THE National Manufacturing Policy (NMP) cleared by the Cabinet recently comes in the backdrop of falling business confidence, slowing investments and slowdown in manufacturing. The growth of the sector was at a 21 month low at 2.3 per cent in July this year.
It has been saddled with assorted problems including lack of infrastructure, multiple clearances and compliance issues, regulatory environment and multi-tier decision making, land acquisition problems, lack of skilled manpower, bad business sentiment, lack of labour reforms and delayed environmental clearances. Data compiled by the centre for monitoring Indian Economy reveals that investment has declined sharply in the manufacturing sector. Foreign Direct Investment too has shown a major decline. According to World Bank parameters for ease of doing business, out of 183 countries, India ranked at 134, way behind Bangladesh, Sri Lanka, Nepal and Pakistan.
The NMP has set a target of creating 100 million jobs by 2025. Manufacturing has a multiplier effect as each job creates 2-3 additional jobs in the ancilliary sectors. The sector contributes 12 per cent of the work force which compared to other developing and advanced countries is low. The creation of seven National Investment and Manufacturing Zones (NIMZ) on the Delhi-Mumbai Industrial Corridor is the first step in creating large scale China style industrial zones where compliance is easier and faster clearances are provided with softer labour and environmental clearances.
The policy is a positive initiative but only the actual results on the ground will prove its success. One will have to see how fast the seven NIMZs take off. Interestingly, some of the problems with manufacturing are already being addressed by some states which are able to attract huge investments. Entrepreneurs and capital go where there is opportunity to make money. If the NMP is one such game changer it will revive manufacturing projects at a time when few are in the mood to invest.
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