INDIA

The Economy of India is the seventh-largest in the world by nominal GDP and the thirdlargest by purchasing power parity(PPP). The country is one of the G-20 major economies, a
member of BRICS and a developing economy among the top 20 global traders according to
the WTO.
According to the Indian Finance Ministry the annual growth rate of the Indian economy is
projected to have increased to 7.3% in 2014-15 as compared with 6.9% in the fiscal year 201314. In an annual report, the IMF forecast that the Indian Economy would grow by 7.5% percent in
the 2015-16 fiscal year starting on April 1, 2015, up from 7.2% (201415).
India was the 19th-largest merchandise and the 6th largest services exporter in the world in
2013; it imported a total of $616.7 billion worth of merchandise and services in 2013, as the 12thlargest merchandise and 7th largest services importer. The agricultural sector is the largest
employer in India's economy but contributes a declining share of its GDP (13.7% in 2012-13).
Its manufacturing industry has held a constant share of its economic contribution, while the
fastest-growing part of the economy has been its services sector which includes, among
others, the construction, telecommunications, software and information technologies,
infrastructure, tourism, education, health care, travel, trade, and banking industries. [6]
The south western state of Maharashtra contributes the highest towards India's GDP among all
states, while Bihar is among its poorest states in terms of GNI per capita.Mumbai, Maharashtra is
known as the trade and financial capital of India.

Exports

$313.2 billion: merchandise exports

$150.9 billion: services exports
$464.2 billion: Total (2013)[19]

Export
goods

Main
export
partners

software, petrochemicals, agriculture products, jewellery, engineering goods,

[20]

pharmaceuticals, textiles,chemicals, transportation, ores and other commodities[17]

European Union 16.7%(2013)[19]
United States 12.5%
United Arab Emirates 10.1%
China 4.9%

Singapore 4.2%
Imports

$466 billion: merchandise imports

$124.6 billion: services imports
$590.6 billion: Total (2013)[19]

Import
goods

Main
import
partners

crude oil, gold and precious stones, electronics, engineering goods,[20]chemicals, plastics, coal and ores, iron
and steel, vegetable oil and other commodities[17]
China 11.1% (2013[19])
European Union 10.6%
Saudi Arabia 7.9%
United Arab Emirates 7.1%
Switzerland 5.3%

FDI stock Inflows: $223.7 billion

Outflows: $54.6 billion (2009-2013)[21]

Manufacturing comparison

News article

Why India Must Revive Its Manufacturing Sector

With a rising urban population, the country needs to look beyond its
services sector
A lot has been said in the past decade about the ascent of emerging economies (EME)
in the global South. Their sustained growth and attractiveness as a destination for
investment has drawn much academic and policy attention. India, as part of BRICS
(the trailblazing manifestation of the EME phenomenon), and also as the largest
democracy, has been at the centre of much of the praise lavished on these EMEs. A
lot of the optimism surrounding India owed to its bulging young population, poised
to rise to 64 percentage of the countrys total population by 2020, a stark contrast to
greying EU and Japan.

However, there is a gloomier side to this perceived demographic dividend, one that
could trump all sense of cheer: the prospect of increasingly unmanageable
unemployment in a country forecast to have almost 1.7 billion people by 2050. At
present, 12 million people enter the Indian workforce each year. Substantial shares of
them are low skilled workers, many having migrated from rural India to the urban
centres. Jobs are not being created at a concomitant pace. Meanwhile, 40 percentage
of Indias population are expected to be living in cities by 2030.
Thanks to a slowdown in the Indian economy in the last year or so, investments have
stalled and the government has cut back on capital expenditure to ensure fiscal
prudence. An economic contraction and resulting stagnation or loss of jobs now
looks inevitable.
Indias unique positioning in the global marketplace as a services-led economy is in
contrast to most other developing economies, including China, which took the
traditional route of labour-intensive manufacturing followed up by higher value
added part-labour, part-capital intensive manufacturing. This has come back to
haunt India. While the services sector employing decently skilled English-speaking
workers has had its share of glory, it cannot provide employment to the teeming
masses. The scale and nature of employment that is required to employ people with
limited skills and education can only be provided by mid- and low-end
manufacturing.
After India liberalized in 1991, the services sector was long the fastest growing part of
the economy, contributing significantly to GDP, economic growth, international
trade and investment. Manufacturing contributes just 16 percentage to Indias GDP,
compared to a 56.5 percentage contribution by services. According to the Reserve
Bank of India (RBI), Indias ITeS/BPO exports rose 37 percentage in 2012-13. While
manufacturing exports continue to perform well, most of it remains in the skillintensive sector (automotive, engineering, etc.). This does nothing for the large
swathe of low-skilled workers who are either unemployed or labouring away in
hazardous, inhumane conditions beyond the purview of established formal state
regulations. Moreover, manufactured goods as a share of total Indian exports pales
in comparison to the level in China.
The policymaking focus has now finally shifted to the manufacturing sector, with the
government instituting a National Manufacturing Policy in 2011. The policy laid out
plans to boost the manufacturing sector by raising its contribution to GDP to 25
percentage and creating 100 million new jobs by 2025.
Even today, Indias share of global manufacturing stands at little over 2 percentage.
China has meanwhile over the years positioned itself as the workshop of the world,
accounting for 22.4 percentage of global manufacturing. For India to achieve its
stated goals of reviving the manufacturing sector and providing jobs to the tens of
millions of unemployed youth, IT will need massive investment, including major
contributions from foreign investors. What will be particularly helpful to Indias job
creation needs is vertical foreign direct investment (FDI), wherein production in the

host economy is intended not just to serve the local (host) economy but also global
exports. Such FDI is more employment intensive and also responds positively to
quality infrastructure. This would also ensure that India is seen as more than just a
consumer economy, where the primary category of FDI is horizontal or marketseeking.
Staying with the concerns of the workforce, reforming existing labour laws, while
politically difficult, will eventually be in the interests of the populace. In nonagricultural urban India, where almost 70 percentage of those employed fall beyond
the registered manufacturing sector (i.e., the informal economy), there is an urgent
need to not only formalize these professions but also encourage long-term, big ticket
investments in large-scale manufacturing in order to provide meaningful
employment to low-skilled workers. If India wants to avoid unemployment-spurred
social mayhem, this is the approach to take.
The most urgent need is to upgrade Indias physical infrastructure to encourage
domestic and foreign direct investment in the manufacturing sector. This will absorb
the rural labour surplus that is migrating to the cities by providing employment in
labour-intensive, less technology-intensive manufacturing, regulated by humane
labour laws catering to the contemporary needs of the economy

BRAZIL
Brazil has the tenth largest economy by nominal GDP in the world as of 2015, and seventh
largest by purchasing power parity. The Brazilian economy is characterized by moderately free
markets and an inward-oriented economy.
Brazils economy is the largest of Latin America and the second largest in the western
hemisphere. From 2000 up to 2012, Brazil was one of the fastest-growing major economies in
the world, with an average annual GDP growth rate of over 5%, with its economy in 2012
surpassing that of the United Kingdom, making Brazil the world's sixth largest economy. Brazil's
economy growth has however decelerated in 2013 and had almost no liquid growth throughout
2014, and the country's economy is expected to contract by 1% in 2015.
According to the World Economic Forum, Brazil was the top country in upward evolution
of competitiveness in 2009, gaining eight positions among other countries, overcoming Russia
for the first time, and partially closing the competitiveness gap with India and China among
the BRIC economies. Important steps taken since the 1990s toward fiscal sustainability, as well

as measures taken to liberalize and open the economy, have significantly boosted the countrys
competitiveness fundamentals, providing a better environment for private-sector development.
In 2012 Forbes ranked Brazil as having the 5th largest number of billionaires in the world, a
number much larger than what is found in other Latin American countries, and even ahead
of United Kingdom and Japan.

Exports

$256 billion (2012 est.)[9]

Export goods

transport equipment, iron ore,soybeans, footwear, coffee, autos

Main export
partners

China 17.0%
United States 11.1%
Argentina 7.4%
Netherlands 6.2% (2012 est.)[10]

Imports

$238.8 billion (2012 est.)[9]

Import goods

machinery, electrical and transportequipment, chemical products, oil,automotive parts, electronics

Main import
partners

China 15.4%
United States 14.7%
Argentina 7.4%
Germany 6.4%
South Korea 4.1% (2012 est.)[11]

Gross external $397.5 billion (31 December 2011 est.)

debt

GDP Contribution from Manufacturing:

NEWS :

Brazils Manufacturing Growth Puzzle

For years, protectionist policies helped Brazil build a fortress around its manufacturing base,
which profited from a rapidly expanding domestic market over the past decade. Automakers,
home appliance manufacturers, and their supplying industries have seen their output rise as
consumers went on a shopping spree motivated by a surge in employment and inflation-adjusted
incomes. Ever-rising purchasing power and the best credit conditions in decades fuelled the
demand for durable goods and housing, in turn stimulating most intermediate industries. A sort of

virtuous cycle led to a broad-based manufacturing expansion that was interrupted in the wake of
the 2008 global economic crisis. It took Brazilian factories more than a year to recover pre-crisis
output levels, and manufacturing subsequently stopped growing (Figure 1). Three years have
passed without genuine manufacturing growth in Brazil, despite the governments protectionist
stance that is ingrained in every sector of the economy.

Manufacturing activity has generally mimicked the path of the overall economy in Brazil, an
expected outcome in a protected environment. Figure 1 shows the high correlation between
Brazils GDP proxy and manufacturing production index between 2003 and 2008. The 2008 crisis
seemingly created a structural break, leading these two variables on divergent paths once
activity reached pre-crisis levels in early 2010. While manufacturing production stopped growing
in March 2010, Brazils economy kept expanding, although at a more moderate rate. Surprisingly,
this growing disconnect between manufacturing and GDP has been taking place in the midst of a
surge in protectionist policies.
Many observers ask how Brazils economy can grow without the expansion of manufacturing.
The answer is fairly straightforward: Chinas strong demand for iron ore and agricultural
commoditiesnotably soybeansexplains most of the countrys GDP improvement. Growth in
the mining and agricultural sectors and associated services helped Brazils economy keep afloat
in the last three years.
Most important to MAPI member companies is why manufacturing has been so sluggish in this
time frame. From a macro point of view, sustained currency strength and low overall productivity
have hurt the competitiveness of local factories, making Brazils manufactured goods relatively
more expensive than imports. Currency strength explains part of the problem, since substituting
locally made goods for relatively cheaper imports is limited by protectionism. So, if imports are
deterred, why is it that local manufacturers are not expanding output to keep up with rising
demand? A careful examination of most credible surveys among Brazils captains of industry
suggests that a lack of qualified labour is at the heart of the manufacturing slump, which in turn
helps explain why GDP growth is concentrated in capital-intensive sectors such as agriculture
and mining.
Skilled labour is in short supply and is one of the most significant growth barriers for Brazils
labour-intensive manufacturing industry. Industrial surveys undertaken by the most prestigious

research institutions in Brazil over the last few years ranked the lack of qualified labour as one of
the most critical barriers to manufacturing growth, along with the high tax burden. With the
current tax reductions benefiting a broad range of manufacturing industries, the National
Confederation of Industrys latest surveys have shown a decline in the percentage of
respondents listing the tax burden as one of the major problems facing factories. On the other
hand, the proportion of respondents calling out the lack of qualified labour continues to rise. The
organizations quarterly Manufacturing Costs report reveals that the cost of labour is rising at
least twice as fast as the overall cost of manufacturing index, and isby farthe indexs fastestgrowing subcomponent. While the overall cost of manufacturing index grew 6.1 percentage in
2011 and 6.6 percentage in 2012, the cost of labour surged 10.5 percentage and 11.2
percentage, respectively.[1]
Historically and currently, the well-known Custo Brasilthe cost of doing business in Brazil
was the main culprit of the lack of sustained economic growth. Firms must contend with one of
the highest tax burdens in the world, poor infrastructure, prohibitive credit conditions, expensive
energy, and a lack of qualified labour. The government has recently focused on driving
competitiveness in the economy by lowering taxes and energy costs. It has engaged in a series
of concession schemes for private sector companies to develop roads, railways, and airports.
[2]
Infrastructure takes time to be developed, however, so the benefits will take time to be realized.
Except for some increased budget allocations for education that may pay off years from now,
nothing can be done in the short- and medium-term to generate the quantity and quality of labour
desperately needed for growth and lower inequality readings.
Amid the industrial complexs standstill and the governments initiatives to foster local
manufacturingprotectionist policies, tax reductions, lower energy costs, etc.tensions are
rising between public officials and the countrys captains of industry. The most powerful trade
association in Brazil, the Federation of Industries of the State of So Paulo (FIESP), is facing
increased government pressure to ensure a pickup in production levels and employment. The
government believes that it is making overly generous efforts to protect and stimulate local
manufacturing without an appropriate response from industry. Some officials are inclined to open
up sectors to retaliate against what they see as an indolent local industrial bourgeoisie. While a
growing number of authorities in Brazil think that competition could help wake up a dormant
local industry, the majority of high-ranked officials are afraid of the employment consequences of
trade liberalization, and prefer not to open the fortress.
The truth is that there are structural barriers to expand Brazils manufacturing industry in the
short- and medium-term. A lack of qualified labour and poor infrastructure will keep production
costs elevated for some time, since there is no easy fix. Currency strength does not help, either,
but currency devaluation is not a solutionthe competitive gains of a weaker real would be
quickly offset by rising inflation because of higher costs of imported intermediate goods. It seems
that absent a major influx of qualified workersunlikely in an inward-looking societygrowth can
be achieved only through the opening of the economy; the prevailing ideology in Brasilia goes
against that, however. Our upcoming forecasts for Brazil suggest that an on-going favourable
cycle (partly explained by public and private investments related to the 2014 World Cup and
2016 Olympic Games) will foster manufacturing production in the next few quarters. Tensions will
thus decline, but the underlying problems will likely continue to limit the growth of the local
industrial complex and open the door for eventual policy shifts.

BRAZIL
Brazil has the tenth largest economy by nominal GDP in the world as of 2015, and seventh
largest by purchasing power parity. The Brazilian economy is characterized by moderately free
markets and an inward-oriented economy.
Brazils economy is the largest of Latin America and the second largest in the western
hemisphere. From 2000 up to 2012, Brazil was one of the fastest-growing major economies in
the world, with an average annual GDP growth rate of over 5%, with its economy in 2012
surpassing that of the United Kingdom, making Brazil the world's sixth largest economy. Brazil's
economy growth has however decelerated in 2013 and had almost no liquid growth throughout
2014, and the country's economy is expected to contract by 1% in 2015.
According to the World Economic Forum, Brazil was the top country in upward evolution
of competitiveness in 2009, gaining eight positions among other countries, overcoming Russia
for the first time, and partially closing the competitiveness gap with India and China among
the BRIC economies. Important steps taken since the 1990s toward fiscal sustainability, as well
as measures taken to liberalize and open the economy, have significantly boosted the countrys
competitiveness fundamentals, providing a better environment for private-sector development.
In 2012 Forbes ranked Brazil as having the 5th largest number of billionaires in the world, a
number much larger than what is found in other Latin American countries, and even ahead
of United Kingdom and Japan.

Exports

$256 billion (2012 est.)[9]

Export goods

transport equipment, iron ore,soybeans, footwear, coffee, autos

Main export
partners

China 17.0%
United States 11.1%
Argentina 7.4%
Netherlands 6.2% (2012 est.)[10]

Imports

$238.8 billion (2012 est.)[9]

Import goods

machinery, electrical and transportequipment, chemical products, oil,automotive parts, electronics

Main import
partners

China 15.4%
United States 14.7%
Argentina 7.4%
Germany 6.4%
South Korea 4.1% (2012 est.)[11]

Gross external $397.5 billion (31 December 2011 est.)

debt

GDP Contribution from Manufacturing:

NEWS:

Brazils Manufacturing Growth Puzzle

For years, protectionist policies helped Brazil build a fortress around its manufacturing base,
which profited from a rapidly expanding domestic market over the past decade. Automakers,
home appliance manufacturers, and their supplying industries have seen their output rise as
consumers went on a shopping spree motivated by a surge in employment and inflation-adjusted
incomes. Ever-rising purchasing power and the best credit conditions in decades fuelled the
demand for durable goods and housing, in turn stimulating most intermediate industries. A sort of
virtuous cycle led to a broad-based manufacturing expansion that was interrupted in the wake of
the 2008 global economic crisis. It took Brazilian factories more than a year to recover pre-crisis
output levels, and manufacturing subsequently stopped growing (Figure 1). Three years have
passed without genuine manufacturing growth in Brazil, despite the governments protectionist
stance that is ingrained in every sector of the economy.

Manufacturing activity has generally mimicked the path of the overall economy in Brazil, an
expected outcome in a protected environment. Figure 1 shows the high correlation between
Brazils GDP proxy and manufacturing production index between 2003 and 2008. The 2008 crisis
seemingly created a structural break, leading these two variables on divergent paths once
activity reached pre-crisis levels in early 2010. While manufacturing production stopped growing
in March 2010, Brazils economy kept expanding, although at a more moderate rate. Surprisingly,
this growing disconnect between manufacturing and GDP has been taking place in the midst of a
surge in protectionist policies.
Many observers ask how Brazils economy can grow without the expansion of manufacturing.
The answer is fairly straightforward: Chinas strong demand for iron ore and agricultural
commoditiesnotably soybeansexplains most of the countrys GDP improvement. Growth in
the mining and agricultural sectors and associated services helped Brazils economy keep afloat
in the last three years.
Most important to MAPI member companies is why manufacturing has been so sluggish in this
time frame. From a macro point of view, sustained currency strength and low overall productivity
have hurt the competitiveness of local factories, making Brazils manufactured goods relatively
more expensive than imports. Currency strength explains part of the problem, since substituting
locally made goods for relatively cheaper imports is limited by protectionism. So, if imports are
deterred, why is it that local manufacturers are not expanding output to keep up with rising
demand? A careful examination of most credible surveys among Brazils captains of industry
suggests that a lack of qualified labour is at the heart of the manufacturing slump, which in turn
helps explain why GDP growth is concentrated in capital-intensive sectors such as agriculture
and mining.
Skilled labour is in short supply and is one of the most significant growth barriers for Brazils
labour-intensive manufacturing industry. Industrial surveys undertaken by the most prestigious
research institutions in Brazil over the last few years ranked the lack of qualified labour as one of
the most critical barriers to manufacturing growth, along with the high tax burden. With the
current tax reductions benefiting a broad range of manufacturing industries, the National
Confederation of Industrys latest surveys have shown a decline in the percentage of
respondents listing the tax burden as one of the major problems facing factories. On the other

hand, the proportion of respondents calling out the lack of qualified labour continues to rise. The
organizations quarterly Manufacturing Costs report reveals that the cost of labour is rising at
least twice as fast as the overall cost of manufacturing index, and isby farthe indexs fastestgrowing subcomponent. While the overall cost of manufacturing index grew 6.1 percentage in
2011 and 6.6 percentage in 2012, the cost of labour surged 10.5 percentage and 11.2
percentage, respectively.[1]
Historically and currently, the well-known Custo Brasilthe cost of doing business in Brazil
was the main culprit of the lack of sustained economic growth. Firms must contend with one of
the highest tax burdens in the world, poor infrastructure, prohibitive credit conditions, expensive
energy, and a lack of qualified labour. The government has recently focused on driving
competitiveness in the economy by lowering taxes and energy costs. It has engaged in a series
of concession schemes for private sector companies to develop roads, railways, and airports.
[2]
Infrastructure takes time to be developed, however, so the benefits will take time to be realized.
Except for some increased budget allocations for education that may pay off years from now,
nothing can be done in the short- and medium-term to generate the quantity and quality of labour
desperately needed for growth and lower inequality readings.
Amid the industrial complexs standstill and the governments initiatives to foster local
manufacturingprotectionist policies, tax reductions, lower energy costs, etc.tensions are
rising between public officials and the countrys captains of industry. The most powerful trade
association in Brazil, the Federation of Industries of the State of So Paulo (FIESP), is facing
increased government pressure to ensure a pickup in production levels and employment. The
government believes that it is making overly generous efforts to protect and stimulate local
manufacturing without an appropriate response from industry. Some officials are inclined to open
up sectors to retaliate against what they see as an indolent local industrial bourgeoisie. While a
growing number of authorities in Brazil think that competition could help wake up a dormant
local industry, the majority of high-ranked officials are afraid of the employment consequences of
trade liberalization, and prefer not to open the fortress.
The truth is that there are structural barriers to expand Brazils manufacturing industry in the
short- and medium-term. A lack of qualified labour and poor infrastructure will keep production
costs elevated for some time, since there is no easy fix. Currency strength does not help, either,
but currency devaluation is not a solutionthe competitive gains of a weaker real would be
quickly offset by rising inflation because of higher costs of imported intermediate goods. It seems
that absent a major influx of qualified workersunlikely in an inward-looking societygrowth can
be achieved only through the opening of the economy; the prevailing ideology in Brasilia goes
against that, however. Our upcoming forecasts for Brazil suggest that an on-going favourable
cycle (partly explained by public and private investments related to the 2014 World Cup and
2016 Olympic Games) will foster manufacturing production in the next few quarters. Tensions will
thus decline, but the underlying problems will likely continue to limit the growth of the local
industrial complex and open the door for eventual policy shifts.