November 08, 2011

National Manufacturing Policy

Last week the cabinet came out with the National Manufacturing Policy. This was a much awaited move that required clearance from the government and finally it has come to reality. India is a country that was recognized for its services throughout the 1990s but then the manufacturing industry could also not be ignored. Considering the perception of growth of the manufacturing industry, a general public view could have been that the share of the manufacturing industry in India’s GDP was also increasing year on year but the fact is that year after year the manufacturing industry was recording an almost constant share of about 15-16%.
Some of the major objectives and highlights of the policy are
1) To generate 100 million jobs within the next 10 years- Though this idea is very ambitious. If it comes as planned, it should increase the GDP share of manufacturing industry manifold.
2) To increase the contribution of manufacturing industry in the GDP to up to 25 % by 2022- This is quite an achievable target considering the seriousness with which the government has now come out in support of the manufacturing industry.
3) Increase competitiveness in the global markets by appropriate policy support
National Investment and Manufacturing Zones
 This idea seems to be taken from that of Special Economic Zones. Under NIMZ’s a land of about 5000 hectares shall be allocated to each zone. There will be one CEO of the zone who will be a high rank government official to take care of all the major decision in the zone. Various benefits will be given to the operators in these zones such as relief from capital gain tax. If the amount used for the purchase of new equipment is derived from the consideration received from the sale of old plant and equipment there shall be a relief in capital gain tax. This shall increase and motivate the units to bring back the money from the sale consideration back to business. The work of land acquisition shall lie with the government and it will be a challenge to bring in land excess of 5000 hectares for the use of NIMZ’s
Innovative IT methods and clearance system
In the past the manufacturing industry has experienced many roadblocks despite the government bringing in many IT enabled tools for faster processing. The government officials have many times been found reluctant to follow new methods. Efforts will now be on to bring in a single window for all clearances to enable faster processing of matters related to the clearances from the government. This shall be done by integrating as much IT systems within the system as possible. One of the major and innovative measures in the policy is that all government clearances will now have a timeline and if the clearances are not given within the stipulated timeline the clearance will be deemed to have been given.
In most of the case where matters will be held up due to clearances, due importance shall be given to the case and the government shall support the manufacturer to get the clearance done.

Go Green

Those industries willing to go green or those that are willing to reduce their carbon footprints shall be incentivized in manners more than one. In fact the policy also says about the idea of buying out Intellectual Property rights from the innovators. By this method, if some industry wants to go green and is withheld due to some technology getting patented then it can also enjoy the freedom of using that idea. The idea/invention/innovation or any other IP shall be shared by the government after the buyer duly gives a royalty for the idea. But in this manner after paying a certain amount at least the IP right will not be a hindrance for anyone to go ahead.

Development of new ITI’s and polytechnics.
The policy has also focused on the grass root level from where the talent for working in a manufacturing industry comes. The policy aims at increasing the number of ITI’s and polytechnics in the country. This shall focus even on bringing in specialized courses besides new colleges. The new courses shall be highly industry specific.

Sector Specific policy

Though a policy as generic as this doesn’t have many sector based inclination but in this policy it is proposed to focus on such sectors that can bring in more money. This shall be a method that will fulfill the motive on 25% share in GDP by 2022.  Such measures are always good wherein the industry hits and exploits such sectors which are new and have lots of potential. The basic indicators of success such as share, GDP, profit, sales margin can all be increased for the whole industry by focusing on these few sectors.

As we all understand that more important than making a policy is its implementation and for the very reason the policy makers have provided the tool of manufacturing policy review mechanism. Secretary, Department of Industrial Policy and Promotion will be reviewing the policy on regular basis.

We hope that all these measures help India achieve its targets and come out victorious through the execution of this policy.

The writer of this article, Abhijeet Srivastava is a PGP student of Indian Institute of Management, Raipur. Abhijeet has worked in Punj Lloyd for 36 months before joining IIM Raipur.

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