Determinants of Competitiveness of the Indian Auto Industry- Badri Naryanan G. and Pankaj Vashisht

This study analyses the determinants of competitiveness of auto industry in India, based on a field survey and a quantitative analysis of secondary data. It highlights that all segments of Indian auto sector are growing at a fairly high rates and their productivity as well as export intensity is on the rise. Domestic sales are rising, but they have declined in certain sub-segments of vehicles. However, the R&D expenditure has been scarce. Effective rate of protection of automobile assembly is far higher than that of auto-components manufacturing. Unorganised sector, which is quite significant in auto-component manufacturing, has grown more rapidly in the urban areas than in the rural areas. The econometric analysis suggests various measures that could be taken by the government, particularly, the credit facilitation for SMEs. A field survey comprising auto manufacturers in India underlines various constraints faced by the sector, such as the shortage of skilled manpower along with poor infrastructure, fluctuating steel prices and unavailability of land at reasonable price. This suggests that the government could facilitate the industry in becoming more competitive by taking steps such as structural fiscal reforms, cut in import duties of raw materials and capital goods, promotion of R&D and FDI, training facilities, research-backed negotiations of FTAs, roadmap for harmonising emission norms across the country and infrastructure improvement. Industry, on the other hand, should improve its R&D capabilities and market research.

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Impact of Organized Retailing on Unorganized Retail Sector - Mathew Joseph, Sanghamitra Sahu, Manisha Gupta and Nirupama Soundararajan

Divergent views had been expressed on the impact of future growth of large scale retailing in India. On the one hand, concerns had been raised that it may have an adverse impact on the small retailers in the unorganized sector. On the other hand, it was argued that the growth of organized retailing will yield efficiencies in the intermediate stages, enabling higher prices and/or access to markets to producers (including farmers and small producers) and/or lower prices to consumers. This ICRIER study analyzed these issues.

On 26 May 2008, ICRIER submitted its findings of the study “The Impact of Organized Retailing on the Unorganized Sector” to the Department of Industrial Policy and Promotion, Ministry of Commerce, Government of India. Dr. Thomas Reardon and Dr. Ashok Gulati, Co-Directors of the IFPRI-MSU Joint Programme on Markets in Asia, reviewed the international retail experience. The other partners for the study were Technopak Advisors Pvt. Ltd. and Development & Research Services.  

The findings of the study were based on the largest ever survey undertaken in the retail sector of  2020 unorganized small retailers across 10 major cities; 1318 consumers shopping at both organized and unorganized retail outlets; 100 intermediaries; and 197 farmers. In addition, a “control sample” survey was conducted of 805 unorganized retailers who are not in the vicinity of organized retail outlets in four metro cities. Detailed interviews were also carried out for 12 large manufacturers, 20 small manufacturers and six established modern retailers. Based on the results of the surveys and the review of international retail experience, the study has made a number of specific policy recommendations for regulating the interaction of large retailers with small suppliers and for strengthening the competitive response of the unorganized retailers. The Report received extensive national and international media coverage. ICRIER, in collaboration with DIPP, also organized a roundtable titled “Modernization of Indian Retail: The Role of Public Policy”, on 23rd July 2008, to bring together various stakeholders, policy makers and academicians to discuss the findings and recommendations of the Report.

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Labour Intensity and Employment Potential of Indian Manufacturing - Deb Kusum Das, Deepika Wadhwa and Gunajit Kalita

The study attempts to examine the labor intensive industries of organized manufacturing in order to understand the employment generation potential of these industries and analyze what constraints the growth and employment of this sector. The study is structure in two parts- in the first part of the study, using secondary data from the annual survey of industries a concordance between NIC 1998 and NIC 1987 of four and three digit industries was undertaken to build a continuous time series at the four-digit level NIC 1998 classification. Based on average L/K ratio for the 97 four digit industries during 1990-91 to 2003-04, 31 industries were identified as the labour intensive industries. For the 31 identified labor intensive industries, we have documented industrial performance in terms of the employment growth, labor productivity and real wages growth as well as employment elasticity and capital productivity for the period 1990-91 to 2003-04.  An important finding of our study is that labor intensity (L/K) is declining across majority of industries in the chosen time period, more significantly for the 31 labour intensive industries the L/K ratio has declined from 0.72 in 1990-91 to 0.30 in 2003-04. The noticeable experience of the period 1990-91 to 2003-04 has been the continuous falling of capital productivity across all major sectors, which can have significant implication of substitution of labour by more capital and restricted the employment potentials of these sectors.

In the second part, based on industrial performance and export potential five labour-intensive industries - apparel, leather, bicycles, sports goods and gems and jewellery were selected and a survey of 252 firms was undertaken to identify and understand the potential and bottlenecks in these sectors regarding employment generation. The major findings of the primary survey, across all the five labour intensive industries were shortage of skilled workforce, lack of training centers across different towns to provide trained labour, issues of infrastructure development and lack of easy finance. The other sectors specific findings were inability to diversify export basket to more nontraditional items and inability to upgrade to modern technology in sports goods; seasonality of work, , the need for employing more women workers to enhances firms efficiency of operations, lack of apparel parks, lack of participation of export promotion councils in apparel; lack of output growth in bicycle industry owing to raising input cost and unexplored exports market of Latin America and African countries for heavy bikes, shortage of power and raw material and increasing compliance costs leather industries, fragmented family business, lack of hallmarking and technology upgradation in gems and jewellery sector.

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Development Strategy for Hill Regions of Uttarakhand: Surabhi Mittal and Gaurav Tripathi

Uttarakhand, in spite of being a small state, has certain key features that make it distinct from other states of the country and highlights its potential for development. However, development has predominantly been in the plains, and the hill districts have been left behind. The state faces the challenge of promoting livelihoods to minimize migration through local employment and income generation, and to enhance the quality of life of people living in villages. To change the situation of economic and social backwardness in the these hill districts it is important to adopt a strategy based on long term planning that will take steps to counter all the problems described above. Thus the objective of the study was to identify the sectors where these hill districts have a comparative advantage and prepare the strategy for inclusive growth based on the district specific requirements. The study suggests that the development strategy for Uttarakhand hills should be based on developing brand equity under the name of Organic Green State and an Uttarakhand Brand Equity Fund should be set up. This can be achieved by working towards this common goal through infrastructure development, tourism promotion, agriculture diversification, poultry- and wool-based livelihoods, and SMEs based on the above that capture linkages with industry and tourism. This study was sponsored by CII, Dehradun. The results of the study are available as ICRIER Working paper No. 216

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Impact of Preventive Healthcare on Indian Industry and Economy - Alka Chadha, Garima Malik and Ali Mehdi

The objective of this study is to examine how corporates practise preventive healthcare and to assess the impact of this on their profitability and competitiveness.  This was done with the help of an online survey of firms in manufacturing and services. The questionnaire asked the firms the type of prevention activities offered by them. The study suggests solutions for effective delivery of healthcare by stressing the importance of prevention through a system of vouchers issued by the employers for the benefit of employees.

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Competitiveness of the Plastic and Polymer Industry - Garima Malik and Ruchi Jain

The study is examining the current status of the plastics and polymer industry in India. Its aim is to make recommendations that will make the industry internationally competitive. A comprehensive comparison with the international plastics industry has been attempted.

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National Mineral Development Policy in an open Economy: A case study on Indian Iron Ore - A.S. Firoz

This study examines whether iron ore should be conserved for the globally competitive steel industry in India or if market forces should be allowed to play freely for the optimum allocation of resources between domestic use and exports. It concludes that the government, as well as the minerals industry, must realise the need for urgent reforms in order to attract investments and modern technology in the iron ore and steel industry and allow the full play of competitive forces to determine the nature of exports.

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Can Horticulture be a Success Story for India?- Surabhi Mittal and Gaurav Tripathi

This study examines whether India can become more integrated in global agro-trade by exporting high value horticultural products and importing staple cereals in which the country may not have a comparative advantage. It analyses recent cropping pattern shifts, past trends in production and in exports. It uses secondary data sources from the National Horticulture Board and the Directorate of Economics and Statistics. The SAFAL case study is analysed with a view to assessing the impact of changes in the Agricultural Produce Marketing Commission Act. The study also attempts to identify modalities for successful diversification of Indian agriculture.

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Effects of Global Agricultural Trade Liberalisation on Agricultural Production and Poverty in India - Surabhi Mittal

This study estimates the impact on world prices of the removal of OECD trade distortions. It also estimates the effects of changes in world prices on domestic prices in India through a price transmission model. Finally it estimates the impact of this on small farmers in India.  It has found that if subsidies are eliminated in the OECD countries it will result in world crop prices increasing 

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Governance in the Provision of Public Goods in South Asia - Arvind Virmani, Sanghamitra Sahu and Suchitra Tanwa

This study develops an index of governance based on data on public goods and examines the role of governance in the development process of India, Pakistan, Sri Lanka and the 15 States of India. It has used the Principal Component Analysis (PCA) and OLS regression method to construct the governance index over the period 1980-81 to 2003-04 as well as to assess the impact of governance on economic development.

The findings indicate that governance in Kerala, Gujarat, Tamil Nadu, Himanchal Pradesh outweigh States like Bihar, Madhya Pradesh, Orissa, and Uttar Pradesh. Similarly, among the countries considered, Sri Lanka has the best governance and Pakistan ranks the lowest. The study also found a positive relationship between quality of governance and development outcomes.            

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Emerging Trends in the Indian Textile and Clothing Sector: Post-MFA - Meenu Tewari and Manisha Gupta

This study assesses India’s emerging position in the textile sector after the elimination of quotas.  While several studies have used trade statistics to analyse shifts in the patterns of sourcing and supply in the global apparel industry after the abolition of MFA, few studies have tracked the actual responses of buyers and suppliers to the elimination of quotas, and the implications of these responses for policy supports and industry competitiveness.  This study is one of the first few to provide primary evidence on emerging patterns in the Indian textile industry in a comparative international context.

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Cost-benefit analysis of tax exemption - Aradhna Aggrawal and Sukumar Mukhopadhyaya

This study evaluates the efficiency of six major export promotion schemes in terms of their overall economic impact, namely, welfare gains vis-à-vis investment, foreign exchange and employment and revenue loss. The schemes selected for the analysis are: Special Economic Zones (SEZ) policy Export oriented Units (EOU) scheme, Software Technology Park scheme (STPI), Duty Entitlement Pass Book (DEPB), 100 percent Export Oriented Units (EOUs), and Export Promotion Capital Goods Scheme (EPCG). It quantifies the costs and benefits of these schemes and draws important policy implications. The study on SEZs makes a detailed analysis of various scenarios to estimate overall economic impact of SEZs.

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Towards a Competitive Manufacturing Sector - Rajiv Kumar and Abhijit Sen Gupta

This study analyses the existing state of the Indian manufacturing sector and identifies the core determinants of its competitiveness. It focuses on some key industries and identifies the constraints affecting their growth, employment generating potential and export performance. It also explores India’s potential for transforming itself into a hub for mass manufacturing and singles out the main constraints.

The study has found that the Indian manufacturing sector exhibits a great deal of regional variation and a marked dualism between the organized and the unorganized segments in terms of both productivity and wage levels. The level of labour absorption in the organized manufacturing sector has been weak as reflected in the declining labour intensity in this sector. Although there have been significant changes in the composition of exports in the last 20 years India remains a very small player at the global level, especially in knowledge intensive and advanced technology products. The main constraints to transformation to a hub for mass manufacturing are low levels of R&D, relative lack of skilled personnel, and relatively low FDI levels.