Comments on: The Development Path of Economies

By: Reuben

Reuben — Unknown, 30 Nov -0001 00:00:00 +0000

In fact, the WSJ and Bloomberg news have been running stories on India’s new-found success in maufacturing, especially in the auto sector, steel sector and so on.

The WSJ, in particular, seems to be more optimistic about India’s chances than you or Prof Bardhan are. Of course,it could simply be that, as a conservative mouthpiece, they have an axe to grind with China But it does seem to me that its more than that and that there’s some truth to this manufacturing story that Ive been hearing about from more than one source.

By: Reuben Abraham

Reuben Abraham — Unknown, 30 Nov -0001 00:00:00 +0000

I have also made a post on my blog today about lower interest rates in India and their effect on the manufacturing sector. Do read it. Its very interesting.

By: anand

anand — Unknown, 30 Nov -0001 00:00:00 +0000

First the point that is to be noted is that India has a decent base in manufacturing which is indeed rapidly growing.

Second fact to be noted in India’s case is that like the US, in India, imports & exports constitute a low percentage of the GDP. Indeed, if you take out Oil, the rest of the imports as a percentage of GDP is dimnished to a large extent. This indicates that India has a fair amount of self sufficiency ( in manufacturing ) and domestic orientation in its markets.

Now comes the route that we will take in the future. Certainly, nobogy is saying that let us all jump into services. But the fact a reasonable majority will go into services is fairly certain.

Now is this a bad thing ? Most certainly not.

Take manufacturing. Today, I can start a factory, pull people from the streets, teach them how to use the machines and the next month, my products will be on the market.

In case of services, it is knowledge that matters. It takes far more time to attain this.

The guy who designs the chip will always have the upper hand over the guy who produces the chip. Basically, this stems from the fact that the guy who designs the chip can produce it himself if the need arises. But the other way around is fairly difficult.

The main advantage of manufacturing is ofcourse the fact that it provides easy ( low barrier to entry for the worker ) and mass emplyment. This ofcourse is the primary argument for manufacturing for which services has not much of an answer except saying that ancillary services ( for example the BPO ancillary services is slated to touch $2 Billion soon ) may provide this route.

As long as manufacturing shows a decent growth in India and services grows much faster, we are on the right track.

By: Vishal

Vishal — Unknown, 30 Nov -0001 00:00:00 +0000

I agree with Antanu that we can’t leapfrog on services industry without having set up the manufacturing/heavy/infrastructure based industy, which i think India has to do a lot inn.
Service industry in India has a very small share of global business on the lines of 1 or 2% i think (Plz correct me if i’m wrong, not good in keeping stats.). It’s a very small part of what we are getting business inn, it is good to have revenue coming from these sectors but not the way to move forwads for a robust economy, u need heavy industries because that are the engines for services, if u don’t have that, then the services as such what we are getting is a very risky proposition, because from a business men’s point of view its a very easy process to make money. Ex Call centre industry needs only few computers a rented place, and few people who knows how to talk in englisg roughly and u are up and running with the growth propsects of business from 100% to 200% to 300%, and when u think the cost advantage is not good here, it is far better in places like Phillipines South africa or Italy move there, then he can move esaily because his investment was minimal where as heavay based industry cant be moved easily requires more resourcess, more skills to set up initially and returns comes in long term, but that creates a robust economic model as compared to one in call centre based, which is very risky.
I think we should use our Forex reserve which we are getting to be used properly(efficiently) in the heavy/infrastucture/defence based industries.
Currently it’s costing us money to mainatin that, so why dont we utilise it.

On the other side, keep watching the prices of oil which is touching 55-6O USD/Barrel, migh be putting a huge pressue on the government.

Vishal.