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De-Industrialization Worries: Expert Urges New Gen to Join Family Biz

Is India's manufacturing sector doomed? Jobs are disappearing, young people don't want to join the family business & the govt might not be helping enough. But there's hope with new technologies & govt programs! Can India turn things around? Watch TICE TV.

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Swati Dayal
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India's manufacturing industry is facing some tough times. May be not in terms of growth or performance but in terms of stagnation. Its contribution to the country's Gross Domestic Product (GDP) hasn't grown in over 15 years. In fact, the number of people it employs has shrunk by 31% since 2017, according to Statista. That's a loss of millions of jobs!

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In an interview with TICE TV, Mr. Shashidhar Shetty, President of the Karnataka Small Scale Industries Association (KASSIA) and MD of ProTech Engineering, said, "If you see, the manufacturing contribution to the GDP in Karnataka is coming down, while the service sector is growing. This is an alarming issue. The service sector will not be able to provide the same level of employment that the manufacturing sector provides. The manufacturing sector provides employment to all, even to those who are illiterate. But in the IT and service sectors, it is not like that.

What do you think is the reason, sir? Why are the manufacturing sector industries declining? The manufacturing sector is struggling because it is at the mercy of large industries and government PSUs. They have to compete with China, whose products are competing with Indian industries. Additionally, labor costs are rising due to the growth of the IT sector and other areas like malls, which also provide employment.

Labor costs have become very high in Karnataka. We have to compete with other states, and it's a cutthroat competition. Here, margins have decreased significantly, and the manufacturing segment is hardly making any money. The next generation, if they can get better employment in the IT sector or elsewhere, with good salaries, finds it not lucrative to join the family business. That's why the second generation is not entering the manufacturing sector, as there is no incentive for youngsters to enter the family business."

Its Manufacturing That Will Create Jobs

The problem? Manufacturing just isn't creating jobs like it used to. While a typical factory might hire dozens of workers, new tech startups often have very small teams, sometimes just a few people. This makes it tough to keep up with India's growing workforce, where millions of new job seekers enter the market each year.

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The difference is clear when you look at the numbers. Over the past 15 years, manufacturing's share of GDP has barely budged, stuck between 14% and 17%. Meanwhile, the service sector has boomed, jumping from 43% to over 50% of GDP.

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New Gen Entrepreneurs Not Taking on Family Businesses

India's young entrepreneurs are also changing the game. They're not as interested in taking over the family business as previous generations. Instead, they're striking out on their own, starting new ventures. There are a few reasons for this!One reason is the desire for innovation and creating new things. Others see gaps in the market they want to fill.

TICE News spoke to Mr. Shashidhar Shetty, President of the Karnataka Small Scale Industries Association (KASSIA) and MD of ProTech Engineering.

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He says, "New entrepreneurs are not coming forward to enter the industry. One day, we may need to import all the manufactured components from other countries. This situation will definitely occur if the current trend continues.

In one line, what message would you give to young and second-generation entrepreneurs? Before venturing into any industry, they must analyze all aspects and seek proper guidance. They should not venture into an activity just because some incentives are provided by the government. They need to analyze everything, understand the ups and downs, take proper guidance, and then venture into it. I urge the younger generation to enter the manufacturing industry because it is crucial.

The manufacturing industry will never come down because we will always need hardware. We can't manage with software alone. That is why industries and new entrepreneurs should venture into the manufacturing segment along with the service sector. That is my request to the younger generation."

Let's not forget the challenges of working in a family business, where there can be clashes between generations. There can be fixed regulations that make it difficult to innovate, and a lack of support for younger generations entering the business.

Starting your own company gives you more control and freedom. But running a family business can be rewarding too. The key is to find a way to bridge the gap between the generations and work together effectively.

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The Need for Manufacturing Startups

If India's economy is going to keep growing, it needs more manufacturing startups. Tech startups are great for innovation, but manufacturing startups are the real job creators. New factories create jobs not just on the assembly line, but also in all the businesses that support them, like transportation and restaurants.

Government Steps Up

The Indian government knows manufacturing is important. That's why they've launched a few programs to help it grow. Their National Manufacturing Policy has a goal of boosting manufacturing's share of GDP to 25% by 2025. They've also started a program called the Production Linked Incentive (PLI) scheme to help Indian companies compete globally.

The government is also offering big financial incentives, up to Rs. 18,000 crore (US$ 2.2 billion), to companies that manufacture certain products in India, like chemicals and medical supplies.

But the need is more and different. Explains Mr Shetty, "Karnataka's small industry history spans more than 100 years. Therefore, the environment here is not the same as in other states. This is why the central government needs to study each state individually and design programs suited to each state, rather than applying a one-size-fits-all policy. It is very difficult because the problems are different; just like one size cannot fit everybody, one policy cannot suit all states. Policies and implementation strategies must be state-specific. However, if such a request is made, how far they will act on it remains uncertain.

Also, sir, if we talk about the startups in your state, Karnataka has one of the most robust ecosystems in the country. The state boasts the maximum number of innovators and unicorns, and the startup sector is doing really well."

A Bright Future for Manufacturing?

There's a lot of potential for India's manufacturing which has the potential to create hundreds of thousands of new jobs in the next year. This shows what can happen when the government and businesses work together.

The future of manufacturing in India depends on a few key things. First, the industry needs to embrace new technologies to stay competitive. Second, family businesses need to find ways to work with younger generations. And finally, the government needs to keep offering strong policies to support manufacturers.

By focusing on these areas, India can build a world-class manufacturing sector that creates jobs and fuels economic growth for years to come.

Sharing experience as to why Karnataka has a robust startup ecosystem, Mr Shetty, an experienced industrialist cum industry body head, explains, "Karnataka as you know is a IT city and IT exports or our gdp share if you see, maximum is coming from IT industry. All the startups also you can see is in IT sectors only.  And one more thing, incubation centers are more in Karnataka.

And few are performing very well. They are contributing towards more to the startups by this incubation centers in Karnataka. They are working now. All the engineering colleges have incubation centers and six, seven incubation centers are performing very well. That is why startups are getting better encouragement from them for the newcomers to start the innovation. All the services they're providing, joint venture they're providing, seed capital they're providing, technology labs they're having in these incubation centers. so if some startups, new entrepreneurs come, they can have the facility with minimum cost, they can develop the product. That is the one area. Other thing is because of the it industries, IT enabled. If you see softwares or some IT based products only coming in the startups, we need to have more and more startups in traditional sectors like engineering and all."

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