India’s Manufacturing powerhouse sector has emerged as a key driver of economic growth, contributing significantly to job creation and influencing various other sectors of the economy. Between fiscal years 2006 and 2012, the manufacturing-sector GDP in India witnessed robust growth, averaging 9.5 percent annually. Subsequently, over the following six years, this growth rate moderated to 7.4 percent. In fiscal year 2020, manufacturing accounted for a substantial 17.4 percent of India’s GDP.
Opportunities For India to Become a Manufacturing Powerhouse:
Promising opportunities are on the horizon. While there is optimism for a swift recovery in India’s manufacturing landscape, realizing this potential demands a comprehensive approach that involves support from public policy, private sector engagement, and the active participation of citizens. This presents a golden opportunity for India, as numerous companies explore relocation options from China. Preparing a favorable environment to welcome such investments is imperative, with a focus on streamlining procedures for investors.
- Reforming Labor Laws: The need for labor law reforms is evident. Stringent labor laws have pushed Indian corporates towards capital-intensive production methods in a nation abundant with labor. Streamlining these laws can foster labor-intensive growth.
- Promoting Labor-Intensive Sectors: Encouraging labor-intensive sectors such as food processing, leather, apparel, electronics, gems and jewelry, financial services, and tourism is paramount. Offering appropriate subsidies and tax incentives can incentivize growth, aligning with the Make in India initiative.
- Strengthening MSMEs: The promotion and support of the MSME sector are crucial. Easing regulations, providing subsidies, and ensuring easy access to credit should be prioritized. Initiatives like MUDRA have the potential to create the much-needed jobs in India.
- Implementing Niti Ayog Action Agenda: The Niti Ayog Action Agenda presents innovative ideas for job creation, including state-level labor law reforms. Emphasizing the role of exports in job creation and establishing coastal employment zones (CEZs) akin to China’s special economic zones (SEZs) is pivotal, demanding rigorous implementation.
- Fostering Entrepreneurship: Economic policy should focus on enabling youth entrepreneurship to spawn more jobs. India’s goal should not be five companies with 5000 crore turnover but rather 5000 companies with 5 crore turnover.
The Indian government has introduced several initiatives to boost manufacturing powerhouse:
- Make in India Initiative: Aiming to transform India into a global manufacturing hub.
- ‘Zero Defect Zero Effect’ for MSMEs: Focusing on delivering top-quality products through clean technology.
- ‘SKILL INDIA’: A multi-skill development program geared towards job creation and entrepreneurship.
- Labor Reforms: Facilitated through the Shram Suvidha Portal, Random Inspection Scheme, Universal Account Number, and Apprentice Protsahan Yojana.
- Defense Procurement Policy (DPP): Prioritizing indigenously made defense products.
- Technology Acquisition and Development Fund (TADF): Promoting Clean, Green, and Energy-Efficient Technologies for MSMEs under the National Manufacturing Policy (NMP).
- Pradhan Mantri MUDRA Yojana (PMMY): Providing loans to small-scale businesses.
- Aatmanirbhar Bharat Abhiyan: Stimulating self-reliance and attracting foreign capital and technology.
To enhance India’s manufacturing prowess, the following steps are essential:
- Boosting investor confidence.
- Improving physical infrastructure, including transportation and power sectors.
- Focusing on the electronics sector.
- Enhancing access to finance for smaller enterprises.
- Simplifying entry and exit processes for businesses.
- Addressing the issue of an inverted duty structure.
- Increasing R&D expenditure in the industry.
- Elevating the level of value addition at all stages.
- Reviewing FDI policies to promote technology transfer and innovation.
- Encouraging formal sector job creation with performance-linked tax incentives.
- Offering competitive remuneration to attract talent to the manufacturing sector.
- Aligning educational curricula with industry demands, emphasizing soft skills and values-based training.
By following these strategies and embracing these initiatives, India can significantly elevate its status as a manufacturing powerhouse, fostering economic growth and job opportunities for its citizens.