Growth engine

The national manufacturing policy, which was approved by the union cabinet, has ideas and elements which can make a difference to the nature of development in India. It is not often realised that while the country has registered 8-9 per cent growth continuously for many years, the contribution of the manufacturing sector to growth has remained static at about 16 per cent of the GDP. 

Most industrialised countries secured economic growth on the strength of the manufacturing sector, and China is the latest example of manufacturing leading the growth. The need to give a push to the sector through a package of policies specifically designed for it has long been debated, a number of proposals discussed and reworked and they are now ready for implementation.

The aim of the policy is to increase the share of manufacturing in GDP from 16 to 25 per cent by 2022 and to create 10 million additional jobs in the next 10 years. This is necessary to absorb the fast-growing population into the job market and to make development inclusive and meaningful for both the urban and the rural poor. With population growth slowing down and costs and wages rising in China, it can also open up possibilities for India as a major manufacturing hub for the world.

An important element in the policy is the creation of a number of national investment and manufacturing zones (NIMZ) with the best technological and infrastructural facilities across the country. Like the SEZs, they will enjoy certain freedoms and exemptions from norms and will be entitled to environmental and other clearances on a priority basis. The policy aims to make India’s manufacturing globally competitive and the  industrialisation process environment-friendly, to improve energy efficiency and to optimise the use of natural resources.

A sound manufacturing policy is linked to sound policies in other areas like infrastructure development, environment, education, finance etc, and to the social and political framework in which they are implemented.  The special zones, which have been envisaged, are a bit like industrial utopias, but they may help to give a boost to manufacturing if the idea is planned and executed well. But it  should not be misused, as some SEZs were. 

The policy should also not be focused entirely on these zones. For various reasons industries will have to be set up and encouraged outside these zones. This is also necessary for development to be geographically even and socially more relevant.