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Services, the Pied Piper for Foreign Investments (FY16)
Jun 15, 2016

Amidst global slowdown, India's robust economic growth has been attracting a lot of foreign investments. Foreign Direct Investments (FDI) in the country hit an all-time high of US$ 41 billion in FY16. A closer look at the numbers indicates that services continued to attract the largest investments, riding on the wave of e-commerce and start-ups. But the employment generating manufacturing segment has remained a laggard. Large manufacturing sectors such as construction development, automobiles and drugs and pharmaceuticals recorded a decline in FDI flows in FY16.

This is worrisome as India is already battling chronic unemployment. India's unemployment rate grew from 6.8 per cent in 2001 to 9.6 per cent in 2011, according to Census 2011 data. If numbers from Labour Bureau's quarterly employment are to be believed, then the job creation dipped to its six-year low in 2015. Most of the job creation that has taken place during the year has been on account of the IT/BPO sector. The unemployment problem in India has been compounded by poor industrial growth, low agricultural production due to two consecutive drought years and streamlining of costs by manufacturing firms. Moreover, increased mechanisation of operations in labour intensive industries has led to a fall in jobs.

But if India wants to benefit from the demographic advantage, it needs to create the enabling environment for manufacturing business. Although the government has been making concerted efforts to attract investments in manufacturing through its 'Make in India' campaign, the same is yet to yield results.

Source: The Financial Express

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