India Economic Growth: The Tug of War Between Services and Manufacturing Sectors
Shift in Economic Landscape
India's economic growth has been primarily fueled by the services sector, especially in Information Technology, banking, and finance. Yet, this expansion is juxtaposed with a stagnation in the manufacturing sector, which currently hovers around 14% of GDP. In contrast, India aims for 25% manufacturing contribution, highlighting a significant gap in job creation.
Impacts of Manufacturing Stagnation
- The decline in traditional industries like apparel and footwear threatens low-skilled job opportunities.
- Job creation estimates indicate India requires nearly 7.85 million jobs annually, a target not being met.
- Data indicates a worrying trend with export-related employment in decline.
The Rise of Global Capability Centres
Amidst manufacturing stagnation, the establishment of Global Capability Centres (GCCs) has surged in India. These centres leverage the large pool of IT talent, with close to 1,600 GCCs now operating in various sectors.
Challenges in Global Integration
- Low participation in Global Value Chains hampers trade-related job generation.
- High tariffs on intermediate goods raise production costs for Indian manufacturers.
- Recent budgetary measures aim to address some tariff issues but comprehensive reforms are necessary.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.