As regards to China, its manufacturing contribution to its GDP witnessed a sharp rise from less than 15 percent in 1965 to about 35 percent by January 2006.
Manufacturing constitutes around 74 percent of India's merchandise exports and there is enormous scope for accelerating such exports to become a global sourcing hub. Manufacturing exports have risen from 27,323 crore in 2000-01 to more than Rs. 1 lakh crore in the first 10 months of the current fiscal. This growth has been measured at a CAGR rate of 30 percent which is a good indicator, said Mr. Anil K. Agarwal, ASSOCHAM President.
In view of the potential that the manufacturing sector can register, the ASSOCHAM Paper says that sectors which need urgent attention in terms of fiscal incentives and for technological upgradation will include small and medium size enterprises (SMEs), textiles, steel, auto ancillary, engineering and capital goods, logistics and even Special Economic Zones created for higher export potential.
Trade policy reforms should be focused and also aim at reducing the transaction costs which currently erode our export competitiveness. The current transaction costs to Indian industry is estimated within the range of 18-20 percent.
The ASSOCHAM is of the view that since SMEs cover a wide spectrum of items that contribute substantially in the overall economic growth of the country and its major sector which will need government support in terms of fiscal assistance comprise marine products, woolen garments and knitwear, finished leather, leather products and semi-finished leather.
Modernisation fund need to be separately set up for the textile sector as it is labour intensive and currently operate under old and prototype laws which need to be modified to suit the current pace of textile competitiveness in vogue worldwide. The sectors like steel, auto ancillaries, engineering and capital goods will have to be given excise waivers and excessive rationalisation on customs fund should be avoided to help domestic industry grow faster.
India's top 500 manufacturers in the auto-ancillary sector account for nearly Rs.31,000 crore or 85 percent of total output. With the exception of few large players, the rest are exclusively small and medium enterprises which need protection and tax incentives.
The Associated Chambers of Commerce and Industry of India
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