India’s manufacturing sector faces many hurdles

The Dollar Business Bureau

India's manufacturing sector continues to face significant hurdles that, in future, will prevent it from achieving government targets and executing its economic potential, says a BMI report.

"Weak infrastructure has long served as a drag on India's manufacturing performance. Inefficient national rail networks impede access to coal as well as the delivery of imported raw materials to inland factories," the BMI Research, a Fitch group company, said in a report.

The study underscored that the country’s manufacturing sector, along with infrastructure, will have to face myriad regulations which will result in fragmented land and labour markets. “Reforms have stalled in these areas partly due to the government's lack of majority in the upper house," it said.

The study suggested Prime Minister Narendra Modi’s administration to form a consensus among the country’s diverse regional parties, in order to ease land acquisition process.

The regulatory burden, especially in labour markets, will also offset India's cost competitiveness, it said.

These bottlenecks to manufacturing investment will limit its expansion and hinder India’s ambitions to catch-up with other global manufacturing countries like China and Germany.

It highlighted that there is plenty of room in the improvement of India's energy grids. The expected time for an establishment to access electricity has come down since 2013, but continues to be high than other nations at 90 days.