McKinsey scripts 7-point India growth plan

McKinsey has prescribed a seven-point agenda for the government to spur growth in the manufacturing sector. According to a study conducted by CII and McKinsey, India should reform indirect tax, reduce import duties to 10 per cent within a specified time frame, push SEZ (special economic zone) model, carry out power reform, labour reform, dereserve SSI sector and lower interest rate.

Shirish Sankhe, partner, McKinsey & Company, said at a seminar organised by CII in Kolkata on Tuesday said that labour productivity in China grew by 8.9 per cent from 1990 to 1999, which had been a major driver of the country's GDP growth during the same period.

Comparing with India, Sankhe said that China's growth was driven by the existence of a large domestic sector. In fact, the domestic economy accounted for two-thirds of the difference in Indian and Chinese per capital GDP.

The study said that China's high domestic consumption levels were a result of low prices which were lesser by 20 per cent to 40 per cent than Indian prices across most products.

Dismissing the belief that Chinese products were of low quality, the McKinsey official said the reality was that products of several Chinese manufacturers were of world-class quality.

Some of the Chinese companies were enjoying good market globally, which would not have been without good quality product, he pointed out.

He noted Indian companies must achieve lower price point to encourage domestic consumption.

On Chinese exports, he said FDI was a major driver, with foreign-invested enterprises accounting for more than 50 per cent of all exports in 2000.