SERVICE VS MANUFACTURING LED GROWTH
service ns manufacturing growth & exports
SERVICE VS MANUFACTURING - the difference it makes
SERVICE VS MANUFACTURING GROWTH and exports
Debate – Recently former governor of reserve bank of india Raghuram rajan expressed the opinion that service led growth fits india well whereas india’s current foreign minister has a diametrically opposite view & opines that it is a flawed strategy and inhibits indias global footprints & India should aspire to become a manufacturing power to achieve its rightful place in global community.
Logic behind supporting service led growth:
- services-led export model offers massive potential in reducing inequality in industrial economies and also contributing towards climate action.
- services, unlike manufacturing, can be distributed across a country and reduce pressure on megacities that are turning into heat sinks and becoming increasingly unlivable.
Indian position in global service trade:
During 2022-23, the country's services exports rose by 42 per cent to USD 322.72 billion from USD 254 billion in 2021-22, according to provisional data from the commerce ministry, which can rise to USD350. India accounts for just 1.5% of world merchandise exports, Indias standing in global exports in 2022 is presented below:
| Top Service Exporting Countries in 2022 | |||
| Rank | Country | Exports of services (in millions USD) |
Year |
| 1 | United States | 795,273 | 2021 |
| 2 | United Kingdom | 429,928 | 2021 |
| 3 | Germany | 386,709 | 2021 |
| 4 | Ireland | 346,680 | 2021 |
| 5 | China | 338,440 | 2021 |
| 6 | France | 300,679 | 2021 |
| 7 | India | 240,655 | 2021 |
| 8 | South Korea | 229,866 | 2021 |
| 9 | Netherlands | 191,701 | 2021 |
| 10 | Japan | 170,029 | 2021 |
Policymakers & politicians favour a manufacturing led export growth because it can resolve Indian demand for more jobs, Vast subsidies and tariff protection are offered to attract manufacturing companies to shift from China to India.
Indian position in global merchandise trade:
| Country/Territory | Region | WTO | |
| Exports | Year | ||
| World | — | 22,487,000 | 2021 |
| China | Asia | 3,363,959 | 2021 |
| European Union[n 3] | Europe | 2,577,778 | 2021 |
| United States | Americas | 1,754,578 | 2021 |
| Germany | Europe | 1,631,818 | 2021 |
| Japan | Asia | 721,994 | 2021 |
| Netherlands | Europe | 678,400 | 2021 |
| Italy | Europe | 610,285 | 2021 |
| France | Europe | 585,036 | 2021 |
| United Kingdom | Europe | 543,313 | 2021 |
| Canada | Americas | 503,373 | 2021 |
| Mexico | Americas | 494,225 | 2021 |
| Russia | Europe | 494,025 | 2021 |
| South Korea | Asia | 468,055 | 2021 |
| Singapore | Asia | 457,357 | 2021 |
| Taiwan | Asia | 447,693 | 2021 |
| India | Asia | 395,400 | 2021 |
| Hong Kong | Asia | 395,400 | 2021 |
| Vietnam | Asia | 335,929 | 2021 |
| Spain | Europe | 384,459 | 2021 |
| Switzerland | Europe | 379,885 | 2021 |
| Australia | Oceania | 343,594 | 2021 |
India's export push
China remains the worlds biggest manufacturer for most of the last decade & exports almost 50% more than the USA the 2nd largest exporter but now this monopoly is being challenged because of the following factors.
- Rising labour costs in China and
- Pressure from the Chinese government to transfer technology to Chinese competitors.
- Bad human rights record.
- Compliance of paris convention goals.
Many countries are competing to be the "plus one," with Vietnam, Mexico, Thailand and Malaysia in particular contention. India must still overcome entrenched problems that have kept it a bit player in global supply chains. Its labour force remains mostly poor and unskilled, infrastructure is underdeveloped and the business climate, including regulations, can be burdensome.
Manufacturing remains small relative to the size of India's economy. Nonetheless, after decades of disappointment, it is making progress. Its manufactured exports were barely a tenth of China's in 2021, but they exceeded all other emerging markets except Mexico's and Vietnam's,
The biggest gains have been in electronics, where exports have tripled since 2018 to USD 23 billion in the year through March. India has gone from making 9 per cent of the world's smartphone handsets in 2016 to a projected 19 per cent this year,