Friday, May 18, 2007

Bizarre proposition concerning India's manufacturing sector

The McKinsey Quarterly, in an article titled "When to make India a manufacturing base", suggests that with regard to India;
Its process-engineering skills, which can be applied to such tasks as the redesign of manufacturing processes to make them more labor intensive and less capital intensive, enable multinationals to reduce their overall costs substantially. "De-automating" the production processes used in Western factories, for example, can cut the overall manufacturing cost of some components by up to 20 percent.

While the short term gain in terms of reduced production cost for the foreign company is clear, the advantage for India and its workers seems non-existent to me. The last 200 years of manufacturing improvement have revolved around making manufacturing less labor-intensive. Redesigning a process to be more labor-intensive might result in short-term employment gains for Indian workers, but they'll be then stuck doing the same task for their tenure in the job. This seems like a step backward to me, particularly considering that capital is cheap on a global basis at this time.

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