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RBI governor Subbarao roots for jobs in manufacturing sector

India's evolution from developing to developed economy could either be by way of maintaining its current services-led model or it could follow the US and UK's of the world by focusing on manufacturing.

twitter-logo Anand Adhikari        Last Updated: July 27, 2011  | 22:40 IST

Who will absorb millions of young job seekers pouring from farmland to top notch universities in future?

Certainly not the services sector, which today dominates the country's GDP with a 65 per cent share. "We need to focus on manufacturing," remarked RBI governor D Subbarao, doubting India's two decades of services-led growth model.

"To reap the demographic dividends, we need to find jobs for 150-200 millions who will be thrown out of the farm sector," suggested Subbarao in a seminar on Monday.But this task is easier said than done.

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The traditional manufacturing model is already under threat from China. From toys and mobile phones to dairy products and high end power equipment, Chinese workers are already giving Indian entrepreneurs a run for their money.

To translate Subbarao's thoughts into real action, India needs to focus on high end manufacturing. That's where India lacks capabilities, a long term approach and a will to do it. That could only happen through innovation or an innovation-led manufacturing model. There are no big successes so far. Imagine Indian entrepreneurs competing with Boeing and Airbus, or manufacturing metro coaches in the style of Bombardier and Siemens.

India happily rules in ancillary business, like making select aircraft components (and by the way we are not talking about engine components) or manufacturing few low end products.

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What the RBI governor is articulating is possibly right for India, but that approach also requires a long term focus both from the government and private sector to give it shape. If that takes place, the share of manufacturing will certainly improve from its teens, and contribute to greater job creation in decades to come.

Like many say, the current century is certainly of India's century. India has highly skilled engineers and also a deep entrepreneurial culture. Indian businessmen are already acquiring the biggest corporations of the world. So what's keeping India from taking the lead?

All over the world, the skill base is eroding, especially in Europe and North America. Germany, the UK and the US built their economies on manufacturing and later, after they had become developed countries, began to shift to services-led economies.

India's evolution from developing to developed economy could either be by way of maintaining its current services-led model or it could follow the US and UK's of the world by focusing on manufacturing.

Subbarao has cast his vote.

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