India's National Manufacturing Policy ..

Manufacturing growth in India is much below than what it should be. The employment and output generation in organized and unorganized manufacturing sectors exhibit a major imbalance. The share of the industrial sector in GDP has stagnated around 20-21% from 1991-92 to 2002-05, and thereafter actually declined to about 18% in 2010-11.India has, for various reasons, failed to expand its manufacturing base and capitalize on employment creation in the manufacturing sector. Several earlier attempts have not yielded the desired result of promoting growth in the sector. But the key to success will be policy implementation, but there are several challenges.

 India is also not known for exports of manufactures and in a number of manufactured goods the country is not internationally competitive. National Manufacturing Council (2004) came up in 2006 with the National Strategy for Manufacturing. It not only identified a set of 12 challenges facing the sector ranging from general framework conditions such as macro-economic stability, and strengthening education and skill, infrastructure development to the needs for specific policies for promoting investments in technology and innovations and for increasing the usage of ICT in the manufacturing sector, and improving firm level and specific industry level competitiveness.

The targets for the manufacturing sector in India :
(i) It aims to increase the share of the manufacturing sector in India's GDP from 15% to 25 % by 2025.
(ii) Creation of 100 million new jobs.
(iii) Aims at improvising local value addition by ensuring that the industry has most of the components, spare parts and raw materials locally available.
To achieve these goals the policy prescribes five issues :
(i) Encouragements to foreign investments and technologies,
(ii) Improving the competitiveness at the firm level,
(iii) Reducing the compliance burden on procedural and regulatory formalities of the industry,
(iv) Encouraging innovation
(v) Effective consultative mechanism to ensure mid-course mechanism.

The National Investment and Manufacturing Zones (NIMZs) are being developed s integrated industrial townships with state-of-the-art infrastructure and land use on the basis of zoning, clean and energy efficient technology, necessary social infrastructure and skill development facilities. These can lead to significant cost savings as well as improved productivity from :

(i) Increased supply chain responsiveness because of manufacturing consolidation near suppliers,

(ii) Decreased time-to-market as companies can more effectively leverage the capabilities available with vendors in the cluster,
(iii) Better and cost-effective availability of labor and also reduced talent recruiting efforts because of the power of clusters in drawing labor,
(iv) Lower logistics costs.

 With the size of NIMZs at least 5000 hectares in size and with administrative structures including four entities, an SPV (Special Proposal Vehicle), a developer, the State Govt and the central Govt the labor policy has been designed in a flexible and liberal manner to promote productivity by reducing the rigidities in the labor market and ensuring protection of workers' rights. 

Some critical issues and challenges to this policy are land acquisition, effects of change in governments, policies on economic growth, corruption, management practices etc. The solution to these issues is the government should provide infrastructure and leave the rest to markets. Creating the required skills and human capabilities among rural migrant and the urban poor so as to make the growth process more inclusive; increasing  domestic value addition and technological 'depth' in manufacturing; building energy-efficient and environment-friendly structures will add up in growth and success of NIMZs.

Change is necessary in many areas for India's manufacturing sector to reach its goals: industrial relations, land acquisition, the regulatory framework and so on. These improvements must happen widely around the country, not only within the proposed New Manufacturing and Investment Zones, for the country to realize its ambitious overall growth and employment targets. A systematic and collaborative process of implementation, involving products, stake-holders and many ministries of government, in the Centre and the States is required to accelerate manufacturing growth.