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On This Day - 7 JUNE 2011
Why Indian manufacturing is yet to become world-class
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But that may not be so simple. Today India boasts of world class companies which set strong standards not just in India but also in the global markets. India Inc. is also hopeful of strong growth in sales and profits in the years to come led by strong growth in the economy. But unless Indian companies are careful, certain issues could well prove to thwart their growth efforts. Take labour issues for instance. Recently, auto major Maruti has had to deal with loss of production of around 1,800 units at its Manesar plant due to strike by workers. Earlier this year, a 50-day long strike by a section of workers at the General Motor's Halol plant cost the firm to lose production of 2,000-2,500 units.
While for the time being these might be near term concerns for Maruti, India Inc. in general will have to ensure that this kind of labour unrest does not become a regular feature. For indeed, a restrictive labour law environment has been one of the major hurdles to the development of the Indian manufacturing sector. Thus, corporate India will have to evaluate existing labour laws which are quite archaic on a priority basis. It will have to work towards ensuring that there is a major overhaul in these laws in keeping with the changes in the economic and industrial landscape. Otherwise, India's hopes to become a world class manufacturing behemoth will only be a distant dream.
Markets in US, Europe and even Japan have seen tougher times. Lower economic growth as well as the heavy burden of debt has forced investors to look away from them. With higher returns, emerging markets have been attracting investments in recent times. However, a major part of these funds were invested in the commodity sectors. However, commodity prices have seen a cool off in recent times. This has led global investors to look at alternatives. And consumption driven sectors appear to be the new hot favourites.
The US is yet to implement Basel II capital adequacy standards, which the EU implemented in 2006. Post the crisis, major industrialised nations agreed to cut back on incentives for risk-taking. But, the US mostly used non-binding terms to implement this deal. It does not enforce a particular cash-limit on executive bonuses. Paying fat-cat bankers hefty bonuses and later having to bail them out caused significant public outrage a few years back. For the public to have faith in the banking system and regulators, the US needs to work on ironing out these issues. They may not get a second life next time around.
Saudi Arabia has already raised its production ahead of cartel's meeting. However, there are others OPEC members like Venezuela and Nigeria that choose to under produce. With underlying political tensions among the member nations, this meeting is definitely going to be a charged one. What makes the policy trickier is balance of supply among the member nations. Any proposition to change the relative share can lead to further political tensions among them. But what is in it for us? Any boost in quotas up to or less than 1.3 million barrels per day may not translate into actual increase in supplies. This is because the earlier supply limits have already been flouted and a limited increase will only formalize it.
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