this is that Gujarati economic sucess is the result of a long-standing relatively cosmopolitan, entrepreneurial culture which simply does not exist in most parts of India. Elements of both the left and right are enamoured of the “great man” theory of politics but history shows us that culture is paramount and culture cannot be arbitrarily changed or indeed changed at all without mighty effort. Hopefully Modi can begin the task of turning India around but it’ll take a lot more than one man to make a difference.

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