12. "Industrial growth rate has
lagged behind in the overall growth of Gross Domestic Product (GDP) in the post-reform period." Give reasons. How far the recent
changes in Industrial Policy are capable of increasing the industrial growth rate?
(250 words)
·
It has been seen that in the last 25 years due
to the IT revolution and the government support
the growth rate of the services sector has increased tremendously. Now the
services sector's contribution to the overall GPD is around 57% and of manufacturing is 25%. It has also been seen that India moved to services sector driven economy without even completing the industrial development phase.
·
In the post reform period, the public
investment and the formal sector concentrated on the capital-intensive industries not on the MSME sector. This
sector lost the special benefits like deregulation of the items
restricted for the MSME sector. This sector also suffered from the
lack of technology, capital and skill set with the workforce.
·
After reforms competition has increased and Indian markets were being flooded with cheap goods from other countries like
China. This has not allowed Indian firms to
grow.
·
Strict labour laws has not allowed the
informal small units to become formal and a small unorganised firm to become a big
organised firm. This reduces their capacity
of industrial development.
· Poor infrastructure, higher hidden costs (like PF, EPF) which increases
the wages along with the instances where most of the benefits of the schemes like SEZ (Special Economic Zones) were taken by the
service industry.
So, to change
this situation and drive the industrial growth rate. Recently a discussion
paper has been released by the DIPP on industrial policy mainly emphasized on the following
Enabling
ecosystem for technology adoption and innovation
The policy
stressed on right models of technology transfer
need adopted to ensure that the transferred technology is enhanced and customised for indian conditions. The issue of academia-research institutions-industry linkages needs to be addressed.
Employing gainfully, a growing
workforce
The policy is stressing on the skill development, labour reforms to provide employment to the workforce to realise the goal of
demographic dividend.
Enhancing industrial
competitiveness
Competitiveness
can be improved by reducing the cost of infrastructure such as
power, logistics, easing regulatory/compliance burden, reducing the cost of capital and improving labour productivity.
Establishing global linkages
·
India needs to strengthen global strategic linkages by -creating global brands out of India, strengthening linkages between Indian and global SMEs
and intensifying FDI.
·
Increasing the number of global-Indian firms
to those in the Fortune-500 category.
·
Establish complete value chains, within
India or across countries, in select sunrise sectors like renewable energy,
food processing, electronics etc.
·
An FDI regime that balances the short term
and long term benefits of inward and outward investments.