But unless Indian industry also invests in regular training for skill upgradation, housing and schooling for children of factory workers, the productivity of labour will not rise to match the higher productivity of other countries. Instead, labour will continue demanding higher wages every year. This will ultimately erode competitiveness. It also has an educated and skilled labour force. Thus, they are able to make products with fewer defects leading to cost advantage.
China also has an unemployment benefit scheme for the jobless in urban and rural areas.
Firing labour, thus, becomes easier for cost reduction. For raising overall efficiency of the manufacturing sector, other factors like easier credit, better marketing channels and an aggressive thrust to export are also important. If it is the economies of scale that is seen to be responsible for low-priced products, then mergers and acquisitions of small and medium firms should be encouraged. Often mergers can be used for the mutual benefit of two medium-sized firms. The spate of mergers and acquisitions also attract foreign investment.