A CRISIL report urges India to focus on domestic market to boost manufacturing

In view of India's low rankings in global ease of doing business, rating agency Crisil stressed on the need for India to focus on the domestic market to boost manufacturing.

In its recently released report, it said - "India can nurture growth in its manufacturing sector only if it strikes a balance between export-led and domestic demand-led growth. And that will require relentless efforts on improving the competitiveness of our manufacturing sector."

The report also cited difficulties like inadequate physical infrastructure , inflexible labour laws and an "opaque" land acquisition system coming in the way of the sector becoming more competitive.

"Even after the goods are produced, they face problems because of the inefficiencies in the system like logistical bottlenecks which results in higher costs," the report added.

It said the government will also have to ensure purchasing power across all sections for pushing the domestic consumption as well.

"Policy measures that ensure distribution of income growth to all sections will sustain domestic demand-led growth. This need not be achieved by merely subsiding the poor, but also by empowering them to participate in the growth process," Crisil said.

The report by Crisil's research wing comes nearly two years after the then Reserve Bank Governor Raghuram Rajan stressed on the need to address the domestic opportunity and not focus on the exports alone as part of the 'Make in India' programme.

"The maximum possible growth for manufacturing sector can only be realised if it strikes a balance between export-led and domestic-demand led growth," the report said.

It said domestic firms will have to ensure that their goods are competitive in the global market, failing which there can also be a rise in imports as India is open to international trade.

Crisil said the external environment is far less conducive to trade, and the country cannot do a repeat of the Asian tigers in the pre-1990s and China who successfully adopted an exports-led strategy to boost manufacturing.

It also said that the country has not been able to seize the opportunities in the global arena, pointing out that countries like Vietnam and Bangladesh have been able to increase their share in global exports even as the overall trade is falling.

Stating that China is ceding space in the low-end manufacturing, Crisil said the country can target this segment but is lagging behind both Vietnam and Bangladesh in the race.