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Rejuvenating indian manufacturing industries b.v.raghunandan


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Rejuvenating indian manufacturing industries b.v.raghunandan

  1. 1. Rejuvenating Indian Manufacturing Base and Lessons from Chinese Miracle -B.V.Raghunandan, SVS College, BantwalPost Graduate Department of Commerce University College, Mangalore March 14, 2013
  2. 2. India and China: Similar History and Different Journeys• India was liberated from British Rule in 1947 and People’s Republic of China was founded in 1949• India became a Republic with the idea of Socialistic Pattern of Society and China became a single party communist state• India adopted mixed economy and China adopted state ownership of everything including land
  3. 3. Political Leadership • Nehru caused the Public Sector • Mao gave importance to agriculture, and Defence • 1962 Humiliation in War
  4. 4. Indian Industry: Initial Stage• Growth of Public Sector• Family Owned Business comprising Private Sector• License Raj and a Land of Shortages• Bureaucracy and its Suspicious and Vindictive Attitude Towards Private Business• Politicised Co-operative Sector• Many Instances of Black Economic History• Sluggish Exports, Growing imports and Deficit Economy
  5. 5. Chinese Industry: Initial Stage• Economy of Deprivation & Self Sufficient• Conservation of Resources• Huge Amount Spent on Defence• Piling Up Nuclear Arsenal including Hydrogen Bombs• Industrial Production was less than the Bare Minimum• Totally Regulated and Centrally Planned Economy• Became a Superpower
  6. 6. Indian Fiasco• Slow Growth Rate• Inefficient Public Sector• Corrupt Government• Killing Tax Rates• Black Money• Energy Crisis• Lack of Investible Funds• 1968-a Shameful Year• 1990-Another Shameful Year• Industrial Policy was Defective• Only Traditional Exports
  7. 7. Defective Industrial Policy• High Tax Rates• No License for Expansion• Powerful MRTP Act & Commission• Traditional Family Owned Business dominated the industrial scene• Poor Infrastructure• Delay in Completion of Power Projects• Generation & Transmission-Govt Monopoly
  8. 8. Game Changers• Remittance from 1976 from Gulf NRIs• Government could Liberalise Import Policy• Industrial Raw Materials became available more• Growth of Reliance Industries• Capital Market becoming a Household Investment• EPZs and Tax Holidays• Housing Finance by HDFC• Rajiv Gandhi’s First Dose of Liberalisation in 1984
  9. 9. Chinese Game Changers• Death of Mao Ze Dong in 1976• He left China as a unitarian monolith of single party communist ruled• Mass Poverty and Deprivation• Conserved Resources• Only Country in the world without exports and imports• The biggest Red Army in the world• A Thermo-nuclear Power
  10. 10. Rise of a Socialistic Market Economy • Deng Xiao Ping became the Chief Economic Advisor • Proposed a Market Economy • More Industrialisation • Invitation of Foreign Investment to a Limited Extent • Pirate Economy • Building up Database • 1980s saw Gorbachev in USSR and Deng in China • Became angels of Market Liberalisation
  11. 11. Rajiv Gandhi’s Liberalisation • In automobiles, telecommunication, education • Liberalising Licensing Policies • Tax Rates were brought down • Encouragement for Exports • Sam Pitroda was the Advisor
  12. 12. Debacle of 1990s• Foreign Exchange Reserves dipped to a low of 7 days’ import requirements• RBI pledged its gold reserves with Bank of England• Tax Revenue was low• Industrial Growth became sluggish• Wheels of Fortune turned against India• Blame was on the first dose of liberalisation
  13. 13. Liberalisation 1991• Lower Tax Rates• Easier Licensing Policy• Diluting PSU Monopoly• Disinvestment• Banking Sector Reforms• Capital Market Reforms• SEBI and other Regulatory Bodies• Forex Management• Media Reforms• Opening up Telecommunications• Opening up Insurance Sector
  14. 14. Policy Dithering• Self-Cancellation Policies• Bureaucratic Mindset• Lack of Firmness• Lack of Unity of Command• Lack of Ministerial Stability• Still suspicion on Industries• Lack of Planning and all Management Strategies
  15. 15. Policy Variations• China has Clear Cut Policies• India changes Policies very often• China believes in Manufacturing whereas India is betting on Service Industries• China invested in hardware industries, whereas India was preoccupied with software Industries• China believes in penetrating every market in every foreign country-India gets preoccupied with a few sectors• Trade Surplus and Trade Deficit• Cheaper Yuan and Tendency to Make Indian Rupee Costlier• Growth Vs Inflation-Rates of Interest• Cost Wonder and High Cost Economy• Monitoring Project Execution• Investing in Infrastructure
  16. 16. India’s Agenda• Further Encouragement to Export Industries with a Guarantee of Non-Withdrawal• Further Reduction of Taxation on the same Footing as IT Industry• Encouraging Research in Industries where Chinese Products are Flooding Indian Market• 24x7 power supply to industries-dedicated terminals• Government Assuming the Role of Managing Industrial Pollution through outsourcing
  17. 17. THANK YOU