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DEBATE- Is a Strong Manufacturing Base Essential for a Successful Economy? FOR Economies cannot succeed without having a strong manufacturing base. It means competitive and innovative Aditya Polisetty processes which PGP2012-14 are at par with the global competition so that they can develop export markets and sustain their strong hold in the domestic market. When we look at countries like the US (for the past century), Russia, Germany and now China (for past 2 decades) we do not fail to recognize that all of them are strong economies and manufacturing strong holds. Economies today are largely dependent on the service sector (banking, insurance, healthcare, retail, IT etc.).One should not fail to acknowledge that many of them are manufacturing based services (transportation, telecommunication, IT, insurance, etc). Generally services are mostly non tradable (except few services like banking, engineering) as they still require the service provider and the consumer to be at the same place, which requires immigration of personnel which, today, many countries discourage. This creates a scenario of low balance of payments, which on long term is not good for a nation’s economy Historically manufacturing sector have been providing jobs to people with lower education and skill sets and this is still true in developing economies. However, good education and skill sets do fetch handsome salaries. This can be attributed to the fact that the productivity in the manufacturing industry is high. This disposable income generates the demand for services and provides scope for growth. The manufacturing sector now-a-days is mainly dependent on economies of scale. Lower production costs give advantage in the international trade and strategic sourcing which is evident in the countries like China and South Korea. This will help in growth of a nation by generating not only revenues but also by providing employment at various levels. Economists across the world believe that developing nations like the BRIC countries should emphasize on the development of competent manufacturing sector. Large internal demands and good export markets should help them to keep good balance of payments without which growth of economies is impossible. Taking into consideration the above view points, it would not be correct to say “manufacturing good, services bad”, it’s only to drive home the point that ignoring or undervaluing the manufacturing sector means invitation for our peril. 25 NOVEMBER 2012
DEBATE- Is a Strong Manufacturing Base Essential for a Successful Economy? AGAINST At present, the essential factors in measuring an economy’s progress, quality and future is the success and vitality of its service sector and not the manufacturing sector. Service sector is the primary wealth creator in developed and developing countries, owing to more that 60% of the world’s GDP. Countries all over the world have shown rising value-added share of services industry while the share of manufacturing industry has declined. Advanced economies of the world like the U.K., the U.S., Canada, etc which were predominantly manufacturing economies, have shown declining share of manufacturing sector, an indication of the inevitable post-industrialization shift. In the growing economies of the world, the service sector has grown rapidly during its transition to market economies. At the same time, the interdependencies of manufacturing and service sector are increasing. Almost 90% of the added value in products from the industry comes from services. Even the machine and plant producers are more dependent on maintenance contracts, which constitute the largest share of their turnovers rather than the actual machines. Investment goods sector is an example of firms that exist solely on services. Sustainability gives service industry an edge over manufacturing industry. The service industry is more dependent on human capital rather than natural capital when compared to manufacturing industry. This reduces the pressure on local, regional and global environments. This also prompts the countries to put emphasis on creating educated and trained workers S.Sreejith PGP2012-14 which in turn makes the global development sustainable, both environmentally and socially. Service-oriented economies are not necessarily prone to low balance of payment. Deterioration of current account of economies is not always a result of a declining manufacturing sector or an increasing service sector, but also the fiscal and monetary policies pertaining in that economy. The niches beyond manufacturing make the service industry the easiest way to rapid and explosive development for poor and developing countries. This development can be sustained because there is a huge room for catch up and convergence. In turn, the competition in manufacturing industry and high educational levels in the developed economies will push it towards service industry. Thus it can be established that sustainable economic success can be achieved by a predominantly service based economy with a comparatively small manufacturing base. 26 NOVEMBER 2012
Page 2 and 3: CONTENTS Editorial Director’s Mes
Page 4 and 5: Dinesh Kumar Likhi, Prof. Koilakunt
Page 6 and 7: 10-Step Methodology for Deploying T
Page 8 and 9: human resource management systems d
Page 10 and 11: Operations Strategy Dr. Dinesh Likh
Page 12 and 13: People are assets whose value can b
Page 14 and 15: References [1]. Robert H. Hayes and
Page 16 and 17: environment including energy effici
Page 18 and 19: Dark Ages of Manufacturing Industry
Page 20 and 21: Also the policy makers do not bothe
Page 22 and 23: product to the government at a frac
Page 24 and 25: various public and private sector c
Page 26 and 27: Mr. J L Aggarwal: The steel industr
Page 28 and 29: Q) Sir, the term PMI is very common
Page 32 and 33: Summer Internship Prashant Meshram
Page 34 and 35: Summer Internship Abhijeet Srivasta
Page 36 and 37: learnt by observing Toyota over the
Page 38 and 39: Crossword Across 1. Type of manufac
Page 40 and 41: Solution to Crossword Team Strive 3

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