Editorial✍ Live Mint Prelims cum Mains

2020 could be for manufacturing what 1991 was for our economy

India moved from agrarian to services dominated economy:

  • India was once a predominantly agrarian economy.
  • Over the past few decades, it has come to be acknowledged globally as a software/ information technology giant.
  • Sector-wise, it has been a quantum leap from agriculture to services.

India’s manufacturing never took off:

  • Indian manufacturing revolution never really took off in earnest.
  • This, despite various state interventions aimed at industrialization, ranging from the massive PSUs to special economic zones.

Manufacturing must take off now:

  • Every year, an estimated 12-15 million youngsters enter the Indian job market.
  • Our mainly service-oriented economy is structurally incapable of absorbing this massive influx of human resources.
  • The only sector that can, clearly, is manufacturing.

Make in India programme saw limited success so far:

  • In 2014, the government of India launched an ambitious “Make in India” programme that sought to take the share of manufacturing to 25% of the country’s gross domestic product (GDP).
  • While sectors like smartphone production did get a big boost as a result, more could have been done to encourage domestic manufacturing.

Global factors provide opportunity for Indian manufacturing:

  • In this context, recent covid-induced global supply chain disruptions and international trade wars (both of which had China in focus) have present India with a unique opportunity.
  • Every other country and large corporation is looking to de-risk its dependence on China and hunting for alternatives.
  • If India plays it smart and acts now on key policy initiatives, it can emerge as a preferred destination for global supply chains and as a manufacturing hub for the world.
  • It’s now for India to seize the moment that history has presented it in the form of an opportunity.

Make in India 2.0

  • The Indian government has sought to make up for missed opportunities by launching Make in India 2.0.
  • It has adjusted its priorities to make the country a manufacturing hub under the overarching idea of Atmanirbhar Bharat.
  • There is a renewed thrust on “Vocal for Local” and “Make in India for the world” to make it succeed.

Latest initiatives towards Make in India:

  • The latest drive focuses on 27 sectors; and 24 sub-sectors, including agro-processing, electronics, steel, textiles and auto parts.
  • These sectors have been identified with their export potential kept in mind, as also their scope for import substitution and employment generation towards making India a global supplier.
  • As part of the government’s thrust for local capacity expansion, the Union ministry of defence has earmarked 101 items that will be manufactured and procured domestically.

Many challenges remain:

  • Despite the government’s good intentions, it remains difficult to do business in India.
  • The conditions and demands of India are unique, and hence call for a uniquely Indian response.

Priorities that must be met for a manufacturing boom:

  • Political consensus on reforms:
    • Political stability and will is clearly there today.
    • An empowered group of government secretaries has been constituted to fast-track investments in coordination with the central and state governments.
    • A political consensus is now needed on the need for economic reforms, which would provide a big boost.
  • Infrastructure:
    • Economic growth is a necessary precondition for generating jobs, spreading prosperity and lifting millions out of poverty
    • A major roadblock to faster growth is India’s creaking infrastructure.
    • The Centre is looking for a massive Rs 111 lakh crore spend on infrastructure projects in the coming years.
    • However, the government needs to ensure that these projects not only take off, but are also completed in a time-bound manner.
    • This will enable the much-needed capital infusion for big infra projects and will help create modern facilities to support manufacturing initiatives.
  • Land and labour reforms:
    • Labour and land are two priorities that have been mentioned by the Prime Minister.
    • While remaining committed to labour rights, we need to move ahead on the unfinished agenda of labour reforms, initiated recently by many states.
    • Land banks are also needed for dedicated industrial usage.
  • Ease of business:
    • We also need to further institutionalize the idea of—and commitment to—the ease of doing business.
    • It is encouraging to see states with a relatively low industry presence doing well in the national rankings on that measure.
  • Tax incentives to investors:
    • In addition, we need to offer more tax holidays to investors.
    • While slashing the corporate tax rate to 15% for new manufacturing companies has been a good idea, more could be done on taxation.
  • Industrial zones:
    • We must also promote industrial townships and parks in a big way, so as to attract transnational corporations that are exiting China and looking for alternatives with similar size and scale.
  • Lowering input costs for manufacturing:
    • Indian industry cannot become a global manufacturing hub if its key input costs continue to remain high.
    • To make Indian industry globally competitive, the government must ensure raw material security with cheaper power and better logistical support to existing industries. 
  • Supporting investments already on the ground:
    • Above all, an important indication of success demonstrable to potential investors would be how governments in India, both at the central and state levels, are supporting the investments that are already on the ground in India.
    • Only if existing investments operate at full capacity utilization and unlock their full potential, attracting new investments, both domestic and foreign, would be possible.

Conclusion:

  • As a country, India missed the manufacturing opportunity in the past.
  • India cannot afford to miss it again.
  • The covid crisis of 2020 has provided an opportunity for laying the foundation of a manufacturing revolution in India.
  • The will and intent is now there to boost manufacturing. It is now necessary to act, and act fast.

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