MODELLING AND ANALYSIS FOR MANUFACTURING GROWTH IN INDIAN ECONOMY

Abstract

newline The annual growth and contribution of manufacturing sector to GDP (Gross Domestic Product) are two critical measures of prosperity of a developing nation. India has kept manufacturing growth under focus through its make-in-India , skill-India , zero-defect zero-effect and many other initiatives, in the recent past. Indian economy with its sizeable and growing domestic market, its large and diverse population and its innate sense of enterprise has the potential to make manufacturing its engine of growth. One of the key objectives of the National Manufacturing Policy (NMP), formulated by the then Planning Commission of India in 2011, has been: contribution of manufacturing to India s GDP to reach a level of 25% by the year 2025. Paradoxically, the share of Indian manufacturing sector in the nation s GDP has remained stagnant, at approximately 15%, in the last few decades. The manufacturing sector in India has been facing many challenges: diminishing value-addition, burgeoning informal labour employment, archaic labour laws, unattractive labour-productivity, volatility in material cost, high logistics cost, declining share in exports, low global competitiveness, not enough focus in Research and Development and many more. There are assignable factors affecting them which need a deep analysis. Most of the factors that impact manufacturing growth are complex, dynamic, provide multiple feedbacks, have side effects, are affected by delays and show the effects over long periods. In the current research study, using the Interpretive Structural Modelling (ISM) approach, six significant factors that would accelerate the growth of manufacturing sector in Indian economy have been identified as: Technology deployment, Labour Reforms, Infrastructural growth, Good-Governance, Quality Education and Resource management (TRIGGER). The achievability of the NMP targets has been studied using System Dynamics based simulations. The current research further attempts to address, understand and analyse long-term behaviour trends of the key variables in the five important sub-systems that affect the growth of manufacturing sector of India. These five subsystems are: Labour laws, Informal labour, Transport infrastructure, Circular material consumption and Good governance. An extensive System Dynamics based simulation has been applied to the various sub system models studied in the research. The analysis has provided useful insights and recommendations to policy makers, planners and industry leaders. Finally, prioritization of the factors to accelerate the manufacturing growth of India for the next decade has been attempted using the Analytic Network Process (ANP) approach.