New Industrial Policy Aims At Making India A Global Mfg Hub

The commerce and industry ministry last month proposed a new industrial policy which envisage making the country a global manufacturing hub and creating employment for thousands of aspirants who enter job market every year.

The country had last announced its industrial policy in 1991 when it was trying to break the conservatism in enterprises. Since then India has transformed into one of the fastest growing economies in the world.

The ministry said that with strong macro-economic fundamentals and several path breaking reforms in the last three years, India is equipped to deploy a different set of ideas and strategies to build a globally competitive Indian industry.

The Department of Industrial Promotion and Policy under the ministry has constituted six focus groups for the policy and an online survey is being conducted to obtain inputs. The groups have members from government departments, industry associations, academia and think tanks. The six areas on which the group would focus are: manufacturing and MSME; technology and innovation; ease of doing business; infrastructure, investment, trade and fiscal policy; and skills and employability for the future.

Besides, a task force on artificial intelligence has been set up to provide inputs for the policy. The new policy is likely to be announced in October this year. The new policy will subsume the National Manufacturing Policy. The new Industrial Policy will aim at making India a manufacturing hub by promoting Make in India.

It will also suitably incorporate the use of modern smart technologies such as Internet of things, artificial intelligence and robotics for advanced manufacturing, according to the ministry. Commerce and Industry Minister Nirmala Sitharaman will also hold consultations with stakeholders, including industry captains, think tanks and states in Chennai, Guwahati and Mumbai, for inputs on the policy. The DIPP also released a discussion paper — Industrial Policy-2017 — to garner public views and suggestions on the proposed policy.

As per the DIPP, India needs a future-ready industrial policy so that the country attracts USD 100 billion inward FDI annually in medium terms and gainful employment of the millions of aspirants who join the workforce over the next two decades in the long run. Through the policy, the DIPP aims to strengthen global strategic linkages by creating global brands and more FDI.

Activities across the value chain for component manufacturing, design and R&D activities have to be strengthened, as per the discussion paper. It also wants to address concerns over the brand value of Indian products, significantly low value addition and the minimal positive externalities from FDI. The policy seeks to increase the number of Indian companies in the Fortune 500 list. DIPP has also sought comments on key reforms that can enhance labour market flexibility. It wants to know how can the problem of inverted-duty structure be addressed and also be balanced against obligations under multilateral or bilateral trade agreements.

The paper also seeks to strike a balance between industrial growth and improvement in environment and sustainability.

FDI promotion

The policy document explained that India has made giant strides in liberalising the foreign direct investment (FDI) policy. Foreign investment in most sectors is allowed up to 100 per cent under automatic route. Only few sectors such as publishing and printing, satellite, food product training, mining and mineral exploration, titanium based minerals and ores require Government approval. In the last three years, new sectors such as defence and food retail were opened, investment limits have been reduced progressively and conditionalities have been eased. Total FDI inflow was USD 156.53 bn since April 2014.

Highest ever annual inflow (USD 60.08 billion) was received in 2016-17. FDI equity inflows increased by 52 per cent during 2014-16 and 62 per cent since the launch of Make in India. India is now ranked amongst top 3 FDI destinations (World Investment Report 2016, UNCTAD). The DIPP says that benefits of retaining investments and accessing technology have not been harnessed fully. The new policy would aim at facilitating greater technology transfer, leverages strategic linkages and innovation.

Labour reforms

The DIPP paper notes that the tenor of labour laws has been overly protective of labour force in the formal sector.

Though labour protection and security are required, the flipside is that it discourages employers from hiring workers on a regular basis. It has probably also led to entrepreneurs choosing to stay away from labour intensive sectors and opt for highly capital or skilled-labour intensive technologies sectors. The DIPP through the new policy seeks to bring reforms to enhance labour market flexibility. Also it wants to explore how fixed-term employment can contribute towards flexibility in hiring as well as retrenchment. The paper also seeks to address the problem of low job creation in the formal sector.

Creating jobs

The paper says that India is now in the mid-point of the demographic dividend phenomenon which is expected to continue for another 20-25 years. The country faces concerns such as providing jobs at the bottom of the pyramid and to large number of unskilled and semi-skilled labour moving out of the primary sector. The paper says that advances in technology are leading to emergence of new activities, major changes in existing systems. It has become important to assess the impact of automation on jobs and employment. The paper says it envisage a new industrial policy that provides direction and charts a course of action for a globally competitive Indian industry which leverages skill, scale and technology.

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