INDUSTRIAL POLICY

Before independence, policy of the government was characterised by laissez-faire i.e. non-
interference policy in the affairs of industries. Industrial development was left to the exclusive care
of private sector.
However, in the post independence era, government has been taking an active interest in the
development of industries in India. So far, government has formulated five industrial policies i.e.
Industrial Policy 1948, 1956, 1977, 1980 and 1991 respectively. Government is planning to come out
with a new Industrial policy in 2018.

Industrial Industrial Industrial Industrial Industrial

policy policy policy policy policy
1948 1956 1977 1980 1991

Industrial Policy Resolution, 1948

The first industrial policy was announced in April 1948 by the then Industrial Minister, Late Mr. S.P.
Mukherjee. Its historic importance lies in the fact that it ushered in the system of ‘Mixed Economy’ in
the country i.e. it entrusted the task of industrial development on both private and public sectors.

Industrial Policy Resolution, 1956

IPR, 1956 was the most comprehensive industrial policy, which was formulated in the backdrop of the
adoption of the constitution and the socio-economic goals. The policy may be described as the
‘economic constitution’ of India as it not only outlined the basic framework of the future industrial
policies (especially up to 1991) but also of the general economic policies. Its main objectives were to
accelerate the rate of economic growth and to speed up industrialization for achieving a ‘socialistic
pattern of society’.

Salient Features

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 • Schedule A (Public sector)- 17 industies exclusively reserved for
public sector. Eg- arms and ammunition, atomic energy, iron and steel,
3-fold heavy machinery, coal, air transport, railways, electricity
division • Scedule B (Mixed sector)- 12 industries in the mixed sector of private
and public. Eg- machine tools, aluminum, drugs, chemical fertilizers.
of Progressively state owned in which state would generally set up new
units
industries • Schedule C (Private sector)- All the remaining industries and their
future development left to private sector

• Predominant State role in setting up new industrial undertakings

Predomin • State to facilitate development of industries in the private sector
by ensuring the development of transport, power etc. and by
ant State appropriate fiscal and other measures
role • State to support small-scale and cottage industries through positive
discriminatory measures like reservation of items for SSI, differential
taxation, subsidies
Balanced
industrial • Stressed the necessity of reducing regional disparities. Industrially
backward regions to receive priority in establishment of new industries
developm • Allowed for foreign capital but with effective Indian control
ent

Industrial Licensing Policy

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The Industries (Development and Regulation) Act, 1951, empowered the government to issue licenses
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for setting up of new industries, expansion of existing ones and for diversification of products.
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Objectives of the industrial licensing policy were:

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1. Development and control of industrial investment and production as per national priorities
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2. Checking the concentration of industries and ensuring balanced regional development

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However, from time to time, many deficiencies in the licensing system came to light. The government
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set up several committees for the study of the licensing system and for suggestions for its
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improvement. Such committees included R.K Hazari Committee 1964 and Dr. Subimal Dutt
Committee 1967. These committees revealed that the system of licensing had resulted in increased
concentration of economic power in the hands of few business houses. Dr. Subimal Dutt Committee
(viz. Industrial Licensing Policy Enquiry Committee) was the most important, which submitted its
report in 1969. On the basis of its recommendation, government enacted the Monopolies and
Restrictive Trade Practices (MRTP) Act, 1969.
Industrial Policy Statement, 1977

Focus on Focus on promotion Introduced the

concept of tiny sector
decentralisation of of cottage and small within the small-scale
industries scale industries sector

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Industrial Policy Statement, 1980

Emphasis on- Selective liberalization of industrial sector-

MRTP Act was liberalised, scope of
optimum utilization of installed capacity,
licensing was reduced, simplification of
technological upgradation and procedure for regularization of
modernization unauthorized excess capacity

NEW INDUSTRIAL POLICY (NIP), 1991

The Government of India announced the New Industrial Policy on July 24, 1991. The main objective of
this policy is to unshackle the Indian industrial economy from administrative and legal controls. Its
main aim is to raise industrial efficiency to the international level through substantial deregulation of the
industrial sector of the country.
Salient Features
1. Delicensing: The industrial licensing was abolished irrespective of the level of investment, except for
18 specified industries like defence, atomic energy, etc. Since then, most of these industries were
delicensed and now only 5 industries fall under the purview of industrial licensing.
2. Foreign investment: Foreign capital investment limit was raised from 40% to 51% in high technology
and high investement priority industries.
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3. Foreign Technology: Automatic approval was granted for foreign technology agreements upto the
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limit of 200 crore subject to 5% royalty on domestic sales and 8% on exports.

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4. Foreign Investment Promotion Board (FIPB): FIPB was established to expeditiously clear foreign
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investment proposals. It serves as a single-window clearing agency for the FDI proposals.
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5. Industrial Location Policy: Excepting the big cities with population of one million, in other cities
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industrial licensing will not be required but for those industries where licensing is compulsory. In
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case of cities with population of one million or above, excepting non-pollutant industries, all other
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units will be set up at a distance of 25 kms from the city limits.

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6. MRTP limit scrapped: The threshold limit of Rs. 100 crore worth of assets for classification of a
company as MRTP company was removed, such companies were to be recognized on case-by-case
evaluation basis.
7. Phased Manufacturing Programme (PMP) was abolished. Under this programme, government use
to impose a condition on foreign firms to gradually reduce and finally eliminate the use of imported
inputs.
8. New small enterprise policy: A separate policy was announced by the government in August 1991
for the promotion of small-scale industries.
9. Public Sector’s role diluted: The following measures were undertaken to reform the public sector
enterprises.
q Dereservation: The number of industries reserved exclusively for the public sector were reduced
from 17 to 8 under NIP, 1991. Now, it has been reduced to just two viz. atomic energy including
minerals specified under the schedule of atomic energy and rail transport.

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 q Professionalisation of management by inducting non-official members in the boards of PSUs.
q Disinvestment of the share of PSUs was initiated.
Appraisal of New Industrial Policy 1991
New industrial policy was aimed at raising efficiency and accelerating industrial production in the
country. Large number approvals required earlier were done away with. It paved the way for efficient
utilization of resources available with the industries. Changes in the foreign investment, transfer of
technology etc. related laws were relaxed in order to give boost to foreign investment in country.
Privatization was meant for bringing in efficiency in the public sector by inducing competition in the
economy. Various measures like MOUs were expected to improve the performance of the enterprises in
public sector. It was also expected that the manufacturing activity in the country would get a boost and
large number of jobs would be created for unemployed youths of the country.
However, the NIP 1991 has invited criticism from various sections:
q Firstly, we have witnessed erratic and fluctuating industrial growth in the country in the post
reform era. Rate of growth declined in the post reform era, particularly during latter half of
1990s.
q Secondly, we have witnessed various threats from foreign competition. Indian businessmen are
facing an unequal competition from MNCs. The Indian enterprisessuffer from size disadvantages
in comparison with MNCs. India has moved from too much protection to too little protection,
which may eventually result in policy induced deindustrialization.
q Thirdly, there has emerged a danger of business colonization. Various measures to promote
foreign investment contained in the new industrial policy and the various concessions to such
investment announced in recent years have provided opportunities to MNCs to penetrate the
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Indian economy and gobble up Indian enterprises.

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q Fourthly, we have misplaced faith in foreign investment. The govt. expects foreign investment
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to help in technology up gradation of the industrial sector and push up export earnings. But
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none of the MNCs working in the country has attempted to develop India as an important base
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for a significant part of its worldwide research and development work.

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q Fifthly, crony capitalism and corrupt practices continue to prevail. While delicensing and
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deregulation has undoubtedly discouraged rent-seeking and corruption at the central

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government level, these practices have continued and may have even increased at the state
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level.
q Sixthly, industries have failed to emerge as an engine of growth in India. In case of India, the
economy jumped from primary to service sector directly. NIP 1991 failed to give enough push to
the industries.
q Lastly, it has resulted into distortions in production structure. We have witnessed significant fall
in growth rate of capital goods industries in the country.

Monopolies and Restrictive Trade Practices (MRTP) Act, 1969

MRTP Act was enacted in 1969 and MRTP commission was constituted in 1970 to prevent the
concentration of economic power and to prohibit restrictive or unfair trade practices. Under the act
companies having assets beyond the threshold limit (i.e. 20 crores in1985) were placed under the
purview of the act. Certain restrictions are imposed on such companies like prior approval of the

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 MRTP commission for establishment of new undertakings, expansion of undertakings merges and
amalgamations.

COMPETITION ACT, 2002

The competition act was enacted by the government in 2002 on the recommendation of the S. V. S.
Raghavan Committee. It repealed the MRTP Act and the MRTP commission was replaced by the
Competition Commission of India (CCI). The act seeks to promote competition by creating a level playing
field for all the enterprises in the Indian economy. It seeks to prevent abuse of dominance rather than
dominance as such.
Competition Commission of India
The objectives of the Act are sought to be achieved through the Competition Commission of India (CCI),
which has been established by the Central Government with effect from 14th October 2003. CCI consists
of a Chairperson and 6 Members appointed by the Central Government. It is the duty of the
Commission:
q To eliminate practices having adverse effect on competition
q To promote and sustain competition
q To protect the interests of consumers and ensure freedom of trade
q To give opinion on competition issues on a reference received from a statutory authority
established under any law
q To undertake competition advocacy, create public awareness and impart training on
competition issues.
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NATIONAL MANUFACTURING POLICY (NMP)

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The government released the NMP on 4 November 2011 for bringing about a quantitative and
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qualitative change in the manufacturing sector.

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Objectives
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The major objectives of the National Manufacturing Policy are to increase the sectoral share of
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manufacturing in GDP to at least 25% by 2022; to increase the rate of job creation so as to create 100
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million additional jobs by 2022; and to enhance global competitiveness, domestic value addition,
technological depth and environmental sustainability of growth.
The objectives of the act were to be achieved by simplification of business regulations and
establishment of NIMZs.
National investment and manufacturing zones (NIMZs)
NIMZs are envisaged as integrated industrial townships with world-class physical and social
infrastructure. Key features of the proposed NIMZs:
q The state government would be responsible for selection of suitable land having an area of
5,000 ha in size
q The central government will bear the cost of master planning and will improve/provide external
physical infrastructure linkages to NIMZs including rail, road (national highways), airports, and
telecommunications in a time-bound manner.

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 q The central government will provide financial support in the form of viability gap funding (VGF)
not exceeding 20 per cent of project costs.
With the government undertaking a host of initiatives like “Make in India”, “Digital India”, “Skill India”
and significant relaxation of foreign investment norms in the past 3 years, it has become imperative to
revamp the manufacturing policy. So, the government has set the ball rolling for a new Industrial policy
that will subsume NMP 2011 and will be aligned to Industrial revolution 4.0, which encompasses use of
robotics, artificial intelligence, Internet of Things, data analytics and automation.

Issues with manufacturing sector in India

 Power availability: The major challenge in Indian manufacturing is low power availability. Due
to unavailability of power 24 hours per day, there is decrease in productivity and efficiency, and
lower output rates.
 Labour Productivity: Labour productivity is lesser in India than many competing countries. This
is due to lack of skilled workforce and large unorganized sector.
 Cost and Fragmentation of Transportation and Logistics: Transportation is very costly and slow
in India. It can take long delivery time to get products to the coasts from some places in India.
 Lack of Infrastructure and basic facilities reduce the competitiveness of the manufacturing
sector.
 Lack of innovation: in production process, planning, machine capability etc.
 Lack of export competitiveness: Key industries like textiles and clothing fallen behind in global
markets, they are now finding it difficult to survive in the domestic market in the face of import
competition.
 Availability of finance: for putting the manufacturing sector on the rails is a problem area
 General economic slowdown, surplus capacity in certain sectors has a cascading effect on
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large/medium/small industries leading to low growth in manufacturing sector in recent times.

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 MSME sector a key contributor of manufacturing sector has been underperforming.

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Industrial Corridors
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Five industrial corridor projects across India have been identified, planned and launched by the
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Government of India. These corridors are spread across India, with strategic focus on inclusive
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development to provide an impetus to industrialization and planned urbanization. These are as follows:
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The DMIC Project is a planned industrial development project between the Indian capital city of Delhi to
its financial hub Mumbai. This corridor lies along the Western Dedicated Freight Corridor (DFC) of the
railways.
Out of twelve NIMZs so far announced, eight are along the Delhi-Mumbai Industrial Corridor (DMIC).
Besides, four other NIMZs have been given in-principle approval.
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RECENT INITIATIVES TO BOOST MANUFACTURING

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MAKE IN INDIA
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‘Make in India’ initiative was launched on September 25, 2014 with the objective of facilitating
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investment, fostering innovation, building best in class manufacturing infrastructure, making it easy to
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do business and enhancing skill development. Action Plans for 21 key sectors were identified for specific
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actions under (i) Policy Initiatives (ii) Fiscal incentives (iii) Infrastructure Creation (iv) Ease of Doing
Business (v) Innovation and R&D (vi) Skill Development areas.
Achievable Targets

 Target of an increase in manufacturing

sector growth to 12-14% per annum over
the medium term.

 An increase in the share of manufacturing in

the country’s Gross Domestic Product from
16% to 25% by 2022.

 To create 100 million additional jobs by

2022 in manufacturing sector.

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  Creation of appropriate skill sets among rural migrants and the urban poor for inclusive growth.

 An increase in domestic value addition and technological depth in manufacturing.

 Enhancing the global competitiveness of the Indian manufacturing sector.

 Ensuring sustainability of growth, particularly with regard to environment.

Initiatives under Make in India
q Twenty-five sectors have been selected under Make in India; a framework was developed to
share a large amount of technical information on these sectors. Domestic and international
audiences are constantly updated with latest information on opportunities, reform measures,
etc.
q The ministry has engaged with the World Bank group to identify areas of improvement in line
with World Bank’s ‘doing business’ methodology.
q An Investor Facilitation Cell (IFC) dedicated for the Make in India campaign was formed in
September 2014 with an objective to assist investors in seeking regulatory approvals, hand-
holding services through the pre-investment phase, execution and after-care support.
q The Indian embassies and consulates have also been communicated to disseminate information
on the potential for investment in the identified sectors.
q Various sectors have been opened up for investments like Defence, Railways, Space, etc. Also,
the regulatory policies have been relaxed to facilitate investments and ease of doing business.
q Six industrial corridors are being developed across various regions of the country. Industrial
Cities will also come up along these corridors. Sagarmala, Bharatmala, Smart cities mission and
various other infrastructure initiatives have also been undertaken.
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 Intellectual Property Rights (IPRs) registrations are being accelerated and measures are being
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taken to cater to the training needs of the skilled workforce

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 Government has recently launched Make in India 2.0 with renewed focus on 10 sectors,
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including capital goods, auto, defence, pharma and renewable energy to push growth in
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manufacturing and generate job opportunities. The other sectors are biotechnology, chemicals,
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electronic system design and manufacturing, leather, textiles, food processing, gems &
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jewellery, construction, shipping and railways.

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Invest India
It is a joint-venture company between the Department of Industrial Policy and Promotion and FICCI, as a
not-for-profit, single window facilitator, for prospective overseas investors and to act as a structured
mechanism to attract investment. Invest India is the official investment promotion and facilitation
agency of the Government of India, mandated to facilitate investments into India. It is envisaged to be
the first point of reference for potential investors.
E-Biz Project
Under the project, a Government to Business (G2B) portal is established to serve as a one-stop shop for
delivery of services to the investors and address the needs of the business and industry from inception
through the entire life cycle of the business. The government in 2018 has decided to shut down the eBiz
portal.
Skill Development

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After the setting up of a new Ministry of Skill Development and Entrepreneurship to promote skill and
entrepreneurial activities, work is being undertaken on setting up common norms for skill training
across central ministries/departments. Thirty-one industry/employer-led Sector Skill Councils (SSCs) are
now operational and these have been aligned with the twenty-five sectors of ‘Make in India’.
To create a common standard for skills training and certification in the country efforts are on to align the
National Council for Vocational Training (NCVT), school boards, and the University Grants Commission
(UGC).
FDI Policy initiatives
As a part of policy reform process, the FDI policy is being progressively liberalized on an ongoing basis in
order to allow FDI in more industries under the automatic route. Government has issued the Foreign
Direct Investment Policy 2017-18. Some important features:
q Abolition of FIPB to promote ease of doing business. It has been replaced by DIPP’s foreign
investment facilitation portal, responsible for processing of FDI proposals in a time bound
manner of six-eight weeks.
q Introduction of ‘Competent Authorities’: The FDI Policy 2017 defines and lists sector-specific
administrative ministry/department as ‘Competent Authorities’ empowered to grant
government approval for FDI. Consultation with the DIPP has been made strictly need based,
leading to a more streamlined procedure and expeditious timeline (maximum time of 10 weeks)
for approval

Achievements under Make in India

Since its launch, Make in India has played a major role when it comes to improving ease of doing
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business in India. The various initiatives being undertaken have made a hugely positive impact on
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investor confidence. Some of the major achievements are as follows:

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 Foreign Direct Investment: The total Foreign Direct Investment (FDI) inflow was USD 160.79
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billion between April 2014 and March 2017 – representing 33% of the cumulative FDI in India
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since April 2000. In 2015-16, FDI inflow crossed the USD 50 billion mark in one fiscal year, for
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the first time ever. In 2016-17, FDI inflow stood at a record of USD 60 billion, highest ever
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recorded for a fiscal year ever.

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 Improved business processes and procedures open up new avenues of opportunities and create
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confidence among entrepreneurs as a result of which India moved up significantly in world

bank’s ease of doing business. India climbed 14 rungs in the World Bank’s Ease of Doing
Business 2020 survey to stand at 63, among 190 countries, making it the one of world’s top 10
most improved countries for the third consecutive time.
 The Insolvency and Bankruptcy Code 2016 has consolidated all rules and laws pertaining to
insolvency into one legislation, thereby bringing India's bankruptcy code in step with global best
practices.
 The Government of India introduced a holistic National Intellectual Property Rights (IPR) policy
in May 2016 in order to spur creativity and innovation in the Indian economy. During April -
October 2017, 45,449 patents and 15,627 copyrights were filed in India, out of which 9,847
patents and 3,541 copyrights were granted.
Failures of Make in India

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  The share of manufacturing in gross domestic product (GDP) came down to 15.3 per cent in
Q1FY20 against 16.2 per cent in Q1FY19. Contrary to the Make in India campaign aim to increase
this share to 25 per cent by 2022.
 In terms of ease of doing business ranking though there has been substantial improvement but
still lags in enforcing contracts and some other key parameters. Also it is argued that EoDB index
only covers Delhi and Mumbai and does not give proper assessment of business environment of
whole country
 The MSME sector which is critical to achieve objective of creating 100 million jobs is also facing
various problems like access to credit, lack of trained labour, low productivity and
competitiveness.
 Manufacturing Sector as a whole is facing challenges due to high logistics cost, lack of advanced
and latest technology, unskilled labourforce etc. which is reducing its competitiveness.
Ease of Doing Business

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Major initiatives that helped India boost its Ease of Doing business ranking:
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DEALING WITH CONSTRUCTION PERMITS: The introduction of online single window has reduced the
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number of procedures as well as the time required to obtain a construction permit. GETTING
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ELECTRICITY: Major reforms included reduction in the number of procedures, documentation, and time
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required to obtain an electricity connection. TRADING ACROSS BORDERS: Major reforms include online
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application system for traders, reduction of mandatory documents to export/import to three, and
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robust risk management system for inspection.

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PAYING TAXES: Introduction of Goods and Service Tax (GST) and robust IT infrastructure of online return
filing have been the major reforms in this indicator. Apart from this, online services for registration and
return filing for employee insurance and provident fund have eased paying taxes as well.
RESOLVING INSOLVENCY: The Insolvency and Bankruptcy Code of 2016 is India’s first comprehensive
legislation of corporate insolvency.
ENFORCING CONTRACTS: Major reforms included the establishment of Commercial Court, Commercial
Division and Commercial Appellate Division in High Courts of Mumbai and Delhi. National Judicial Data
Grid (NJDG) which provides case data, and e-filing of case in district courts of Delhi and Mumbai have
made a significant contribution as well.

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 India has moved 14 places to be 63rd among 190 nations in the World Bank’s ease of doing business
ranking

Criticism of Ease of Doing Business

 Kaushik Basu, former chief economist of the World Bank argues Many countries and political
leaders make the mistake of equating the DB ranking with overall welfare. But the DB merely
measures what it says it measures: the ease of doing business.
 In an independent evaluation carried out in 2008, serious problems were found with the
methodology and politics of the Doing Business indicator. Concerns were raised about the very
small sample sizes (sometimes only a single firm) from which data about entire countries’
investment climates was collected. The evaluation also pointed to the lack of transparency in
data collection and to what it ominously called “the adjustments staff make to the data received
from informants.
 In India, the vast majority of businesses are unregistered micro-enterprises, things like a
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neighbourhood convenience store or a small garments factory. These are clearly not the targets
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of ‘ease of doing business’ provisions – they don’t avail cheap land, electricity, and loans from
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the government.
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 India has risen rapidly in the World Bank’s Ease of Doing Business (EODB) rankings in the past
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five years. This rise has occurred alongside widespread deregulation, which has eroded
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environmental protections and seen attempts to introduce labour and land laws that favour
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corporations. This is highlighted by a recent Oxfam report pointing to rising inequality in India
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and poor performance of India on Environmental Performance Index

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 The ranking is also criticized for various issues and flaws in methodologies like small sample size
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focusing on reforms only in Delhi and Mumbai and limited indicators.

World Bank to pause publication of Doing Business report
The World Bank has “paused” the publication of Doing Business Report, which carries the Ease of Doing
Business (EODB) Rankings. The effective suspension of the publication of the rankings has been
announced in the wake of a number of reported irregularities regarding changes to data in the 2018 and
2020 reports published in October 2017 and October 2019. In a statement on Thursday, the Bank said it
was conducting a “systematic review and assessment of data changes that occurred subsequent to the
institutional data review process for the last five Doing Business reports”.

Manufacturing Sector Current Status

For the past decade and a half, revival of the manufacturing sector has been on the agenda of successive
governments. After both UPA governments failed to increase the share of manufacturing sector in GDP
from 16-17 per cent to 25 per cent within a decade, the Modi government made “Make in India” as its

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flagship programme in 2014, and adopting the same target set by its predecessor government. But, the
share of the manufacturing sector in GDP remaining sticky during the past five years.
Manufacturing growth slumped to a dismal rate of only 0.6 per cent in the first quarter (Q1) of the
current fiscal year (2019-20 or FY20) from 3.1 per cent in the fourth quarter of 2018-19 (FY19). For the
whole of FY19, the sector had clocked growth of 6.9 per cent, up from 5.9 per cent in the previous fiscal
year.
The share of manufacturing in gross domestic product (GDP) came down to 15.3 per cent in Q1FY20
against 16.2 per cent in Q1FY19. The government’s flagship programme, Make in India, aims to increase
this share to 25 per cent by 2022.

Government renamed Department of Industrial Policy and Promotion (DIPP)

The Department of Industrial Policy and Promotion (DIPP) has been renamed as the Department for
Promotion of Industry and Internal Trade (DPIIT). The newly-named department under the Ministry of
Commerce and Industry will look into matters related to promotion of internal trade, including retail
trade, welfare of traders and their employees, facilitating ease of doing business and start-ups.

LABOUR REFORMS
One of the main reasons of India not becoming a manufacturing hub is its restrictive and rigid labour
laws. Rigid labour laws discourage firms from trying to introduce new technology, requiring some
workers to be retrenched. This deters FDI because of the fear that it would not be possible to dismiss
unproductive workers or to downsize during a downturn. Hence getting FDI into export-oriented labour-
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intensive sectors in India has not been fully achieved.

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On one side these labour laws hampers country’s economic interests on other they also hampers
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labours well being as well. Employers have taken to hiring workers on contract outside the institutional
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and legislative ambit, resulting in informalisation of the labour market. This hampers worker well-being.
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So, labour reforms are very essential and urgent for our country. Towards creating an environment
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conducive to industrial development while also ensuring transparency in the labour sector, Prime
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Minister NarendraModi unveiled widespread labour reforms. Labour reforms are the key for the success
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of Make in India campaign. Towards achieving this target Indian Government launched Pandit Deen
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Dayal Upadhyay Shramev Jayate Yojana.

Pandit Deendayal Upadhyay Shramev Jayate Karyakram
q Shram Suvidha Portal: The objective of the unified web portal is to consolidate information of
Labour Inspection and its enforcement, which will lead to transparency and accountability in
inspections. The 4 main features of the portal are:
1. Unique labour identification number (LIN) to be allotted to nearly 6 lakhs units and allow them
to file online compliance for 16 out of 44 labour laws.
2. Filing of self-certified and simplified Single Online Return by the industry. Now Units will only file
a single consolidated Return online instead of filing 16 separate Returns.
3. Mandatory uploading of inspection Reports within 72 hours by the Labour inspectors.
q Random Inspection Scheme: Till now Inspector Raj is prevailed in country under which units for
inspection were selected locally without any objective criteria, this gives discretionary powers to
inspectors. As envisaged in scheme, computerised list of inspections will be generated randomly on

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 predetermined objective criteria and complaints-based inspection will also be determined centrally
based on data and evidence.
q Universal Account Number: Enables 4.17 crore employees to have their Provident Fund account
portable, hassle-free and universally accessible
q Apprentice Protsahan Yojana: Will support manufacturing units mainly and other establishments by
reimbursing 50% of the stipend paid to apprentices during first two years of their training
Problems of Labour Market in India
o Organised sector is stringently regulated while the unorganized sector is virtually free
from any outside control and regulation with little or no job security.
o Social security to organised labour force in India is provided through a variety of legisla-
tive measures but workers of small unorganised sector remain outside the purview of
these arrangements.
o Labour is a concurrent subject and 44 Central laws more than 100 state laws govern the
subject.
o Trade Union Act, 1926 provide that any seven employees could form a union.
o Indian labour laws are highly protective of labour, and labour markets are relatively
inflexible. As usual, these laws are applicable in the organised sector only.
o Job security in India is so rigid that workers of large private sector employing over 100
workers cannot be fired without government’s permission.
o 71% of men above 15 years are a part of the workforce as compared to just 22 percent
women (Labour Force Survey)
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LABOUR CODES
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The 2nd National Commission of labour had recommended simplification, amalgamation and
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rationalisation of Central Labour Laws. The central government is compressing of 44 central labour laws
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into four ‘codes’ or broad categories — wages, social security, industrial relations and occupational
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health and safety.

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Code on wages has already been approved by Parliament. The law would be implemented after framing
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rules under the code. The remaining three codes are sent to Parliamentary Standing Committee on
Labour. Entering 2020, the government hopes that India would be able to implement all four codes

1. CODE ON WAGES, 2019

The Code has subsumed four labour laws — Minimum Wages Act, Payment of Wages Act, Payment of
Bonus Act and Equal Remuneration Act. After the enactment of the Code, all the four Acts stand
repealed.
Coverage: The Code will apply to all employees. The central government will make wage-related
decisions for employments such as railways, mines, and oil fields, among others. State governments will
make decisions for all other employments.
Fixing the minimum wage: The Code prohibits employers from paying wages less than the minimum
wages. Minimum wages will be notified by the central or state governments.

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Gender discrimination: The Code prohibits gender discrimination in matters related to wages and
recruitment of employees for the same work or work of similar nature. Work of similar nature is
defined as work for which the skill, effort, experience, and responsibility required are the same.
Floor wage: According to the Code, the central government will fix a floor wage, taking into account
living standards of workers. Further, it may set different floor wages for different geographical areas.
The minimum wages decided by the central or state governments must be higher than the floor wage. In
case the existing minimum wages fixed by the central or state governments are higher than the floor
wage, they cannot reduce the minimum wages.
Advisory boards: The central and state governments will constitute advisory boards. The Boards will
advise the respective governments on various issues including: (i) fixation of minimum wages, and (ii)
increasing employment opportunities for women.
The Code on Wage universalizes the provisions of minimum wages and timely payment of wages to all
employees irrespective of the sector and wage ceiling. At present, the provisions of both Minimum
Wages Act and Payment of Wages Act apply on workers below a particular wage ceiling working in
Scheduled Employments only. This would ensure "Right to Sustenance" for every worker and intends to
increase the legislative protection of minimum wage from existing about 40% to 100% workforce. This
would ensure that every worker gets minimum wage which will also be accompanied by increase in the
purchasing power of the worker thereby giving fillip to growth in the economy. Introduction of statutory
Floor Wage to be computed based on minimum living conditions, will extend qualitative living
conditions across the country to about 50 crore workers.
2. LABOUR CODE ON INDUSTRIAL RELATIONS, 2019
It would replace three laws i.e. Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act,
1946 and the Industrial Disputes Act, 1947.
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Key Features
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o It seeks to allow companies to hire workers on fixed-term contract of any duration.

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o The code has retained the threshold on the worker count at 100 for prior government
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approval before retrenchment, but it has a provision for changing ‘such number of
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employees’ through notification. This provision has been criticized sharply by the labour
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groups and trade unions as any notification may change it later.

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o Introduces a feature of ‘recognition of negotiating union’ under which a trade union will
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be recognized as sole ‘negotiating union’ if it has the support of 75% or more of the
workers on the rolls of an establishment.
o As several trade unions are active in companies, it will be tough for any one group to
manage 75% support, hence taking away their negotiating rights. In such a case, a
negotiating council will be constituted for negotiation.
o Underlines that fixed-term employees will get all statutory benefits on a par with the
regular employees who are doing work of the same or similar nature.
o Proposes setting up of a “re-skilling fund” for training of retrenched employees. The
retrenched employee would be paid 15 days’ wages from the fund within 45 days of
retrenchment.
o While this means workers can be hired seasonally for six months or a year it also means
that all workers will be treated at par with regular workers for benefits.
 Concerns

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 o The Industrial Relations Code of 2019 has evoked strong reactions, as the right to form
unions and accord them powers of representation has been severely curtailed.
o It provided that a minimum of 10% of workers or 100 workers employed in an
establishment or industry would be needed - from seven at present - to register a trade
union.
3. LABOUR CODE ON SOCIAL SECURITY 2019
It proposes universalization of social security benefits, and reduction of employees’ provident fund (EPF)
monthly contribution by workers in select sectors.
The bill seeks to establish a social security fund and tap the corporate social responsibility fund to offer
unorganized sector workers medical, pension, death and disability benefits via the employee’s state
insurance corporation.
The bill once passed will empower the central government to exempt select establishments from all or
any of the provisions of the code and makes Aadhaar mandatory for availing benefits under various
social security schemes.
Once the bill is passed, the central government may “formulate and notify, from time to time, suitable
welfare schemes for unorganized workers.
4. LABOUR CODE ON OCCUPATIONAL SAFETY, HEALTH & WORKING CONDITIONS, 2019
With the ultimate aim of extending the safety and healthy working conditions to all workforce of the
country, the Code enhances the ambit of provisions of safety, health, welfare and working conditions
from existing about 9 major sectors to all establishments having 10 or more employees. The proposed
Code enhances the coverage of workers manifold as it would be applicable to all establishments
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employing 10 or more workers, where any industry, trade, business, manufacture or occupation is
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carried on, including, IT establishments or establishments of service sector.

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Further the varying threshold of applicability has been made uniform at 10 workers for all
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establishments except mines and dock where the Code would be applicable even with 1 worker. The
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definition of inter-state migrant worker has also been proposed to be modified to include those migrant
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workers who are being employed directly by the employer from other States without contractor or
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agent. This proposal would enhance the coverage of the safety, health and working conditions
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provisions manifold as compared to the present scenario.

Way Forward
 Reforms should be made with consensus amongst workers and their unions, and employers and
their associations. Trust between workers and employers should be increased.
 A national policy for domestic workers needs to be brought in at the earliest to recognise their
rights and promote better working conditions.
 Apprenticeship should be promoted. The government should form National Apprenticeship
Corp. by merging the Regional Directorate of Skill Development and the Entrepreneurship and
Board of Apprenticeship Training to achieve the objective of training the 10 million apprentices
and finding jobs through an exclusive job portal.
Child labour (prohibition and Regulation) Amendment Act, 2016 provides complete ban on
employment of children below 14 years of age.

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Maternity Benefit Amendment Act, 2017 has increased paid maternity leave from 12 weeks to 26
weeks
Santusht Portal: The labour ministry has chalked out a plan to launch a new portal 'Santusht' for speedy
redressal of worker as well as employer grievances and ensuring effective implementation of labour
laws at the grassroot level. Initially, Santusht (Hindi for satisfied) would monitor all services provided by
retirement fund body EPFO and health insurance and services provider ESIC to formal sector workers.
Later, the portal would cover other wings of the ministry as well. It would also have data on real time
basis to assess the performance of each and every official. Workers and employers can lodge their
complaints on the portal, which would be managed by an internal monitoring cell comprising five to six
officers.

START-UP INDIA SCHEME

The campaign was first announced by Prime Minister Narendra Modi in his 15 August 2015 address from
the Red Fort. Startup India is a flagship initiative of the Government of India, intended to build a strong
eco-system for nurturing innovation and Startups in the country that will drive sustainable economic
growth and generate large scale employment opportunities. The Government through this initiative
aims to empower Startups to grow through innovation and design.
Startup Definition: Startup means an entity, incorporated
or registered in India (amended by the Department for
Promotion of Industry and Internal Trade (DPIIT) in February
2019):
1. Not prior to 10 years (earlier 7 years),
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2. With annual turnover not exceeding INR 100 crore

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in any preceding financial year (earlier 25 crore),

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3. An entity shall be considered a start-up if it is working towards innovation, development or

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improvement of products or processes or services, or if it has a scalable business model with a

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high potential of employment generation or wealth creation.

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4. Incorporated as a Private Limited Company, a Registered Partnership Firm or a Limited Liability

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Partnership
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5. Entity should not have been formed by splitting up or reconstructing an already existing
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business
Start-up India Action Plan
The key features of the Start-up India Action Plan unveiled by Prime Minister Narendra Modi on 16th
January, 2016 are as follows:

q Start-up profits to be tax-free for 3 years and also no labour inspections for 3 years of launch of
the venture.
q Compliance regime based on self-certification for labour and environmental laws.
q Easy exit policy for start-ups with 90 days.
q Tax exemption to be provided on capital gains if money is invested in another start up.
q Liberalised Fast-track mechanism for start-up patent applications under intellectual property
rights protection with 80% cost rebate.

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 q Encouraging startups to participate in public procurement by easing norms of minimum
turnover/experience.
q Mobile apps, portal for register start-ups in a day from 1st April 2016.
q Establishing Credit guarantee fund and special scheme for women entrepreneurs.
q Sector specific incubators, 500 tinkering labs, per-incubation and seed funds under the Atal
Innovation mission.
q Public-private partnership (PPP) model for 35 new incubators, 7 new research parks, 31
innovation centres at national institutes and 5 new Bio clusters will be set up to help Biotech
Sector.
q Government to start Atal Innovation Mission to give an impetus to innovation and encouraging
talent among young people by instituting national awards.
q Government to promote the provision of core innovation programmes in 5 lakh schools across
the country.
The initiative holds high importance due to the fact that start-ups are the next job creating industry in
the country. The increasing automation also reduces the potential of manufacturing sector to create
more jobs.

Business Incubator: An incubator provides common infrastructure and services such as technology
development assistance, networking and mentoring, funding access, training and development,
business support services to start-ups businesses.

Some Facts
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 As on January 8, 2020, 27,084 startups were recognized across 551 districts, 55 per cent of
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which are from Tier I cities , 45 per cent from Tier II and Tier III cities
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 Under it various steps have been taken - for easing regulations such as
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exemptions from Income tax on investments raised by startups;

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 implementation of 32 regulatory reforms to improve Ease of Doing Business for startups;

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
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self-certification regime for six labour laws and three environmental laws; and
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 Startup India Hub as ‘One Stop Shop’ for the startup ecosystem
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Maharashtra, Karnataka and Delhi are the top three performers in terms of State-wise
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distribution of recognized startups in India

 As per industry-wise distribution of recognized startups, IT Services accounted for 13.9 per cent
followed by Healthcare and Life Sciences (8.3 per cent) and education (7.0 per cent)

Critical Appraisal
As per an IBM-Oxford report, over 90% of Indian startups shut down in the first five years. India’s
startup ecosystem is still a maturing one and cannot be expected to become a major job creator
overnight. It took decades for Silicon Valley to be what it is today. Similarly, the Indian IT industry took
almost three decades to become the $150 Bn industry it is today, hiring over 3.7 Mn people directly.
Hence PM Modi’s wish for these startups to create large-scale job creation will have to wait. What this
government has been able to achieve is to make the conversation about startups mainstream. But many
key policy initiatives such as angel tax reform are needed before startups actually begin contributing
significantly to the mainstream economy in terms of jobs and GDP.

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 ATAL INNOVATION MISSION (AIM)
The Union Cabinet, chaired by Prime Minister Narendra Modi, on Feb 24, 2016 has given its approval for
establishment of Atal Innovation Mission (AIM) and Self Employment and Talent Utilisation (SETU) in
NITI Aayog with appropriate manpower.
The overarching purpose of this Mission is to promote a
culture of innovation and entrepreneurship in India. AIM is a
flagship Innovation Promotion Platform of NITI Aayog, the
think tank of Union Government for promotion of innovation
and entrepreneurship in India. It involves academics,
entrepreneurs and researchers from national and
international levels to foster a culture of innovation, R&D and
scientific research in India. The Atal Innovation Mission shall
have two core functions:

1. Entrepreneurship promotion through Self-Employment and Talent Utilization, wherein innovators

would be supported and mentored to become successful entrepreneurs. SETU will be a Techno-
Financial, Incubation and Facilitation Programme to support all aspects of start-up businesses, and other
self-employment activities, particularly in technology-driven areas.
Initiatives
q Establishment of sector specific Incubators including in PPP mode
q Establishment of 500 Tinkering Labs
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q Pre-incubation training to potential entrepreneurs in various technology areas in collaboration with

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various academic institutions having expertise in the field

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q Strengthening of incubation facilities in existing incubators and mentoring of Startups

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q Seed funding to potentially successful and high growth Startups.

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Atal Incubation Centre (AICs): The Government realizes that there is a need to create high class
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incubation facilities across various parts of India with suitable physical infrastructure in terms of
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capital equipment and operating facilities, coupled with the availability of sectoral experts for
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mentoring the start-ups.

2. Innovation promotion: to provide a platform where innovative ideas are generated.

Innovation promotion
q Institution of Innovation Awards (3 per state/UT) and 3 National level awards
q Providing support to State Innovation Councils for awareness creation and organizing state level
workshops/conferences
q Launch of Grand Innovation Challenge Awards for finding ultra-low cost solutions to India’s pressing
and intractable problems
Atal Tinkering Laboratories (ATL): ATL is a work space where young minds can give shape to their ideas
through hands on do-it-yourself mode and learn innovation skills. The vision is to cultivate 1 million
children in India as Neoteric Innovators . Young children will get a chance to work with tools and
equipment to understand what, how and why aspects of STEM (Science, Technology, Engineering and

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Math). ATLs can be established in schools (Grade VI–XII) managed by Government, local body or private
trusts/society.

STAND-UP INDIA SCHEME

The prime minister NarendraModi launched the ‘Stand up India’ scheme on 5 April 2016 as part of the
government’s efforts to support entrepreneurship among women and SC & ST communities.
Salient features of the scheme
q Composite loan between 10 lakh rupees and up to 1
crore rupees will be provided to SC/ST and women and
also inclusive of working capital component for setting
up any new enterprise.
q Debit Card (RuPay) for withdrawal of working capital.
Credit history of borrower to be developed of these under-banked sections of society.

q Refinance window through Small Industries Development Bank of India (SIDBI) with an initial
amount of 10,000 crore rupees.
q Creation of a corpus of 5,000 crore rupees for credit guarantee through National Credit Guarantee
Trustee Company (NCGTC).
q Handholding support for borrowers with comprehensive support for pre-loan training needs,
facilitating loan, factoring, marketing etc.
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q Loans under the scheme is available for only green field project. Green field signifies, in this context,
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the first-time venture of the beneficiary in the manufacturing or services or trading sector.
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q Web Portal for online registration and support services will be provided.
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The Stand Up India Scheme is anchored by Department of Financial Services (DFS) to encourage
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greenfield enterprises by SC/ ST and women entrepreneurs. It will support 2.5 lakh borrowers with bank
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loans repayable up to seven years. It is intended to facilitate at least two such projects per bank branch,
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on an average one for each category of entrepreneur.

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Growth Potential
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With emergence of signs of overheating of the Chinese economy, India stands to gain immensely. India
has the golden opportunity of turning into a manufacturing hub by exploiting its demographic dividend.
Cheap and abundant labour is already attracting many international firms away from China to South and
South east Asian countries like India and Vietnam.
Opportunities
q The country is expected to rank amongst the world’s top three growth economies and amongst the
top three manufacturing destinations by 2020.
q Favourable demographic dividends for the next 2-3 decades. Sustained availability of quality
workforce.
q The cost of manpower is relatively low as compared to other countries.
q Strong consumerism intake ability of the domestic market.
q Strong technical and engineering capabilities backed by top-notch scientific and technical institutes.

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q The country has a democratized polity vis-à-vis the rule of law.
q Well-regulated and stable financial markets open to foreign investors.
q The government has initiated various schemes to boost manufacturing.

THE COMPANIES ACT 2013

The Companies Act 2013 passed by the Parliament received the assent of the President of India on 29th
August 2013. The new law is aimed at easing the process of doing business in India and improving
corporate governance by making companies more accountable. Some of the salient features of the
CA2013 are as under:
1. Corporate Social Responsibility: Section 135 of the 2013 Act, seeks to provide that every
company having a net worth of 500 crore INR, or more or a turnover of 1000 crore INR or more,
or a net profit of five crore INR or more, during any financial year shall constitute the corporate
social responsibility committee of the board. This committee needs to comprise of three or
more directors, out of which, at least one director should be an independent director. The
committee shall formulate the policy, including activities specified in Schedule VII, which include
eradicating extreme hunger and poverty, promotion of education, promoting gender equality
and empowering women, reducing child mortality and improving maternal health, etc.
Such companies are required to spend at least 2 % of their net profit on CSR. The companies will
also have to give preference to the local areas of their operation. If the companies are unable to
meet CSR norms, they will have to give explanations and may even face penalty.
2. Electronic Mode: The CA2013 proposed E-Governance for various company processes like
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maintenance and inspection of documents in electronic form, option of keeping of books of

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accounts in electronic form, financial statements to be placed on company’s website, etc.

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3. Supremacy of Shareholders: The CA2013 focused and provide major aspect on approvals from
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shareholders on various significant transactions.

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4. Class Action Suits: 2013 Act introduces the western concept of class action suits which allows
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requisite number of members, depositors or any class of them file a suit against the company,
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its directors, auditors and/or other experts or consultants or advisors, if they believe that affairs
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of the company are conducted in a manner prejudice to the company or its members or
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depositors.
5. Strengthening Women Contributions through Board Room: The CA2013 stipulates
appointment of at least one woman Director on the Board of the prescribed class of Companies
so as to widen the talent pool enabling big Corporates to benefit from diversified backgrounds
with different viewpoints.
6. Independent Directors: The CA2013 provides that all listed companies should have at least one-
third of the Board as independent directors. Such other class or classes of public companies as
may be prescribed by the Central Government shall also be required to appoint independent
directors. No independent director shall hold office for more than two consecutive terms of five
years.
7. Rotation of Auditors: The CA2013 provides for rotation of auditors and audit firms in case of
publicly traded companies.

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 8. Auditors performing Non-Audit Services: The CA2013 prohibits Auditors from performing non-
audit services to the company where they are auditor to ensure independence and
accountability of auditor.
9. National Financial Reporting Authority (NFRA): It will supervise and regulate the activities of
auditors and companies and see that they are in compliance with accounting and auditing
standards.
The Union Cabinet approved the proposal for its establishment on 1 March 2018. The establishment of
NFRA as an independent regulator for the auditing profession will improve the transparency and
reliability of financial statements and information presented by listed companies and large unlisted
companies in India.
The primary objective of NFRA is to have an independent oversight body to oversee the quality of
accounting and auditing services with respect to listed companies as well as unlisted public companies
above a prescribed threshold. The Centre government is empowered to refer any other class or classes
of companies to NFRA in public interest.
Conflict between NFRA and ICAI
The Institute of Chartered Accountants of India (ICAI) has been up in arms against the constitution of
NFRA, contending that it would affect their disciplinary power vis-à-vis their members and create a
regulatory overlap.
10. One Person Company: The CA2013 provides new form of private company, i.e., one person
company is introduced that may have only one director and one shareholder. The CA1956
requires minimum two shareholders and two directors in case of a private company.
11. Increase in number of Shareholders: The CA 2013 increased the number of maximum
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shareholders in a private company from 50 to 200.

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12. National Company Law Tribunal (NCLT or Tribunal): 2013 Act provides for constitution of
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Tribunal and Appellate Tribunal with the objective of facilitating expeditious disposal of
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proceedings. All the matters, issues and disputes falling within the ambit of 2013 Act will now be
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referred to NCLT. Appeal would lie before the Appellate Tribunal and thereafter can be
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challenged before the Supreme Court.

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The Companies (Amendment) Act, 2019

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 Issuance of dematerialised shares: Under the Act, certain classes of public companies are
required to issue shares in dematerialised form only.

 Corporate Social Responsibility (CSR): Under the Act, if companies which have to provide for
CSR, do not fully spent the funds, they must disclose the reasons for non-spending in their
annual report. Under the amendment, any unspent annual CSR funds must be transferred to
one of the funds under Schedule 7 of the Act (e.g., PM Relief Fund) within six months of the
financial year.

 Debarring auditors: Under the Act, the National Financial Reporting Authority debar a member
or firm from practising as a Chartered Accountant for a period between six months to 10 years,
for proven misconduct. The amendment amends the punishment to provide for debarment
from appointment as an auditor or internal auditor of a company, or performing a company’s
valuation, for a period between six months to 10 years.

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 NATIONAL CAPITAL GOODS POLICY, 2016
This is first ever policy for Capital Goods sector with a clear objective of increasing production of capital
goods from Rs. 2,30,000 crore in 2014-15 to Rs. 7,50,000 crore in 2025 and raising direct and indirect
employment from the current 8.4 million to 30 million.
The Capital Goods industry is one of the key contributors to value added manufacturing in India. Capital
goods include plant machinery, equipment and accessories required for manufacture or production of
goods or for rendering services, either directly or indirectly. Currently, the Capital goods sector is
contributing 12% to manufacturing sector which translates to around 2% of GDP. It employs around 5
million people directly across various sub-sectors.
The policy seeks to address some of the key issues including availability of finance, raw material,
productivity, quality and environment friendly manufacturing practices, innovation and technology,
creating domestic demand and promoting exports.
Index of Industrial Production (IIP)
The Index of Industrial Production (IIP) is an index, which shows the growth rates in different industry
groups of the economy in a stipulated period of time. The IIP index is computed and published by the
Central Statistical Organisation (CSO) on a monthly basis. IIP is a composite indicator that measures
the growth rate of industry groups classified under:
1. Broad sectors, namely, Mining (14.4% weight), Manufacturing (77.6% weight) and
Electricity (8.0% weight)
2. Use-based sectors, namely Basic Goods, Capital Goods and Intermediate Goods.
Currently IIP figures are calculated considering 2011-12 as base year. The Eight Core Industries
comprise 40.27 % of the weight of items included in the Index of Industrial Production (IIP). On the
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basis of weightage, the arrangement of core industries in decreasing order is as follows: Electricity>
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Steel >Refinery Products> Crude Oil >Coal>Cement >Natural Gas> Fertilizers.

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INDUSTRIAL REVOLUTION 4.0

This fourth revolution is fundamentally different from the previous three, which were characterized
mainly by advances in technology (steam and water power; then electricity and assembly lines; then
computerization). In this fourth revolution, we are facing a range of new technologies that combine the
physical, digital and biological worlds. These new technologies will impact all disciplines, economies and
industries, and even challenge our ideas about what it means to be human.

22
Opportunities and Challenges
Like the revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global
income levels and improve the quality of life for populations around the world. In the future,
technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and
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productivity. Transportation and communication costs will drop, logistics and global supply chains will
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become more effective, and the cost of trade will diminish, all of which will open new markets and drive
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economic growth.
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However, the revolution could yield greater inequality, particularly in its potential to disrupt labor
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markets. As automation substitutes for labor across the entire economy, the net displacement of
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workers by machines might exacerbate the gap between returns to capital and returns to labor. On the
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other hand, it is also possible that the displacement of workers by technology will, in aggregate, result in
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a net increase in safe and rewarding jobs.

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Formulation of a New Industrial Policy

The Department for Promotion of Industry and Internal Trade (DPIIT) had proposed the new industrial
policy last year, with an aim to create jobs for the next two decades and attract $100 billion foreign
direct investment annually.Further initial draft industrial policy which targets to raise value addition in
the manufacturing sector to $1 trillion by 2025.
The policy envisions to create globally competitive business enterprises which can generate gainful
employment and sustainable livelihoods.
It entails creating industry that is equipped with innovation, technology; financially viable and
environment friendly; and whose benefits are shared by all sections of the society.
The policy would work in tandem with the Skill India Mission to improve employability of future
workforce, and with the foreign trade policy to enhance India’s share in global merchandise exports.

23
It would also enable harmonious implementation of macro fiscal and monetary policies and ensure that
incentive regime for industry is competitive.
The policy is likely to introduce self-certification and third-party certification to reduce G2B (government
to business) interfaces. A single ID is proposed for all G2B services. The idea, according to the officials, is
to strengthen ease of doing business and reduce compliance costs for the industry. This, in turn, will
boost private investments and entrepreneurship, thereby creating more jobs.
The new industrial policy is expected to embed provisions that will give weightage to the quality of
foreign direct investment (FDI), with a preference to investments that are expected to create local value
additions and, thus, jobs.
The policy may incentivize research and development with the objective of positioning India as a test
bed for emerging technologies and creating an environment for ease of innovation. The policy may have
provisions for rationalization of electricity cost for industries.
The policy is likely to have provisions under which the government will share risks with small and
medium entrepreneurs by co-investing in research. Also, it may encourage free movement of
researchers between public sector research bodies and industries, apart from relaxing restrictions on
non-resident Indians (NRIs) in certain research areas.

STRATEGY FOR NEW INDIA @ 75 NITI AAYOG

India is the fifth largest manufacturer in the world with a gross value added (GVA) of INR 21,531.47
billion in 2017-18 (2nd advance estimate for 2017-18 at 2011-12 prices). The sector registered
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a compound annual growth rate (CAGR) of around 7.7 per cent between 2012-13 and 2017-18.
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The government has taken several initiatives to promote manufacturing, there are :
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 the Make in India Action Plan aimed at increasing the manufacturing sector ’s contribution to 25
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per cent of GDP by 2022,

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 the Start-up India initiative to promote entrepreneurship and nurture innovation, and
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the Micro Units Development and Refinance Agency (MUDRA) and Stand-up India to facilitate
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access to credit.
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It has also undertaken massive recapitalization of public sector banks to ease availability of credit to
micro, small and medium enterprises (MSMEs). Besides, it has undertaken major infrastructure projects,
such as the setting up of industrial corridors, to boost manufacturing. The Department of Industrial
Policy & Promotion (DIPP) has been engaging with states/UTs to enhance the ease of doing business.
Following concerted efforts of the government, the World Bank ranked India 77th among 190 countries
in the Ease of Doing Business (EODB) in 2019. This was a jump of 65 positions since 2015. Further, India
climbed 14 ranks in the World Bank’s Ease of Doing Business 2020 survey to stand at 63, among 190
countries, making it the one of world’s top 10 most improved countries for the third consecutive time.
While these indices are useful for comparison, actual improvement in EODB will come only with greater
coordination between the centre and states. The foreign direct investment (FDI) regime has been
substantially liberalized, significantly improving India’s rank in terms of annual FDI inflows from 14 in
2010 to 9 in 2017.
Objectives
q Double the current growth rate of the manufacturing sector by 2022.

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q Promote in a planned manner the adoption of the latest technology advancements, referred to as
‘Industry 4.0, that will have a defining role in shaping the manufacturing sector in 2022.
Constraints
q The main constraints on achieving the objectives set for India’s industry in 2022-23 are the
following:
q Regulatory uncertainty: Regulatory risks and policy uncertainty in the past have dented investor
confidence.
q Investment: There has been a cyclical slowdown in fresh investment since 2011-12.
q Technology adoption: The adoption of new technologies like artificial intelligence, data analytics,
machine-to-machine communications, robotics and related technologies, collectively called
“Industry 4.0”, are a bigger challenge for SMEs than for organized large-scale manufacturing
improvements in our global EoDB rank, it continues to be a drag on the system. This is also true
of investment conditions in the states.
q Exports and insufficient domestic demand: There has been no export driven industrial growth.
Domestic demand alone may not be adequate for sustained, high value manufacturing.
q Challenges to doing business: Despite recent improvements in our global EODB rank, it
continues to be a drag on the system. This is also true of investment conditions in the states.
Getting construction permits, enforcing contracts, paying taxes, starting a business and trading
across borders continue to constrain doing business. Data security, reliability of data and
stability in communication/transmission also pose challenges to technology adoption.
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WAY FORWARD
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q Demand generation, augmentation of industrial infrastructure and promotion of MSMEs.

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q The government can play a crucial role in creating domestic manufacturing capabilities by leveraging
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proposed public procurement and projects. Mega public projects such as Sagarmala, Bharatmala,
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industrial corridors, and the Pradhan Mantri Awas Yojana (PMAY) can stimulate domestic
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manufacturing activities provided the projects are suitably structured and demand is aggregated
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strategically. This should be accompanied by simplification of the regulatory process.

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The Madhepura Electric Locomotive Project, a joint venture between the Indian Railways and the French
multinational Alstom, provides a good example of how mega projects can be leveraged to boost
domestic production. The project enabled effective transfer of technology and the availability of
state-of-the-art locomotives for the railways. The Madhepura model is replicable in the defence,
aerospace, railways and shipping sectors.
q Set up a portal to monitor projects beyond a given threshold so that any roadblocks are identified
and addressed on a real time basis. State governments should be encouraged or incentivized to
contribute data to this portal. NITI Aayog’s Development Monitoring and Evaluation Office (DMEO)
can help set up the portal. An inter-ministerial body with representatives of state governments and
project promoters (as special invitees) may be constituted. Efforts should be made to develop self-
sufficient clusters of manufacturing competence, with Cluster Administrative Authorities
empowered to provide single window clearances to entrepreneurs and investors. Industrial
corridors should address the lack of infrastructure and logistics. Logistics will need to be
supplemented with warehousing and other elements of the manufacturing supply chain.

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q NITI Aayog could work with states to prepare manufacturing clusters and develop export strategies
based on their sector competitiveness and resource strengths. A cluster should have supporting
industries and infrastructure. It should also develop a local brand and distribution channel through
an e-commerce platform. A Cluster Administration Office should be given the responsibility to award
factory permissions and compliances.
q For India to become the world’s workshop, we should encourage further FDI in manufacturing,
particularly when it is supported with buybacks and export orders.
q Streamline discretionary powers vested at different levels of governance by adopting digitized
processes and making all approval electronic in a transparent, time bound manner.
q Disruptive technology, while leading to job losses in traditional areas, also presents new job
opportunities. A greater connect between government-industry-academia is required to identify the
changing requirements in manufacturing and prepare an employable workforce. In the context of
employability of engineers, there is a need for thorough review of standards of engineering
education and its linkages with industry.
q E-commerce can be the driver of overall economic growth over the next decade through its impact
on generating demand, expanding manufacturing, employment generation and greater
transparency. A Committee, chaired by CEO, NITI Aayog examined issues related to the e-commerce
industry. It made recommendations for the sector’s growth including increasing internet access,
digitizing payments, further improving transportation infrastructure, logistics and distributed
warehousing support. These may be examined for implementation at the earliest.
q Harmonize Indian quality standards with global standards in many sectors. Lack of harmonization
has affected Indian exports and prevented the leveraging of trade agreements adequately.
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