Manufacturing policy draft approved: Aims mega cities with high employment

Business

oi-Shoaib MD

By Shoaib Md

Published: Friday, June 10, 2011, 11:43 [IST]

The draft focusing on manufacturing policy was approved in a meeting chaired by Prime Minister Manmohan Singh. The policy aims to create 10 crore jobs, it also aims to increase the share of manufacturing by 25% of GDP by 2025, currently at 16%.

The meeting saw the presence of Finance Minister Pranab Mukherjee, Commerce and Industry Minister Anand Sharma, Environment Minister Jairam Ramesh, Corporate Affairs Minister Murli Deora, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Chairman of PM's Economic Advisory Council C Rangarajan.

Anand Sharma, Commerce Minister stated, “An in-principle approval has been given to the draft manufacturing policy and a committee of secretaries has been asked to fine-tune it so that it could be placed before the cabinet within 30 days."

He added that the Prime Minister wants the tenecious issues related to land acquistion, environment clearance, and labour to be resolved among the ministries concerned through discussions.

The policy intends to encourage foreign investment and technologies, and ensuring to keep the compliance to low level. These measures should be formulated while “adequately taking care of the environmental and labour welfare concerns", stated the PMO release.

Sharma said, “The objective of the policy will be to identify ways to augment the share of manufacturing in our GDP from 15 per cent to 25 per cent by 2025. This will entail a growth in manufacturing at the rate of 12-14 per cent per annum, which will be able to sustain the momentum of economic growth in the range of 9 per cent and enable the creation of 100 million jobs by 2025."

Increasing the growth trajectory of manufacturing is priority for the government. In Q4FY11 manufacturing growth was at 5.5%, and for the entire fiscal this was only 8.5%.

Economists have said that country can attain high growth rate only through policies supporting manufacturing industries.

The proposed national investment and manufacturing zones (NIMZs) will be spread over 12,500 acres and these will focus on the domestic market. Some of these will merge with the special economic zones, the existing dedicated export oriented duty free enclaves.

The draft policy by the department of industrial policy and promotion, which has been in the public domain for more than a year, says that the industries in these areas should have the benefit of “hire and fire policy".

Some of the interesting recommendation of the draft is creation of land banks, digitising of land and resource maps. It even suggests utilising land locked up in non-productive use.

The proposed policy stated that selling of assets by sick units should not wait until workers' dues had been paid. The discussion paper said, “This could help to ease the pressure on the manufacturing entity considerably."

It even recommends changes in environment norm that come in the way of investment. It goes to the extent that clearances should come with in the year. “In case the process is not completed in time, it should be treated as deemed granted," the draft said.

Both the labour and environment ministries have opposed such provisions in the manufacturing policy. The first NMIZ will be spread over three states — Haryana, Rajasthan and Gujarat — along the western railway corridor.

The government plans build seven industrial cities along this to Delhi-Mumbai railcorridor over the next five years. The government has for this purpose earmarked Rs 3,500 crore every year for the next five years to set up such cities.

This time the government doesn't want only a manufacturing zone. They would like to see place with host of public utility services, logistic hubs. residential areas. And along with all of this adequate measures should be taken to protect the environment.

Average annual manufacturing growth from FY92 to FY10 is 8% Share of manufacturing in GDP remained stagnant in the last two decades, that of services up 10% Manufacturing employs 58 million people i.e. 12% of the workforce. Nearly 90% of the jobs are in the unorganized sector India needs to create 220 million jobs by 2025 to reap benefits of demographic dividend.

The challenge for activattion of policy will be to secure land, which has become increasingly difficult.

View: The government wants to create planned mega cities but eventually it will run into similar combination of problem that all mega cities i.e. the problem of water, electricity and size. Perhaps the government should get a team of urban infrastructure, economist and architects who plan cities to come out with the idea while maintaining the sustainability of the cities.

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