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[Music] Study IQ I S now preparing war affordable friends India and China both liberalized their economies at almost the same time and both countries have abundant labor force available despite this India's manufacturing sector is far behind China currently China is the world's largest manufacturing country due to China's larger share in total global manufacturing output it is also called the world's factory according to data released by the UN and nations in the year 2019 China contributed 28.7 percent to the total global manufacturing output while India's contribution was only 3.1 percent surprisingly according to experts India itself depends on China for its imports in the year 2019 China contributed 15.4 percent to India's total imports for the last two decades India has also been dependent on China for its export production China's contribution to India's total exports is more than 28.5 percent by value not only India but also developed countries of the world like the United States Australia and Japan depend on supplies from China for their export production according to data China's manufacturing productivity is 1.6 times higher than India's manufacturing activity this means an average Chinese worker produces 1.6 times more output than an average Indian worker for this reason China's manufacturing output is ten times higher than India's so we would like to tell you that before economic reforms China was also a poor agrarian economy like India but as we can see China has become the world's industrial powerhouse today while India is still free from industrial burden if there are such reasons that despite so much similarity on one hand China is leading the entire world in terms of manufacturing sector on the other hand India's manufacturing sector contributes only 16% to the total GDP even after 30 years of liberalization in today's video we will try to find the answer to this question but before moving on friends I would like to tell you that the importance of this video is very high in UPSC Mains questions related to the growth of the manufacturing sector in India can be asked in the GS paper 3 economy section we will talk more about this at the end of the video but for now let's continue our discussion sorry for the interruption friends but this is not an interruption it is just sharing information with you which will help us take an important step towards making education affordable Syed Sapna has launched the UPSC Plus Mains Life Foundation batch in which you will get all the content live 9th class live content 121 mentorship current affairs programs Mains practice questions Mains answer writing practice and much more at a discounted price of just 19040 if you use the coupon code TGLIVE friends if you or your friends or siblings ever want to give a serious attempt at UPSC then I don't think there will ever be a better opportunity than this this price is for limited students only so we will see a significant increase in the prices in a short time so this class is starting from August 1st at 6 PM so you too can use the TGLIVE coupon code to support your UPSC preparation with India's best educators and the Study IQ Foundation batch all the important links related to this batch will be available in the pinned comment now you can watch your video but don't use TGLIVE otherwise it will be said that others are getting the course at a lower rate for all other updates you can follow me on my social media handles Hello friends let's start this discussion with the reasons behind China's industrial sectors according to experts foreign investment has played a crucial role in China's industrial growth China's President Deng Xiaoping announced the open door policy in 1978 considering China's market size labor cost openness to international trade and easy access to foreign markets investors from developed countries worldwide like the US Japan Germany started investing in China within a few years of liberalization foreign direct investment in China reached 100 billion dollars today China is still the country that receives the most FDI in the world according to an office FDI has played a significant role in increasing China's GDP creating employment opportunities and developing the manufacturing and trade sectors one of the reasons for high FDI in China is also its taxation policy during 1979-93 the Chinese government introduced many tax incentives to promote foreign investment for example the government reduced tariff barriers and income tax in 1994 China implemented a uniform tax system under which the same tax rates would apply to all investors whether they are domestic or foreign in addition China introduced a tax refund program for the development of multinational enterprises under the tax refund program, those MNCs that reinvest their profits in China are provided with at least 40% tax refund for a minimum of 5 years in some specific cases like for investors investing in high-tech and export-oriented industries this figure was applicable up to 100% tax refund even today China has provisions for many tax incentives to promote the industrial sector and technological innovation in addition to this attitude China's infrastructure has also played an important role in taking its manufacturing itself to great heights there is no doubt that infrastructure is very important for industrial progress China has paid more attention to infrastructure development from the beginning China started investing heavily in the infrastructure sector which provided employment to millions of people increased their income and their purchasing power which is considered a basic ingredient for industrial development China still invests a significant portion of its total expenditure in infrastructure according to a Bloomberg report in 2022 China's planned investment was at least 2.1 trillion dollars and most projects are related to manufacturing and service industries so these were the reasons for China's industrial sectors high-quality infrastructure foreign investment and taxation policies besides this China is also far ahead of India in terms of workforce now let's move to the next session of the video where we will analyze the reasons behind India's industrial failure
China is the second most populous country in the world after China. According to World Bank data, currently 67.40% of India's total population belongs to the age group of 15-59 years, and about 50% of the youth population is between 15-35 years. Surprisingly, despite having sufficient workforce, most industries in India are facing labor crises. So we would like to tell you that this is because most of the workforce in India is unskilled. Only 20% have relevant skills. According to the Human Development Report released in 2019, India ranks 129th out of 162 countries in terms of school population. According to experts, the educational system here is largely responsible for India's situation. Most work in industries depends on vocational skills, but the Indian education system does not emphasize vocational skills much. According to the latest India Skills Report, only 45.6% of graduates are employable. The second biggest reason for the shortage of skilled labor in India is low female participation. According to data, 20% of India's total labor force is female. Due to lack of social support, women are unable to get training for technical jobs. If India does not focus on skill development, the golden phase of demographic dividend will slip away from India's hands.
As we discussed in the China section, the infrastructure sector is very important for the development of the manufacturing sector. According to experts, low-quality infrastructure is the biggest obstacle to India's industrial growth. According to the latest Global Competitiveness Report, India ranks 79th globally in terms of infrastructure. Recently, there has been some improvement in India's power sector, although small and medium-scale industries still face power shortage problems, and unstable power supply affects their production process. But the condition of India's transportation system is still very poor according to international standards. Roads are the most important means of transportation in India. Economists call roads the backbone of a growing economy. According to data, more than 65% of goods are transported by road in India, but due to overcrowded roads, a lot of time and fuel is wasted. Besides this, the main reason for the infrastructure problem in India is that India has not paid attention to infrastructure development from the beginning. According to experts, for 50 years after independence, India's average investment in infrastructure was only 3%, whereas ideally India needs to invest more than 6.5% of its GDP in infrastructure. On the other hand, China has invested an average of 9% of its GDP in infrastructure. India is still facing a serious infrastructure deficit. According to an economic survey conducted in 2020, India needs to invest 1.4 trillion dollars in infrastructure building to become a 5 trillion dollar economy by 2025. So we would like to tell you that economists believe that this amount is only enough to cover India's infrastructure deficit. India needs more investment to achieve infrastructure like developed countries. The year 2020 was a milestone year for India. By liberalizing its economy this year, India entered a new era of development. But we are all well aware that the decision to liberalize its economy was a compulsion for India. In the 1980s, India was going through the biggest economic crisis in its history. There was such a shortage of foreign exchange that India could not fund imports for more than three weeks, inflation was skyrocketing. Meanwhile, the oil crisis in the world further deepened India's economic crisis. In such a situation, the government had no other option but to open up the economy. But the problem is that even after liberalizing the economy, India did not receive as much FDI as China. Here, it is also important to understand the difference in political crises. According to experts, the commitment of political leadership plays a big role in attracting FDI in any country. In China's case, its leadership showed a strong commitment towards the country's development. For example, as we discussed earlier, the Chinese government encouraged foreign investors to invest in China through tax incentives and a liberal regulatory framework. But in India's case, since India did not liberalize its economy on its own, we did not see such strong political commitment. Foreign investors had no major motivation to invest in India. Instead, other developing countries like Thailand, Vietnam, and Indonesia already had a market and an anti-establishment sentiment, making them more interested in investing in China, Singapore, and Indonesia. Moreover, the multinational companies that come to India mostly prefer to invest in consumer goods rather than high-tech products. So far, we have seen how the growth of the manufacturing sector in India has been hampered due to the lack of skilled workers, infrastructure, and industrial policies. Now we will talk about some Indian laws and regulations that hinder the development of the industrial sector in India.
First, let's talk about the land acquisition law. Acquiring land to set up industries in India is a very complex process. Under the Land Acquisition Act of 2014, any private company needs to get the consent of 80% of the affected families to acquire land. Under this, a Social Impact Assessment team is formed, which decides whether the potential economic benefit of setting up an industry is greater than its social cost or not. Only if the benefit is found to be greater, companies are given permission for land acquisition. This investigation is first done by the local government and then by the state government. After getting government approval, a notification is issued in newspapers and the official gazette the next day, and landowners are given 60 days to raise objections to the land. Companies have to provide compensation to landowners and a job to one member of the affected family. The compensation amount should be four times the market rate for rural areas and twice the market rate for urban areas. Friends, due to the time-consuming and costly process of land acquisition, many investors shy away from establishing industries in India. Apart from the land acquisition law, India's restrictive labor relations also prevent India from realizing the potential benefits of economic liberalization. For example, the Trade Unions Act and the Contract Labour Act of 1970. Under the Trade Unions Act, any seven employees working in a company can form a union. Due to this, many unions are formed in a company, and the company's overall expenditure increases. If we talk about the Contract Labour Act, it often creates hurdles for hiring contract laborers. There are about 200 such labor laws in India. These laws directly affect labor-intensive industries. India is missing out on using the natural advantage of its existing labor force. It is important to understand here that although these labor laws were implemented for the benefit of workers, according to experts, these laws have benefited workers less and hindered overall economic growth more. So, the main reasons for India being behind China are unskilled labor force, poor infrastructure, and its industrial policies. If India works on these, India also has the full potential to become a manufacturing powerhouse like China. Recently, the government has brought many policies to develop the manufacturing sector in India. The Ministry of Commerce and Industry is fully confident that after the implementation of these policies, India will become a global manufacturing hub in the coming times. Let's move to the last section of the video where we will discuss some such policies.
[Music] On September 25, 2014, PM Narendra Modi launched the Make in India program. The main objective of this program is to promote manufacturing in India. Make in India has identified five sectors related to manufacturing, infrastructure, and service activities that need to be changed. To make the Make in India initiative successful, the government has recognized ease of doing business as the most important factor. The government has taken many initiatives to make industrialization easy and smooth in India. The government has brought many reforms in laws related to setting up businesses, resolving insolvency, registering property, obtaining licenses, paying taxes, and international trade. In the World Bank's Ease of Doing Business Report 2022, India ranks 63rd, while in 2014, India's rank was 142nd. Under Make in India, the government has also introduced many investor-friendly policies to promote foreign investment in India. For example, 100% FDI has been allowed in some sectors like telecom, airport projects, industrial parks, railways, infrastructure, etc. Besides this, the government is also providing tax incentives to foreign companies to attract FDI. According to data, the inflow of FDI in India has increased significantly due to Make in India. Between 2014-15 and 2021-22, India recorded a 5% increase in FDI. In the last two years, despite the pandemic, India has received a total of $165 billion in FDI. In the recently held India-UAE Economic Partnership Summit, the UAE announced an investment of $100 billion in India. Apart from this, to reduce its fiscal deficit and increase manufacturing competitiveness, the government has also started privatizing and disinvesting public sector enterprises. 138 PSUs have been disinvested, including Hindustan Petroleum Corporation Limited, HPCL, THDC India Limited, Rural Electrification Corporation Limited, National Project Corporation Limited, North Eastern Electric Power Corporation Limited, Dredging Corporation of India, and Kamarajar Port Limited. It has been learned from government sources that in a NITI Aayog meeting held in May 2020, it was decided to privatize 16 PSUs under the new Public Sector Enterprises Policy. Apart from all this, the government has also launched many infrastructure projects. For example, Delhi-Mumbai Industrial Corridor, Sagarmala Project, Smart City Mission, and many other railway and road projects. So we would like to tell you that Make in India has not been successful in achieving all its objectives. According to experts, the implementation has not been as ambitious as the program's objectives. But there is no doubt that Make in India has led to significant growth in the country's manufacturing sector. The biggest evidence of this is India's mobile phone manufacturing industry. Today, India is the second largest mobile phone manufacturer in the world. In 2014, India contributed 3% to the total mobile phone production in the world, while in 2020, this figure increased to 11%. So, apart from Make in India, the government has launched many other schemes in the last few years to increase entrepreneurship in India. Tata India, Stand Up India, New India Animation, and Entrepreneurship Development Center Biotech are some of these initiatives. In the Global Startup Ecosystem Report 2021, India ranked 20th out of 100 countries. Apart from these schemes, the government launched the Skill India Mission in 2015 to train and make the youth of India employable. According to government reports, by 2021, the Skill India Mission had achieved its target by training 2.07 crore youth with useful skills. With the aim of increasing industrial productivity, the government has also made changes in labor laws recently. Under the new labor laws, 29 old labor laws have been consolidated into four labor codes, and all old redundant laws have been repealed. So, let us tell you that working hours have been increased from 8 hours to 12 hours, and weekly working hours will be 48 hours. This means there will be a four-day work week as well. However, it will depend on the companies and workers whether they want to implement these changes or not. Experts believe that a four-day work week will reduce the workload and increase the productivity level of workers. The new labor laws have universalized minimum wages and also ensured that workers are paid on time. Besides this, trade union rights have also been restricted. Now only those trade unions will be recognized as negotiating unions that have more than 51% of the votes. According to the government, all these labor reforms will enhance industries in India.
The main objective of the New Education Policy launched in 2020 is to make students employable by developing their skills. The New Education Policy emphasizes holistic learning, multidisciplinary approach, and vocational training. According to NEP, the school curriculum will include only four concepts, and more emphasis will be given to conceptual learning. From class 6, students will start receiving vocational training. Considering the need for diverse knowledge in today's world, the New Education Policy has introduced a choice-based credit system under which students can choose subjects from any stream. This will give students an opportunity to explore their interests and also provide them with flexibility and multiple career options. Keeping in mind that India is currently in the demographic dividend phase, experts believe that if the New Education Policy is implemented correctly and on time, then nothing can stop India's manufacturing sector from reaching the pinnacle of development in the coming times. So, these were the crises and the comparison between China and India's industrial development. And as I mentioned in the first part of the video, questions related to this video can be asked in UPSC Mains. Keeping that importance in mind, I am leaving a question for you to answer in the comment section. The question is: Discuss the reasons why China is a more successful industrial nation than India. Thank you for watching the video. I hope you liked the video, and if you did, don't forget to share it with your friends. See you in the next video. Until then, Jai Hind, Jai Bharat.
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