The enormity of this Financial Crisis is unparalleled post World War II. Despite Fiscal and Monetary Keynesian activism, spreads in Funding markets and Foreign Exchange markets remain dangerously volatile, aggravating the
The Indian Manufacturing Sector has not escaped the heat either. Though India has targeted a GDP growth rate of 9 - 10% and a 12-14% growth in particular for Manufacturing Sector, the Central Statistical Organization (CSO) pegged India’s GDP growth for the year ending March 2009 at 7.1%, and manufacturing sector growth at 4.1% .
Therefore a massive investment funded primarily by the financial institutions has to be encouraged for the industry to weather the crisis. However a task committee set up by Prime Minister to look into issues facing manufacturing sector has identified a lack of confidence in financial institutions to lend to the sector on account of unrealistic valuations propelled by overheating of the economy prior to 2008.
To beat this creeping slowdown most of the global firms have already initiated massive cost cutting measures, including Trimming Headcount, Cutting Work Hours, Reduced Expenditure on Skills Development . Therefore human resource management becomes all the more critical. Enhancement in competitiveness will be the mantra for success and sustainability in the coming times.
Manufacturing, with a contribution of 29.4%, is the second largest contributor to GDP after services sector. Needless to mention, it thus, carries a major burden of increasing the employment opportunities in the coming decades directly or indirectly. Services Sector especially in areas like Traditional Trading, Financial Services, and Transport are strongly dependent on manufacturing.
The success and sustainability of Indian Economy is thus hugely dependent of the core manufacturing sector growth.
Session 1: Maintaining Firm Level Competitiveness
'Competitiveness (should) be understood as the ability of companies, industries, regions, nations and supranational regions to generate, while being and remaining exposed to international competition, relatively high factor income and factor employment levels on a sustainable basis.'
Manufacturing is crucial to any economy. The end product of development in manufacturing sector goes far beyond the goods provided by it. Manufacturing sells goods to other sectors and in turn buys materials and services from them for its growth and development. Manufacturing spurs demand for everything from raw materials to intermediate components. Unfortunately the share of manufacturing has been stagnant at a low level of 17% of GDP for over two decades.
The move towards competitive advantage is to a great degree dependent on the firm’s ability to bring about qualitative improvement in the various factors of production, particularly the knowledge resources.
India’s Asian counterparts like China and other South Asian economies seem to be gathering focus of the developed world due to lower costs of production.
Achieving economies of scale by inorganic growth could be one option. But only a few companies are cash-rich and thus most would end up acquiring very small companies that might not add value. Another alternative could be innovation and adoption of leading technologies. However a majority of the Indian companies lag behind their global competitors in both areas due to lack of motivation and proper infrastructure.
“Breakthrough innovation or exceptional growth of a firm is dependent on the leadership of the firm. In India there is an urgent need for more leaders in manufacturing industries at this juncture”
Talent is a crucial factor in implementing any strategy targeted at emerging markets. Talent management is becoming increasingly critical to manufacturers, especially because the strong demand for qualified labor is outpacing the supply. Manufacturing industries world over are shedding workers. Yet, paradoxically, they are short on talent. The companies continue to recruit skilled workers to run their sophisticated manufacturing facilities and make innovative efforts to retain skilled graduate engineers. The talent gap can pose a serious threat to the long-term competitiveness of manufacturing firms if not properly managed. Another area of concern is the retention of talent in the current scenario, where different sectors are competing fiercely for the available talent pool.
Investing in people should be a priority, starting from recruitment. Getting a team to function well is often more difficult in India than it is in some other cultures making it all the more important to choose the right people. Also, with rising attrition, it is essential that a second and third layer be in place in the event the first tier of employees leaves.
By 2025, 40 to 60 percent of workers across many of the world’s most populous nations in both developed and emerging markets will come from Generation Y and younger generations. A failure to effectively attract and engage these new workers will therefore significantly hamper manufacturers’ competitiveness in the long run.
How do manufacturing firms manage these constraints – such as lack of employability, negative image, education, job training, and retention?
Session 3: Manufacturing and Protectionism
The current Economic Crisis possibly the worst after the Great Depression has thrown major world economies into a Protectionist mode. With Decoupling Theory defunct, Protectionist trade measures have ramifications for the world especially when major producing and consuming economies are in a face off.
Free mobility of Capital and Goods has led countries with excess of production of goods , dump the goods under the garb of free trade severely crippling the domestic economies and undermining the rules of fair play. With quantitative restrictions ceasing, it becomes imperative for manufacturers to come to terms with the new economic reality.
Manufacturing currently contributes 17% of the GDP, but has been showing dismal growth for a long time. The peak custom duties have been slashed drastically from 110% in 1991 to 10% in 2007. The number of items reserved for SME has come down.
The government policies are disproportionately biased towards services though manufacturing holds the maximum potential for job creation. A brief analysis of the major manufacturing giants in Asia brings to fore the active role played by their respective Governments in protecting and promoting the domestic industry by way of restricted flow of FDI, setting up of technology up-gradation centers and skills development training institutes. The Indian government is slowly recognizing the importance of this and some new initiatives like National Strategy for Manufacturing, 2006 are steps in the right direction.
Is legislation and Protectionism only way out? Will reverse protectionist measures lead to a trade embargo crippling India's newly flourishing manufacturing industries?
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