India needs to boost manufacturing

The Economist recently did a Special Report on India and one of the problems that it mentioned was the lack of a manufacturing sector. Unfortunately unlike the rest of South-East Asian economies over 50% of the workforce are still involved in the agricultural sector. However it is interesting to see the breakdown of GDP per sector:

Service sector makes up 59% of GDP and is still expanding,
Agriculture 19% and
Manufacturing 22%.

The Economist suggests that more factories could provide jobs that would ease the pressure of 13m people that join the Indian workforce every year. What are the issues regarding its expansion:

* Bureaucracy and a poor infrastructure
* Labour costs are relatively high compared to other East Asian countries
* High cost of credit
* Weaker ruppee makes it advantageous for overseas companies to base their production

But there seems no prospect of a big leap in Indian manufacturing in the near future. And if services are to keep expanding, the country needs huge quantities of skilled labour that will not be easy to come by.

Source: The Economist – September 29th 2012

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