Why is Manufacturing essential for Economic Growth?

Posted by Andria on March 18th, 2020

According to a recent report by the IMF, countries no longer depend on manufacturing productivity and economic growth. But the chatter about the post-industrial community is mostly puffery without proof.

5 reasons why Manufacturing is necessary?

Here are five major reasons why manufacturing process is still extremely essential for economic development:

 1. Manufacturing Boosts Productivity Growth and Innovation

The explanation for the solid connection between economic development and industrialization is that the manufacturing sector is the motor behind the productivity growth of the economy. This, in turn, boosts the industrial sector.

Targeted growth is more effectively attained in the manufacturing sector as compared to the service sector. The reason behind this is because the manufacturing process is more agile to mechanization and innovation.

The importance of an advanced manufacturing process for a nation’s overall need for innovation cannot be emphasized enough. Even in developed countries, where manufacturing and production are suspected to be on a decline, the total of innovation still takes place in the manufacturing sector only.

Also Read: How to start the manufacturing plant of Denatured Ethanol?

 2. Manufacturing Facilitates Services

Every economic function gives rise to another economic function. Similarly, every manufacturing activity gives rise to the facilitation of services, and every delivery of service gives rise to manufacturing production. But there is proof which says that manufacturing has a stronger effect than services.

In simplicity, services are mostly the activity of consuming manufactured goods. You can't transport the experience of using some products. Whether it is wholesale or retail, in the end, it is just an act of selling and buying manufactured products.

The same is applicable for real estate, which is again the act of selling and buying a physical asset-building or any property in general. Even health is an act of consuming drugs and using medical equipment.

3. Manufacturing Creates Job Opportunities

The manufacturing sector plays a very important role in creating jobs for people in the economy. Even with the new high tech manufacturing processes, we still need people to operate them.

You can say that most of the jobs, directly or indirectly, somehow depend on manufacturing — and this sector has time and again provided with thousands of new job opportunities to the people despite adopting new manufacturing technologies for automation and agility.

4. Manufacturing Boosts Global Trade

Imports and exports play an extremely crucial role in the economic development of the nation. According to the World Health Organization, 80% of global trade among countries is merchandise i.e., goods trade, which means that only 20% of global trade is in services.

If there ever existed a situation where an economy constituted of only services, then it would be a very weak situation because there wouldn’t be any goods to trade for it in exchange. Manufacturing is very important to keep the foreign exchange flowing.

5. Manufacturing Makes Way to Development

It has been the strategic goal of many developing nations over the last several years to create a high-standard manufacturing process to boost and develop national power and wealth. Even today, all the major countries focus on how they can improve manufacturing in their economy.

A vibrant and active manufacturing sector of a country further gives rise to research, innovation, more jobs, exports, etc. which directly and indirectly contribute to the development of the nation’s economy.

So, while it may be true that some services are contributing more to the economy in the way of productivity growth, we still need to remember that these services cannot exist without a thriving manufacturing sector. People who think that we will be able to skip the industrialization phase in the future are very wrong. Manufacturing still essential for the economic development of the nation.