Tag: Manufacturing Sector

Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs.

Faster economic growth requires a significant contribution from the manufacturing sector, particularly from Micro, Small, and Medium Enterprises (MSMEs).



The manufacturing sector has the potential to drive economic growth, create employment opportunities, and increase productivity. However, the share of the manufacturing sector in India’s GDP has remained stagnant at around 15-16% for several years.

To address this issue, the Government of India has implemented various policies to boost the growth of the manufacturing sector, particularly MSMEs. Some of the key policies include:
1. *Make in India Initiative*: Launched in 2014, this initiative aims to promote India as a global manufacturing hub. It focuses on easing regulations, improving infrastructure, and providing incentives for businesses to set up manufacturing units in India.
2. *MSME Development Act, 2006*: This Act provides a framework for the growth and development of MSMEs. It offers various benefits, including priority sector lending, technology upgradation, and marketing support.
3. *GST Reforms*: The Goods and Services Tax (GST) introduced in 2017 has simplified the tax structure and reduced the burden on MSMEs.
4. *Ease of Doing Business*: The Government has taken several steps to simplify regulations, reduce bureaucratic hurdles, and improve the business environment.
5. *Startup India Initiative*: Launched in 2016, this initiative aims to support startups and entrepreneurs, particularly in the manufacturing sector.
6. *Atmanirbhar Bharat Abhiyan*: Launched in 2020, this initiative aims to promote self-reliance and boost domestic manufacturing.
7. *Production Linked Incentive (PLI) Scheme*: This scheme offers financial incentives to businesses that invest in specific sectors, such as electronics, pharmaceuticals, and automobiles.
8. *Credit Guarantee Scheme*: This scheme provides credit guarantees to MSMEs, enabling them to access loans without collateral.
9. *Technology Upgradation*: The Government has established several technology centers and incubators to support MSMEs in upgrading their technology and improving productivity.
10. *Skill Development*: The Government has launched several initiatives to develop skills and provide training to workers in the manufacturing sector.
While these policies have shown positive results, there is still a need for more focused efforts to address the challenges faced by MSMEs, such as:
– Access to credit and finance
– Regulatory hurdles
– Infrastructure constraints
– Competition from larger industries
– Limited access to technology and innovation
To further boost the growth of MSMEs and increase their share in GDP, the Government could consider:
– Simplifying regulations and reducing compliance burdens
– Improving access to credit and finance
– Enhancing technology support and innovation
– Providing targeted incentives and subsidies
– Strengthening market linkages and export support
By addressing these challenges and building on existing policies, India can unlock the potential of its MSME sector and drive faster economic growth.

What is Make in India?

When it comes to
manufacturing a product or mass producing it, the go-to country for foreign
investors and companies looking to establish manufacturing and assembling plants
is “China”. China is the major competitor India has when it comes to
outsourcing and manufacturing business, but china was still favorable due to
ease of doing business and low manufacturing costs. India’s ailing
infrastructure, the bureaucratic approach adopted by the former government,
defunct logistics, lack of a proper transportation network, and widespread
corruption were the main reasons why companies found it difficult to do
business in India. These were the reasons
why the Modi government launched the ‘Make in India’ campaign to help transform
India into a manufacturing hub.

 

The Make in India Vision

The Manufacturing sector
in India accounts for around 16% of the GDP. The campaign aims to bring this
number to around 25% of total GDP contribution and also to generate employment
opportunities and attract foreign investors along the way to help transform
India into the number 1 manufacturing hub in the world.

Inspired by the
‘Ashoka Chakra’, the logo for the make in India campaign is a Lion and the
prime minister decided to dedicate the campaign to Pandit
Deen Dayal Upadhyaya born in 1916 on the same date.

 

Main objectives of this initiative

1) To increase the
growth rate of our manufacturing sector to 12-14% per annum

2) To increase the
total GDP contributions of the manufacturing sector from 16% to 25%

3) To create around
100 million job opportunities in the manufacturing sector alone.

4) One of the
objectives was to improve India’s rank in the ease of doing business index by
the World Bank.

5) To improve India’s
export-led growth

6) To attract foreign
investments and develop the industrial base in order to surpass china.

 

Challenges faced by the government

1.     
Shell
companies: – shell companies
are a major problem as they account for the majority of the FDI inflow and are suspected
to be investing their black money.

2.     
Productivity:
– low productivity of the
manufacturing sector, as well as the skilled labor force, is highly
insufficient. On average the Indian workforce is almost four to five times less
productive when compared to china or Thailand.

3.     
Small
Industries:-small size of our
industrial units was also a challenge as they fail to meet desired economies of
scale. Due to their small size, they cannot afford to invest in modern machinery
and develop their supply chains.

4.     
Complicated
labor laws: – complexity of
our labor laws for companies with more than 100 employees which requires
special approval to lay off their employees was also one of the main reasons.

5.     
Electricity:-
even though the per unit cost
of electricity is practically the same in India and China, India experiences
far more outages which can cause delays in meeting the demand.

6.     
Transportation:– the average speed in India is 60km/h which is
far less than china’s 100km/h speed. What India lacks in speed it overcomes in
terms of overloading trucks and having one of the best ports.