Industrial policy back to drawing board as disagreements persist

Industrial policy back to drawing board as disagreements persist
  • 1

New Delhi, Mar 26: The government has begun work anew on a new national industrial policy, discarding a draft that was in the works for months but was dogged by differing opinions on some of the policy’s key contours.
The industrial policy, which was billed as a comprehensive rule book aimed to turn India into a friendlier business destination, was initially set for launch last year.
Lack of consensus among top policy makers across ministries have held back the draft from being sent to the Cabinet for final approval.
India’s last industrial policy overhaul was carried out in 1991, when a large of sectors were delicensed and foreign direct investment (FDI) rules were eased.
The new policy, which the Department for Promotion of Industry and Internal Trade (DPIIT) is piloting, was aimed to create an enabling umbrella framework to deal with contemporary business and investment issues.
The new policy would have replaced the 28-year old framework.
The first draft had proposed a joint Centre-State institutional body modelled on the lines of the Goods and Services Tax (GST) Council empowered to iron out rough edges.
From energy shortages and land problems to ambiguous tax laws and byzantine labour rules, a barrage of hurdles have kept away large-scale private investments in what should otherwise count as a massive, attractive market.
In 2014, Prime Minister Narendra Modi unveiled the `Make in India’ campaign to turn India into a manufacturing powerhouse, vowing to remove bureaucratic red tape and make the country more investor friendly.
The “Make in India” campaign is as much an invitation to domestic and foreign companies as a promise to rectify everything that has kept the country at the bottom rungs of the World Bank’s ‘ease of doing business’ index.
India has since leapfrogged into the 77th rank in the World Bank’s latest Ease of Doing Business rankings, jumping 23 notches from last year. India has improved its rank by 53 positions in the last two years, and 65 positions in the last four years (2014-18).
The new industrial policy, which would incorporate progammes such as Make in India, Start Up India, and labour laws, was seen as an initiative to make India an investors’ preferred destination by removing irritants, bottlenecks and regressive policies often blamed for scaring away companies.
The policy was drafted to serve as the main vehicle to boost the share of manufacturing in the country’s gross domestic product (GDP) to 25 percent from about 15 percent now, roughly the same share of the economy as peers like Brazil and Russia but less than China’s 32 percent.
Populous, and strategic, neighbour China’s manufacturing capabilities have long overshadowed India and the government’s push for manufacturing comes at a time when many big companies are seeking an alternative to the Asian giant as costs and risks there rise.
The real challenge lies in getting execution of projects right at the state level. States will have to come around to reform laws, even at the level of local bodies, and proactively facilitate implementation of plans and policies drawn up by the Centre.
“The proposal needed to address issues like labour regulations, lending to the micro, small and medium enterprises, and reversing the inverted duty structure,” a senior official, who did not wanted to be identified, said.
With the announcement of the Model Code of Conduct for the Lok Sabha elections, the new draft is not expected anytime soon.