• UGI USER
  • Nov 03, 2023
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Capital-intensive exports.

Q. Account for the failure of the manufacturing sector to achieve the goal of labor-intensive exports rather than capital-intensive exports. Suggest measures for more labor-intensive rather than capital-intensive exports.

Structure of Answer

Introduction

  • Mention contribution of manufacturing in India’s GDP, its failure to achieve labour intensive exports

Body

  • Mention Factors Leading to Capital-Intensive Exports
  • Mention Measures to encourage Labor-Intensive Exports
  • Mention the measures taken by government like Niryat Bandhu Scheme

Conclusion

  • Mention India can draw inspiration from Vietnam and Bangladesh, how they through conducive business environments and strategic policies, successfully attracted labor-intensive manufacturing

India’s manufacturing sector, contributing 17% to its GDP, lags significantly behind China, which holds over 22% of the global manufacturing share. The failure to achieve labor-intensive exports and reliance on capital-intensive exports have hindered India’s manufacturing growth

Factors Leading to Capital-Intensive Exports

  • Inadequate Infrastructure: Inefficient logistics, power shortages, and transportation bottlenecks increase production costs, making capital-intensive production more attractive.
  • Skill Gaps: The lack of a skilled and adaptable labor force limits the competitiveness of labor-intensive manufacturing.
  • Policy Biases: Historically, policies have favored capital-intensive industries through subsidies, tax benefits, and incentives.
  • Limited Market Access: Restricted access to international markets hampers the ability to compete with global labor-intensive manufacturing hubs.
  • Inadequate Labor Reforms: Cumbersome labor laws and job security discourage labor-intensive practices, driving companies toward automation to sidestep complexities.

Measures to encourage Labor-Intensive Exports

  • Skill Development: Implement focused skill development programs to enhance the labor force’s capabilities for labor-intensive sectors. Niryat Bandhu Scheme offers skill development and training to promote exports.
  • Ease of Doing Business: Streamline procedures and regulations to reduce transaction costs and facilitate smoother operations for labor-centric industries. Single Window Interface for Facilitating Trade (SWIFT) streamlines export-import procedures.
  • Labor Reforms: Revise labor laws to provide flexibility and simplify processes for labor-intensive sectors, encouraging employment.
  • Access to Finance: Ensure easier access to credit and funding for small and medium enterprises focusing on labor-intensive production. Credit Linked Capital Subsidy Scheme supports technological upgradation in MSMEs.
  • Infrastructure Development: Improve transportation, power, and technological infrastructure to support labor-centric industries. Sagarmala Project and Bharatmala Pariyojana improve transportation infrastructure.

Vietnam and Bangladesh, through conducive business environments and strategic policies, successfully attracted labor-intensive manufacturing. By prioritizing labor-centric strategies and implementing supportive measures, India can unlock its potential for global competitiveness in the manufacturing sector.