MANUFACTURING
SECTOR – ECONOMY
News:
At the root of India's
manufacturing challenge
What's
in the news?
●
Recently, the issue of manufacturing or
services as the desirable path for India’s economy makes the rounds in public
fora.
Key
takeaways from the news:
●
Many economic experts had been frustrated
about the leapfrog of the services sector's boom ahead of the manufacturing
sector.
1991
economic reforms:
●
The economic reforms of 1991 had almost
exclusively focused on manufacturing, but the significant scaling down of
tariffs and the dismantling of the ‘licence-permit Raj’ did not lead to an
increase in the share of manufacturing in the economy.
●
The rising quality and variety of the
goods produced, without the expansion of manufacturing in relation to the
economy, suggests a rising inequality of income.
Make
in India reforms:
●
In 2014,
‘Make in India’, with its emphasis on foreign direct investment, was launched.
●
Liberalisation in the foreign Direct
investment, boosting private sector support, easier registration process and
easier production clearance are some of the initiatives in the 2014 Make in
India reforms.
Production
Linked Incentive Scheme:
●
More recently, there has been the Production-Linked Incentive scheme, which
essentially subsidises production of certain products.
●
Companies are given financial incentives
by the government to increase their production.
●
So far 14 sectors are given incentives by the government.
Challenges
in the manufacturing sector:
1. Skilled Labour Shortages:
●
There is a lack of trained and skilled
labour in the manufacturing sector in India, which limits the growth of the
sector.
2. Land acquisition difficulty:
●
Stringent land acquisition laws and inflexible
labour regulations make it difficult for India to attract investors in the
manufacturing sector.
3. Complex taxation system:
●
India started out with an overly complex GST, which has dampened
investor sentiment and created tremendous compliance
burdens on small and medium sized enterprises.
4. Lack of Research & Development spending:
●
Currently, India spends about 9% of GDP on research and development, a
considerably small amount when compared with other developed nations. This
prevents the sector from evolving, innovating and growing.
5. Poor labour productivity:
●
Labour productivity in India is less when
compared with other nations like China due to the lag in supply chain management, transportation, production planning and
maintenance.
6. Red Tapism:
●
Corruption
among the officials lead to slower
movement of the clearance process and further ends up in red tapism.
7. Infrastructure Bottlenecks:
●
Infrastructural bottlenecks (especially in
access to electricity), lack of backward
and forward linkages between agriculture, industry and service sector has
failed to create jobs and also hindered growth of labour intensive sectors.
GOVERNMENT
INITIATIVES TO BOOST MANUFACTURING SECTOR:
1.
Make in India:
●
Launched in 2014, this initiative aimed to
promote manufacturing in India and attract foreign direct investment (FDI).
2. Production-Linked Incentive (PLI) Scheme:
●
This scheme, introduced more recently,
provides production subsidies to incentivize the manufacturing of specific
products.
3. Industrial Corridor Development Programme:
●
The objective of this programme is to develop
Greenfield Industrial regions/areas/nodes with sustainable infrastructure &
make available Plug and Play Infrastructure at the plot level.
○
As part of the National Industrial Corridor Program, 11 Industrial Corridors are being
developed in 4 phases.
4. National Single Window System:
●
The setting up of National Single Window
System (NSWS) was announced in 2021
with the objective to provide “end to
end” facilitation and support to investors, including pre-investment
advisory, provide information related to land banks and facilitate clearances
at Centre and State level.
5. PM Gati Shakti National Master Plan (NMP):
●
It is a transformative approach to
facilitate data-based decisions related
to integrated planning of multimodal infrastructure, thereby reducing
logistics cost.
6. Pradhan Mantri Mudra Yojana (PMMY):
●
It is a scheme set up through MUDRA (a
subsidiary of SIDBI) that helps in facilitating micro credit up to Rs. 10lakh
to small business owners.
●
MUDRA supports Financial Intermediaries to
extend loans to the non-corporate, non-farm sector income generating activities
of micro and small entities with credit needs up to Rs. 10 lakhs.
7.
Startup India scheme:
●
Startup India scheme’s objective is to
generate employment and promote economic development. Its seeks for the
development and innovation of products and services and aims to increase the
employment rate in India.
8. Standup India scheme:
●
Standup India aims to promote entrepreneurship among women and SC and ST communities.
9. Labour law reforms:
●
Four labour codes were introduced by
scrapping 42 unfriendly labour laws in 2020.
WAY
FORWARD:
1.
Boost investment:
●
Invest more in research and development to
stimulate innovation in manufacturing.
○
Example: The Atma Nirbhar Bharat Abhiyan initiative, launched by the government
in 2020, aims to increase domestic manufacturing and research.
2. Cluster specific development:
●
Promote the development of manufacturing
clusters to increase productivity and competitiveness.
○
Eg. One
district and one product should be given more importance.
3.
Skill development:
●
Indian workforce should be provided more
skill development based on the current technological needs.
○
Eg. Skill
development in the lines of fourth industrial technologies.
4. Strengthening Supply chain system:
●
Necessary measures should be taken to
improve the domestic manufacturing supply chain and also its alignment with the
global supply chain.
5. Promoting labour Intensive sectors:
●
Labour intensive sectors like food
processing industry, leather industry, apparel, electronics, gems and
jewellery, financial services, and tourism etc. should be encouraged.
6. Strengthening MSME:
●
The MSME sector should be promoted and
supported. Easing regulations, subsidies will help. Also easy availability of
credit should be the priority. MUDRA has a potential to create required jobs in
India.