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India needs labour-intensive industries, says Manmohan Singh

Former Union finance minister Dr Manmohan Singh has said that the economy has to grow at an annual rate of seven to eight per cent and the country needs to step up investment to the tune of at least 30 per cent of the gross domestic product to tackle the pressing issues of chronic poverty, unemployment and malnutrition.

Delivering the keynote address on 'The Challenge of Entrepreneurship' at the final lecture of the Godrej Memorial Lecture Series in Bombay yesterday, Dr Singh said rapid labour-intensive industrialisation with industry growing an annual rate of 12 to 15 per cent has to be the essential element of the basic development strategy.

He laid emphasis on investments in infrastructure sectors like energy, transport, communications and irrigation.

He further said that the pattern of industrial growth should pay particular attention to export growth and control of environment degradation.

Giving a critical analysis of the economic and industrial growth since independence, Dr Singh said India's economic and industrial performance compares very unfavourably with that of the Southeast and East Asian countries, notably South Korea and China.

"Despite the advantage of an initial headstart in several industries like textiles, iron and steel, ship building, automobiles and even electronics, our industrial performance compares unfavourably with a country like South Korea,'' he remarked.

He said that South Korea and China have increased their share in world exports on account of emphasis on international competitiveness as an important test of economic efficiency.

"By contrast, India's share of world exports which were two per cent in 1950 fell to 0.4 per cent by the late 1980s. Even now, our share is no more than 0.60 per cent,'' he said, highlighting the country's failure on the exports front.

Comparing investment in China to that of India, he said China has been the gross recipient of a net inflow of $40 billion compared to India's annual inflow of slightly more than $2 billion.

Dr Singh stated that to achieve the desired growth of seven to eight per cent, exports need to grow at an annual rate of 15 to 20 per cent.

According to him, the economy has the potential to achieve this growth, as a recent World Bank report has argued that it is feasible for India to raise her share in world exports to 3.90 per cent by the year 2020.

On infrastructure, he said the private sector can play an important supplementary role provided cost-based tariff policies and transparent regulatory system are in place.

He said the government should identify some major ongoing projects in the public and private sector with important forward and backward linkages and work wholeheartedly for their successful implementation on the basis of a time-bound programme.

"Unless the political leadership in India is committed to these reforms, our development potential will not be fully realised,'' he opined.

Dr Singh said India has to learn a great deal from China in the area of exports.

China today dominates the world markets for unsophisticated labour-intensive industrial products. "Direct foreign investment and intelligent marketing networks entered into by Chinese enterprises with overseas concerns have played a major role in boosting the country's exports,'' he said.

According to him, China is not obsessed with not allowing foreign investment in consumer goods and allowing investment in high value-added and technology areas.

"The recent experience of China is a clear refutation of the view that world market conditions are not favourable for a rapid growth of our exports. In the post-Uruguay Round world economy, there is immense opportunities for India to improve its market share in world exports,'' he commented.

Reserve Bank of India Governor Bimal Jalan, who also spoke, emphasised on innovation and risk taking as key ingredients of entrepreneurship.

He said that importance of entrepreneurship will be felt in the 21st century and efficient absorption of technology would see India in the forefront of nations.

UNI