India-another missed opportunity?

Textiles is one of the few manufacturing sectors , where India can hold its own against great Chinese maufacturing machine. It has a huge domestic cotton industry, plenty of expertise and low labour costs which are at par with China's. With the ending of global quotas at the start of this year, India has a golden opportunity to take an early lead in market share for global textile market, however whereas China's exports this year in textile have surged 59%, India's have increased a very modest 5%. The culprit- India's ancient labour laws which are completely out of sync with modern times. For starters, in India you need government permission to fire workers in a factory employing more than 100 workers, which imply that in a labour intensive sector like textile businessmen are afraid to hire in anticipation of demand because firing workers later will not be possible if demand does not materialize. Plus labour laws place restrictions on contract labour and overtime thus unnecessaily increasing labour costs. The result of these archaic laws is that Indian companies are reluctant to expand, operate in smaller units of less than 100 workers which makes economies of scale difficult and in general become less competitive than their chinese counterparts. The macro effect is that India is unable to even take advantage of situations which are apparently tailor made for its strenghts.

I just fail to understand why Indian politicians can not see the obvious example of Chinese model which has been so successful in creating wealth in our giant neighbour. India has almost every advantage which China posseses plus some more like rule of law, large english speaking population and democracy. All politicans need to do is to get rid of old rules and regulations, relics of our Soviet inspired socialist past and take advantage of the globalized world which clearly has the potential of creating enormous wealth for us as chinese have demonstrated. The reason our software or outsourcing industry has grown by leaps and bounds is because senseless government regulations have been kept out. India clearly has the potential of creating the same miracle in manufacturing as well, if only sensible economics can prevail. The stakes are even higher in the battle for manufacturing eminence because manufacturing can provide millions of jobs to vast number of semi-literate or illiterate people in India, which outsourcing and software industries will never be able to provide. A failure to create jobs for these underpriviliged can create social unrest which may hamper India's future prospects. The only way to create more opportunities for India's poor is to open up economy further, allow indian enterpreuners to form companies, allow foreign investors to invest not only in markets but in factories , improve the physical infrastructure. A failure on these fronts has very high cost for our future. We may miss the globalization bus just as we missed the industrial revolution.