Thursday, October 27, 2011

New National Manufacturing Policy

Facing criticism over lack of decision making on economic issues, the United Progressive Alliance (UPA) Government has approved its ambitious National Manufacturing Policy (NMP) that seeks to create a massive 100 million additional jobs in the manufacturing sector by 2025 as well as create large sized industrial zones with easier compliance and labor laws.
Enhancing Share of Manufacturing in GDP
The NMP seeks to enhance the share of manufacturing in the Gross Domestic Product (GDP) to 25 per cent within a decade and create 100 million jobs in manufacturing as part of the inclusive growth agenda of the UPA,
The new policy, cleared by the cabinet, seeks to boost the stagnating manufacturing sector to contribute at least 25 per cent of the national GDP by 2025. The policy has been discussed for almost a year but was stuck due to objections from the environment and labor ministries.
The share of manufacturing in India's GDP has stagnated at 15 to 16 per cent since 1980 while the share in comparable economies in Asia like China, South Korea, Indonesia and Malaysia is much higher at 25 to 34 per cent. Also, the manufacturing sector has a multiplier effect in creation of two to three additional jobs in the allied sectors.
The policy seeks to empower rural youth by imparting necessary skill sets to make them employable. Sustainable development and technological value addition in manufacturing have received special focus.
The policy envisages specific interventions broadly in the areas of industrial infrastructure development and improvement of the business environment through rationalization and simplification of business regulations. In addition, development of appropriate technologies, especially green technologies for sustainable development, and skill development of the younger population are envisaged.
National Investment and Manufacturing Zones
The policy will be a partnership between the central and state governments. The former will create the policy framework, provide incentives for infrastructure development on a public private partnership basis through appropriate financing instruments, while state governments will identify the suitable land and be equity holders in the National Investment and Manufacturing Zones (NIMZs).
Large scale China style industrial zones will be set up in the form of national investment and manufacturing zones — green field integrated industrial townships with a land area of at least 5,000 hectares. Industrial townships are proposed to be self governing and autonomous bodies and managed by a special purpose vehicle.
Seven regions under the Delhi Mumbai industrial corridor have been identified as NIMZ in the states of Gujarat, Maharashtra, Haryana, Rajasthan, Madhya Pradesh and Uttar Pradesh.
While the NIMZs have been identified, the proposals apply throughout the country wherever industry is able to organize itself into clusters. The first phase of the NIMZ will be established along the Delhi Mumbai industrial corridor which will see early results in the next few years.
Improving Business Regulatory Environment
A defining feature of the policy has been the endeavor to improve the business regulatory environment by providing single window clearances. In order to protect the interests of labor in the eventuality of a closure of a unit, a suitable mechanism has been devised using innovative job loss policy and sinking fund to insure workers against such loss.
Green manufacturing has received a special attention. Also, small and medium enterprises will be given access to this patent pool up to a maximum of Rs 20 lakh for acquiring patented technologies.

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