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VCIC to drive growth in India, reveals study

Visakhapatnam: The Vizag-Chennai Industrial Corridor (VCIC) holds the promise of becoming one of the key drivers of economic growth in India, according to a report of the Asian Development Bank (ADB). To turn India’s manufacturing dream into reality, VCIC should cater to industries in which it commands a comparative advantage, it said.

The report ‘Scaling New Heights: Vizag-Chennai Industrial Corridor. India’s first coastal corridor’ by Asian Development Bank (ADB), authored by Sabyasachi Mitra, Rana Hasan, Manoj Sharma, Hoe Yun Jeong, Manish Sharma and Arindam Guha released earlier this week said, “Over a 20-year period starting in fiscal year 2015-16, total output under the BAU (business as usual) scenario is expected to increase from Rs 1,110 billion to around Rs 3,000 billion. Realising the full potential of VCIC under the BIS (business induced scenario) would lead to total output of more than Rs 7,823 billion over the same period.”

Growth in BAU was forecast by correlating growth in AP with India’s projected GDP growth, whereas BIS growth in seven illustrative industries was assumed to expand at rates pursued by stakeholders.

The report said the key sectors contributing around two-thirds of VCIC’s output in FY 2035-36 under the BIS are food processing, chemicals and petrochemicals, textiles and apparel, and electronics. Manufacturing gross value added is seen climbing from Rs 168 billion in FY 2015-16 to Rs 645 billion in FY 2035-36 under the BAU scenario, and to Rs 1,275 billion under the BIS.

“No single industry will drive the development of VCIC. To help realise the untapped potential of the Indian economy, VCIC will need contributions from both capital- and labour-intensive manufacturing industries including modern and high-tech industries such as pharmaceuticals, low-tech industries such as textiles and apparel, and everything in between. This transformation will also require many types of firms, including large firms, both foreign and domestic, playing an anchoring role, as well as MSMEs engaging with one another and with larger firms to strengthen domestic supply chains and link with global value chains (GVCs),” the publication added.

However, it said, “Indian manufacturers lag behind their global peers in production planning, supply chain management, quality, and maintenance. Consequently, workers in India’s manufacturing sector are less productive than their counterparts elsewhere in Asia. To boost productivity and fully harness VCIC’s potential, a number of structural and policy constraints-at both the state and central levels-need to be tackled simultaneously. The country’s central and state governments can start by dismantling existing barriers in markets for land, labour, and infrastructure.”

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