Finance Minister Arun Jaitley on Monday pushed for “putting the house in order” to revive manufacturing activities by, among other things, removing entry barriers and bringing down the cost of capital, which “is one single factor that has slowed down manufacturing in recent times.”
Despite being nudged by the Finance Ministry, the Reserve Bank of India has consistently refused to lower the policy rate, leading to high cost of capital.
Inaugurating the strategy workshop of government’s high-octane Make in India campaign, Jaitley said the manufacturing sector remains a challenge and “unless radical steps are taken, it will continue to be a challenge. Manufacturing is where jobs are… we have to grow fast. We have to set out house in order”.
“Whether Make in India is made for consumers within India or outside is not so relevant. The principle today says that consumers across the world like to purchase products which are cheaper and are of good quality. They hire services which are cheaper and good quality,” he said.
Earlier this month, Rajan had cautioned the government about the campaign, saying it assumes an export-led growth path of China and it should rather be ‘Make for India’ with a focus on manufacturing products for the domestic market.
Further, elaborating on the hurdles in the revival of the manufacturing sector, the minister said that apart from entry barriers, a globally competitive taxation regime, ease of doing business, lack of labour flexibility and stability of policy, lack of skilled manpower, lack of enabling environment for business and trade facilitation among others things have to be addressed to give a push to the sector, which contracted to over five-year low of 7.6 per cent in October.