Manufacturing versus Services

THE MANUFACTURING INDUSTRY:

Manufacturing work places entail lot more sweat and grime as compared to the services sector.

 

Manufacturing is the production of goods for use or sale using labor and machines, tools, chemical and biological processing, or formulation. Manufacturing industries help in modernizing agriculture, which forms the backbone of our economy. Manufacturing industries also reduce the heavy dependence of people on agricultural income by providing them jobs in secondary and tertiary sectors. Every job created in manufacturing has a multiplier effect, creating 2–3 jobs in the services sector. In a country like India, where employment generation is one of the key policy issues, this makes this sector a critical sector to achieve inclusiveness in growth. A big increase in the manufacturing work force will boost the income levels and make a dent in poverty level.

Industrial development is a precondition for eradication of unemployment and poverty from our country. It brings down regional disparities by establishing industries in tribal and backward areas. Export of manufactured goods expands trade and commerce, and brings in much needed foreign exchange.

Countries that transform their raw materials into a wide variety of furnished goods of higher value are prosperous. Manufacturing has long been a cornerstone of our national economy. As a sector, manufacturing firms are especially valuable to the economy because, when they export goods, they bring back to their communities much of the wealth earned from sales around the country and the world.

Deloitte has ranked India as the fourth most competitive nation today and believe that the country will rise up in the rankings to be the second most competitive manufacturing nation in five years. India’s workforce skills and cost advantages, improving policies and regulations, growing middle class, and ongoing investment in infrastructure will boost its competitive advantage and help maintain the country’s position as a strong contender on the global manufacturing front.

Rationalization of business regulations to reduce burden of procedural and regulatory compliance on businesses and the huge domestic market along with the opening up of the economy has created the right investment climate in the country.  India is now getting recognized for high value goods requiring engineering precision and quality. Be it mobile phone industry or automobiles, consumer durables or engineering products, luxury brands or aircraft industry major global players are all eyeing India. Nokia, Samsung and LG have already set up manufacturing plants in India. Skoda Auto has big plans for India. The cases of Ford India, Hyundai and Suzuki are no different. Airbus Industries will have a manufacturing base in India soon.                      

Therefore, we conclude by saying that growth in manufacturing fuels other sectors, creating jobs and investment in non –manufacturing sectors because of its both backward(mining ) and forward (warehousing, transportation) relationship with it. Also India needs a new manufacturing revolution for sustained development and growth. This can be ensured through restructuring of higher education, making it innovation-centered and pumping more investment in research and development, competitive scales of production and establishment of  more National Investment and Manufacturing Zones equipped with world-class infrastructure.

THE SERVICES SECTOR:

 

Makers of many things from aircraft engines to cars simply do not make and sell, but customers want advice design and maintenance.

The service sector  consists of the "soft" parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability. Service sector encompasses a variety like information technology, tourism, consulting, hotel industry; healthcare, mass media, financial services like insurance and banking. In India, the service sector contributed 29.8% of the GDP in 1950 and has grown to contributing 56.5% of the GDP today.  It is also a significant employment generator, generating a quarter of the employment in the country. These have been growing at 28% over the last 5 years, which is remarkably higher than the GDP growth of 7%. 

India’s focus on the service sector began with New economic policy of 1991,and boomed into a fully fledged and a successful contributor to the GDP by 2000. Given that India as a country leaped from the agricultural phase to the service one, there are many schools of thought that believe that a country should focus on doing what its good at as in China’s case it is - manufacturing. A common misconception about the service sector that needs to be set right is that it is not about software alone. We are seeing broad brainpower-led growth. This is reflected in high-skill outsourcing in legal services, engineering services and film animation. Above all it is reflected in the increase in research and development.

 

Unlike the claims put forth by various studies , manufacturing jobs are shrinking. The organized sector today has only 27 million workers, Tata Motors produced 129,400 vehicles in 1994 with 35,000 workers. In 2004, it produced 311,500 vehicles with just 21,400 workers. Bajaj Auto produced a million vehicles in the mid-1990s with 24,000 workers. Today it produces 2.4 million vehicles with just 10,500 workers. Let nobody think that manufacturing has more job potential than services.

Contributed by:

Section A, Economics

Batch of 2013-15