PressInformationBureau

GovernmentofIndia
MinistryofFinance
27February201512:11IST

EconomicSurveyhighlightstheneedforbalancebetweenMakeinIndiaandSkilling
India
Economic Survey 201415 discusses the Make in India the flagship initiative and a key policy
objective of the new government. The Survey contemplates What should India make?
ManufacturingorServices?Asaprelude,theSurveystatesthat,inordertobringaboutexpansion
andstructuraltransformation,Indiashouldutilizeitsdominantresourceofunskilledlabour.
Thesurveydistinguishesregisteredmanufacturing(formalsector)fromthegeneralmanufacturing
whichcoversinformalsectoraswell.TheEconomicSurveyrecognizesregisteredmanufacturing
as having the potential for structural transformation. Registered manufacturing exhibits high
productivitycomparedtoothersectorsoftheeconomy.
However, the Economic Survey observes that manufacturing productivity in India lags behind
othernations.TheSurveypointsoutthatallIndianstatesexhibitdecliningshareofmanufacturing
intheStateGDP.Inaddition,theSurveyidentifiesthatregisteredmanufacturingcouldntbridge
regional disparities in India. In addition to this, registered manufacturing now in India has been
identifiedasskillintensivewhichisnotinlinewiththeIndiascomparativeadvantageinunskilled
labour.
TheEconomicSurveyidentifiesfourfactorsfornondevelopmentofmanufacturingasanengineof
economicgrowth
DistortionsinLabourMarket
DistortionsinCapitalMarket
DistortionsinLandMarket
SpecializationnotinlinewithIndiascomparativeadvantageinunskilledlabour
Certainsubsectorsofservicesfinancialservicesandbusinessservices,exhibithigherproductivity
levels than registered manufacturing. However, these sectors being highly skill intensive
(excludingconstruction)areoutoflinewiththeskillprofileoftheIndianlabourforce.Theyare
unlikely to generate widely shared and inclusive growth. However, the survey observes that the
servicesectorhasthepotentialfordomesticgrowthconvergenceacrossregions.
Hence, the survey redrafts the question of manufacturing versus service. It posits that the real
question should be whether we want to concentrate on nonskilled labor intensive sectors or the
developmentofskillintensivesector.TheEconomicSurveyconcludesthatIndiangrowthshould
balance the nations comparative advantage in availability of low skilled labour with skill
developmentrequiredbyfuturegenerationstotakeadvantageoflostopportunities.Theregistered
manufacturing must be expanded to take leverage of Indias abundant unskilled labour. While
Make in India occupies prominence as an important goal, the future trajectory of Indian
DevelopmentdependsonbothMakeinIndiaandSkillingIndia,theEconomicSurveysays.
DSM/AJ/SPS