The world of today is evolving very fast and with it humans feel the urge to keep up with the speed of change. Technology is advancing rapidly, as if in a race against time. Over time, humans have seemingly come to the understanding that the super computer is not only smarter than the average human mind, rather it has the ability to exceed it. Technological advances have not only defied traditional logic, they are seemingly bent upon materialising the realm of human fantasy, something they consider a worthy feat.
It needs to be understood that we might live in a post industrial age where information technology, biotech and other high value services have somehow become drivers of economic growth. However, countries these days are increasingly ignoring the health of their own manufacturing industries at the stake of promoting high tech services. While specialising in the services industry creates less jobs and therefore its contribution to aggregate employment remains comparatively less, manufacturing has the ability to absorb thousands of workers with moderate skills, providing the workforce with stable jobs and relatively decent benefits. Therefore, if analysed it would be witnessed that for most countries it remains a potent source of high wage employment.
It is the manufacturing sector of countries where the world’s middle class is bred and shaped. Countries that lack a vibrant manufacturing base tend to somehow magnify the extent of socio-economic disparities, increasing the divide between the rich and the poor. Developing a sound manufacturing base thus remains to be ultimately central to the strength of a country’s democracy. Most importantly for developing countries of South Asia, manufacturing remains an imperative that is absolutely essential for their economies. When scrutinised it will be noticed that the productivity gap of the rest of the economy is much more profound. When the manufacturing sector of an economy takes off, it has the potential to create millions of jobs for unemployed workers, potentially give rise to ancillary firms, therefore promoting the cottage industry, and drive out people from petty services or agriculture to the manufacturing sector. Industrialisation in South Asia in the 1960’s and in Southern Europe during the 1950’s was the driving force for strengthening the economies of these regions.
When the Indian model is analysed, some say that India has taken a relatively different service led path to growth by promoting software development, call centres and other such business services. However, the inherent weakness of manufacturing in India is proving to be a drag on its economy and is threatening the sustainability of India’s economic growth. The high productivity service industries in India provide jobs to workers who are at the very top of the pool in terms of education distribution. Eventually what India seemingly does not realise is that they will have to create jobs for the low skilled workers that throng their cities and states. To cater to this particular class, much of the employment will have to come from manufacturing.
When developing economies are taken into account, expanding the manufacturing base not only improves resource allocation but also ensures that once the economy gets a toe hold in a particular industry, productivity, and efficiency tend to rise rapidly. When economies develop, when they become richer, more advanced, when nations prosper, it is a commonly fallacy that manufacturing – or developing things – becomes less significant. However, if the shift from manufacturing to high end services industry takes place more rapidly than workers can acquire advanced skills, it could result in a perilous imbalance in the productive structure of an economy and the workforce. The consequences of this dangerous imbalance can be witnessed across the globe in the form of economic inadequacy, fiscal mismanagement, growing socio-economic disparities and divisive politics.
The writer is Chief Manager SME bank with three decades of experience in the banking industry
