Fact Box: "Factory Asia"

May 6, 2013

Chief Economic Advisor Raghuram Rajan recently held that India is looking forward to introduce the concept of ‘Factory Asia’ in economy to develop rapid production networks. Factory Asia is concentrated where infrastructure is good and there is a large pool of untapped potentially productive labour.
What is the concept of “Factory Asia”?
The concept works on the model of manufacturing and producing parts and components by various Asian developing economies to utilise resources efficiently which are assembled into finished product and exported to developed economies. Thus, Factory Asia refers to the model of regional production networks connecting different Asian economies, producing parts and components that are then assembled, with the final product shipped largely to advanced economies.
It started with economic liberalization in China in the late 1980s, aided by rapid development of production networks. The group comprises, among others, China, Japan, South Korea and Indonesia.
Objectives:

Boost the exports,
Increase employment opportunities,
Lift millions of population out of poverty.

As per Rajan there are four challenges that will take India to Factory Asia:

Supply Chain Management: Provide organised infrastructure to smoothen inter and intra state as well as country connectivity Project costing $90 billion initiated to develop the 1483Km DMIC (Delhi-Mumbai Industrial Corridor) which will have six-lane highways, nine industrial townships, three ports and six airports.
Making India Investor friendly: As Indian investors are risk-averse, effort is required to bring awareness of potential growth to investors facilitating utilisation of undeployed resources.
Reforming Labour laws: Easing of stringent labour laws to increase employment rate.
Skill development: Invest in skills, technologies and private sector to move beyond low cost manufacturing and ensure economic growth.

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