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Draft industrial policy sets aside job creation target, focuses on MSMEs

Subhayan Chakraborty/New Delhi 11 Jan 19 | 10:38 PM

The $36-billion textile export sector, the third-largest foreign exchange earner for India, clocked only 0.75% growth in 2017-18, after a contraction in the past two years

The draft industrial policy has refrained from its plan to create fixed targets for job growth in specific sectors and is, instead, focusing on ‘wide growth’ for the next two decades. 

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The industrial policy, the draft of which may be taken up by the Cabinet for a nod next week, focuses on micro, small and medium enterprises (MSMEs) with an aim to attract $100 billion annual foreign direct investment (FDI), sources say.  The draft is modelled around ease of doing business, they say. 

But a lack of high quality job creation data kept the government from mapping the potential of various sectors, according to a government official. The proposed policy has borrowed heavily from the Make in India initiative, which aims to increase the share of the manufacturing sector to gross domestic product (GDP) to 25 per cent by 2022 from the current 16 per cent, he said.

The flagship initiative of the Narendra Modi government, launched in September 2014, had also promised to create 100 million jobs by 2022. However, the government had last year informed Parliament that it does not maintain any data with regard to jobs created under the initiative. 

On the other hand, according to the Sixth Annual Employment-Unemployment Survey of the Labour Bureau, the unemployment rate stood at 3.9 per cent in 2016-17, compared to 3.7 per cent in 2015-16 and 3.4 per cent in 2013-14.

While the government had floated an initial discussion paper on the proposed policy in August 2017, it has not yet released the final draft.

Industry 4.0

The third industrial policy since 1956 and the first revamp to industrial rules since 1991, the legislation will focus heavily on ease of doing business and feature 'industry 4.0' principles such as robotics and internet of things, sources said. Bringing a focus on new industries, the policy may also incentivise investments by domestic firms in research and development and evolving technologies such as internet of things, digital manufacturing and robotics. 

However, industry bodies have pointed out that most of these have to take place at MSME levels. The Confederation of Indian Industry has accordingly told the government that industry-wise technology upgradation loans, a revised definition for MSMEs and speedy financial assistance would be the need of the hour. 

It is based on the action plans for 15 manufacturing sectors coordinated by the Department of Industrial Policy and Promotion (DIPP), a senior official said. It will also tie into existing government initiatives and serve as a focal point for various sector-wise policies. “It will absorb the 2011 national manufacturing policy apart from furthering the government’s push for the Digital India initiative," he added. 

While the government has pushed for ease of doing business, the Federation of Indian Chambers of Commerce & Industry (Ficci) has suggested the need to have an independent system of regulatory impact analysis for reviewing existing and new regulatory requirements for manufacturing sector. Ficci has also pointed out that legislation should allow devolution of power at the local level so that entrepreneurs need not approach the central authorities for each permission. 

Trade-based manufacturing

The policy also acts upon the suggestion of successive Economic Surveys, which has pointed out that India needs to aggressively take back control of manufacturing lower down the value chain, from China. It aims to seize millions of jobs that are shifting out of China to other developing nations as Beijing makes adjustments to its own industrial policy under the pressure of growing basic wages and greater specialisation in high-end manufacturing, the official added. 

Aiming to promote manufacturing-led exports, the policy will also have special provisions for manufacturing in the textile, leather sectors to leverage growth, and focus on spreading out export hubs across the country that are currently getting concentrated in a few states. 

It will also have a special focus for sectors such as apparel and footwear in which India maintains a manufacturing edge, albeit one that is slipping.

The $36-billion textile export sector, the third-largest foreign exchange earner for India after petroleum products and gems and jewellery, clocked only 0.75 per cent growth in 2017-18, after a contraction in the past two years. On the other hand, outbound trade of leather articles rose 3.46 per cent to $2.42 billion, recovering from the contraction witnessed in 2016-17.

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