Directions: Read the following passage and answer the questions that follows.
Top politicians of India’s ruling coalition boast that China’s economic crisis should be viewed as an opportunity for India to capture a bigger global export share in manufacturing and grow faster. With India being the only BRIC nation growing by 7% plus, it’s not long before India will overtake China economically, they argue.
In 2014, China’s GDP at current prices was US$ 10.38 trillion – roughly five times of India’s GDP at US$ 2.04 trillion. Even if India grows at CAGR of 10% (its best case scenario) while China 3% (its worst case scenario), it won’t be able to overtake China before 2038 counter the critics.
Besides, India’s record of missing global opportunities is far more impressive than not missing them. Yet, these politicians have a chance to make the claim right. India can take on China, but not by blindly following the now obsolete export-led growth model that made China the world’s factory.
Why?
Because India is not China, and today’s world is quite different from what it was, when China embarked on its export-led growth path. India is a multi-party democratic country with all kinds of pulls and pressures that make effective implementation of Chinese growth model difficult, if not impossible.
Export led growth strategy – aided by artificially undervalued currency – won’t work when world trade grows at slower rates than world GDP. And each country is relying on currency devaluation to capture a bigger slice of sluggish global demand. Mega trade pacts like TPP and TTIP will further deprive India from accessing overseas markets.
Moreover, India can’t compete with LDCs in low-cost-labour-intensive manufacturing for long. Its labour cost is lower than China but far higher than say countries like Bangladesh, Ethiopia or Myanmar. If not anything else, India’s badly conceived trade pacts will kill low-tech manufacturing that depends upon labour cost advantage.
Well, it doesn’t make much difference to India’s growth ambition as there’s not much money left in low-tech manufacturing such as leather foot wear or apparel making. Instead, it’s the pre and post manufacturing services that capture maximum value in global value chain compared to actual manufacturing that accounts for as low as 3%. Pre-manufacturing services comprise activities like research and development, design and testing. Post-manufacturing services capture value through branding, marketing and retailing.
India has a handful of strong brands and record of its service providers barring some exceptions is not very impressive. Moreover, creating and building brands is a long drawn process that India can’t afford either in terms of time or money if it really wants to overtake China any time soon.
Many of India’s key exports e.g. apparels are nothing but low-margin contract manufacturing that does not make much money for manufacturers because manufacturers don’t own the brands. A suit being retailed for US$ 2500 in Tokyo or London gives just US$ 250 to its makers in Tirupur. That’s also the key reason why top Indian manufacturers of consumer goods want to sell in domestic markets rather than export despite all kinds of incentives by government.
Ports and logistics related inefficiencies further squeeze exporters’ margins. Moreover, India also has to deal with manufacturing through robotics and 3D printing that are going to take away its comparative advantage that comes from possessing abundant supply of cheap labor. Low skilled – low productive labor will take India only so far.
India should rather focus on high value jobs in pre-manufacturing services like research, engineering and design by capitalizing on its comparative advantage – actual or potential – given the availability of low cost technically qualified manpower. Internet of Things is another big opportunity for India to tap. Only then we can even think of overtaking China.
That in turn calls for overhauling (and not incremental improvement) of education system which is focused on rote learning and scoring high marks in exams, and not on promotion of questioning and critical thinking – prerequisites for innovation. Further, government should focus its energy on five or six strategic sectors that have strong backward and forward linkages with other sectors. These sectors in my opinion are: Automobile, Defence, Housing & Infrastructure, Pharmaceuticals, Electronics, and Agro-processing & Retail.
India’s automobile sector depends on duty protection. Defence production is so shackled that private sector participation is nil. Infrastructure sector is marred by under-bidding and difficulties in getting land and environmental clearances. Housing sector is a good example of how lack of effective regulation can limit the growth potential of a sector. Unscrupulous builders are taking their customers for a ride without any accountability. That reduces its multiplier effect for India’s overall economic growth.
- What is the reason for the plight of Indian apparel manufacturers?
A) Their products fail to compete with products on foreign markets.
B) They don’t own the brands.
C) They have to pay major portion of their profits to local goons.
D) They don’t use the latest technology.
E) None of the above
- Why does India fail to get the advantage of labour abundance?
A) because the labourers are not skilled enough to be engaged iin manufacturing
B) because the latest technology helps produce cheaper and better products
C) because there is lack of required infrastructure
D) because the manufacturers prefer to eploy foreign-trained workers
E) None of the above
- Which of the following statement doesnot represent the true picture with regard to the economy of India and that of China/
A) In 2014, India’s GDP was one-fifth that of China.
B) India won’t be able to overtake China in terms of compound annualgrowth rate (CAGR) before 2038
C) No BRIC nation other than Inia has registered a 7 % plus growth rate in recent years
D) India cannot take on China by blindly folowing following the growth model of China
E) None of the above
- Which of the following statements is not true in the context of the passage?
A) Each country is depending on currency devaluation to capture a bigger slice of the sluggish global demand.
B) Top politicians of India’sruling coalition claim that India will overtake China economically in near future.
C) the infrastructure sector is marred by under-bidding and difficultie in getting environmental clearances.
D) Only export -led growth strategy can work when world trade grows at slower rarte than world GDP
E) None of these
- Why can India not overtake China in terms of GDP before 2038?
A) because India is a developing nation and its relation with neighboring countries is not so good
B) because India is multi-party democracy with all kinds of pulls and pressures that make effective implementation of the Chinese growth model difficult
C) because there is lack of state-of-the-art technology and skilled labour who can produce desired products at cost-effective rate
A) Only A
B) Only B
C) Only C
D) Only A & B
E) All A,B & C
- Which of the following is more valuable in global value chain? Answer in the context of the passage.
A) cost of production
B) price fixation and freebies
C) pre- and post- Manufacturing services
A) Only A
B) Only B
C) Only C
D) Only A & B
E) All A, B & C
- What, according to the author, should India do to accelerate its export growth? Answer in the Context of the passage
A) it should do away with the old system of rote learning and focus on questioning and critical thinking- prerequisite for innovation
B) it should focus on high value jobs in premanufacturing services
C) it should focus on inter-linked sectors such as automobiles defense, housing and infrastructure, pharmaceuticals, electronics and agro-processing
A) Only A & B
B) Only B & C
C) Only A & C
D) Only B
E) All A , B C
- Which of the following with respect to different strategic sectors is not true in the context of the given passage?
A) the govt. Doesnot allow private sector to enter in defence production
B) the lack of effective regulation has limited the growth potential of housing sector
C) India’s automobile sector depends on duty protection
D) the greatest problem for infrastructure is over-bidding
E) None of the above
- Choose the word which is most similar in meaning with the word squeeze as used in the passage.
A) reduce
B) dissipate
C) enhance
D) mobilise
E) transfer
- Choose the word which is most similar in meaning with the word obsolete as used in the passage.
A) in vouge
B) no longer in use
C) out dated
D) archaic
E) outmoded
7/10 thanks mam bt hum etna piche china se omg
3rd mai B to passage mai given hai na than?
6/10
are yha kisi or ko b lgta h kya typo ka.. muje bahut sare words mai lgta h,who else
badiya passage ty Bhawani Pradhan mam
nice passage
had some confusion in No.3 pls explain
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