Delhi approves National Manufacturing Policy; success will depend on implementation
October 26, 2011

Having seen China’s phenomenal progress on the back of it being the factory of the world, India’s Union Cabinet approved the National Manufacturing Policy. Aiming to boost manufacturing, employment  and consequently GDP which is currently heavily dependent on services, New Delhi has also planned a host of fiscal incentives mainly for the micro, small and medium enterprises. Manufactured products, including cars, televisions and clothing, contributed 16 percent of India’s gross domestic product in 2009, compared with 42 percent in China, data from the United Nations show.

“Inadequate physical infrastructure, a complex regulatory environment and a shortage of skilled manpower have constrained the growth of manufacturing so far,” Commerce and Industry Minister Anand Sharma said. The industrial parks will be developed with private sector participation and will be modeled around establishments often seen in China, which has emerged as a global manufacturing hub, he added. Mr. Sharma has been to China several times in the past few years and met several of her top leaders to understand and learn the key to China’s success in manufacturing.

The policy whose effectiveness heavily depends on its implementation, aims to create 100 million jobs within a decade and increase the share of manufacturing in the country’s GDP to 25 percent by 2022 from the current 15-16 percent (a level that has been stagnant since 1980). The policy aims to create industrial enclaves that will offer lower taxes, faster permits and easier labor laws to boost the share of manufacturing in Asia’s fastest-growing major economy after China. India will help set up seven such zones initially. Under the policy, a special company will also be established that will be a one-stop shop for all clearances for businesses interested in setting up operations in the industry parks, the statement said.

Following a host of monetary policy tightening measures, which saw bank rates rise (The Reserve Bank of India raised the benchmark repurchase rate by 25 basis points on Tuesday, the 13th time it has raised rates since the start of 2010) and inflation curb slightly under control, manufacturing grew at the slowest pace in 2 years in September, according to the Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics.

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