The Share of Manufacturing sector to India’s GDP (16-17%) and employment (12%) has remained stagnant since 1991 reforms. MSMEs alone account for 45% of manufacturing output. Hence, increasing the share of manufacturing sector leads to forward-backward linkages, boost job creation and vision of $ 5 trillion economy.
- Incentives to MSMEs in form of cheaper credit, Public Procurement policy, exemption from labour laws etc. to nourish small sized firms into Giants has led to “Problem of Missing Middle”.
Recent Change in Definition of MSMEs to include composite criteria of investment and turnover to prevent Dwarf Firms. However, recommendations of U.K Sinha Committee such as National Council for MSME Facilitation etc. needs implementation.
- Incentives through PLI Scheme boosts manufacturing as evident in India becoming second largest manufacturer of mobiles. However, structural problems such as land acquisition, skill sets, labour reforms etc. needs to be addressed,
- SEZs have been able to create around 2.5 million jobs and account for 26% exports from India. However, unlike their counterparts in China, SEZs in India have failed (Baba Kalyani Committee)
- Consolidation of multiple laws into 4 separate codes
- Increase in customs duty on the finished products promotes domestic manufacturing. However, it may lead to inward-oriented and protectionist policies.
Other initiatives include Signing of FTAs, Make in India and Assemble in India, “Vocal for Local” etc.
No country can become developed without becoming industrialised. Hence, there is a need to incorporate suggestions made by Baba Kalyani committee on SEZs, UK Sinha committee on MSMEs and increase India’s participation in Global Value Chains.