Manufacturing key to higher GDP

India needs to shed its "services" image and try to achieve 12 per cent growth rate in the manufacturing sector to achieve a sustained GDP growth of 9 per cent. This was discussed at the 'Manufacturing' session at the 6th India-EU Summit today.

After the success of services sector, especially IT, industry is all set to reap the benefits of rise in the manufacturing sector. The growth potential of this sector is often overshadowed by its dynamic services sector.

While India is said to be a leader in services, China is considered the manufacturing power house. India's growth prospects in the manufacturing sector, however, cannot be ignored.

A sustained GDP growth rate of 9 per cent per annum is achievable with a 12 per cent growth rate for manufacturing.

There is a huge growth potential in India, bolstered by a 300-million strong (and growing) middle class.

According to Goldman Sachs data, India has the potential to sustain its growth rate of over 5 per cent, over the next decade, while China is supposed to experience slower growth.

India is likely to be the third largest economy in the world (after the US and China) by 2050. The session also discussed India-EU partnership opportunities, especially in technology.

The partnership is important because the EU has emerged as India's largest trade and investment partner. The EU can take advantage of the tremendous cost and quality advantages offered by India, while huge infrastructure gaps in India can be fulfiled by the EU.

Citing an example of Moserbaer India Ltd, the world's second largest manufacturer of optical media, its Managing Director Deepak Puri highlighted India's positive commercial climate that prompted his company to set up a manufacturing base in the country.

The company found India favourable because of the presence of large skilled manpower, low-cost and easy access to capital, and capable construction industry.

The representative from EU automobile suppliers listed several reasons for collaborating with India. They included long industry tradition in manufacturing, language skills (resulting in reduced communication time and reduced risk of miscommunication), market economy, democracy and low-cost base.