FE Editorial : Manufacturing stories

Written by The Financial Express | Updated: Oct 28 2011, 08:39am hrs
It is easy to get swayed by the audacity of the dream that seeks to hike the share of manufacturing in Indias GDP from the current 16% to 25% in just a decade and to, by 2022, provide work for an additional 100 million persons. Having identified cumbersome procedures that make life impossible for entrepreneurs, especially SMEsaround 70 laws, that include maintaining a record of lime washing and painting, have to be complied with and this requires filing as many as 100 returns a yearthe National Investment and Manufacturing Zones (NIMZ) policy has a solution to most problems. Land, for instance, wont be a problem since each NIMZ will be at least 5,000 hectares in size. Nor will getting environment clearances be since the state government will get the environment impact assessment study done for the NIMZfor units within the NIMZ, pre-clearances will be got while regular audits will be made simpler. Routine clearancesthe 100 returns and 70 lawswill be dealt with by the CEO of the NIMZ, a government official who will be empowered enough to take all decisions; the NIMZ will be run as a self-governing and autonomous body and will be declared to be an industrial township under Article 243Q(c) of the Constitution. Labour laws, the bane of all industrial units today, wont be too much of a problem, as the CEO will take care of issues like redeploying labour from units which close down; there will a higher payout for units who wish to close down (from 15 days for each year of completed service right now to 20 days); and even the creation of a sinking fund from where unemployment insurance can be bought.

Juxtapose all of this with the governments track record, whether in acquiring land or delegating authority to even the heads of Navratna PSUs, and the build-up already begins to look quite shaky. It is also instructive to look at is what else the shift from 16% GDP-share to 25% GDP-share entails. For one, it requires manufacturing to start growing at around 14% a year for the next decadeit grew by 9.2% per year over the last five years and 8.1% over the last 10 years. This means export levels have to grow at much higher levels than in the past, a task made even more impossible by the fact that developed country growth is unlikely to return to trend levels for another five years at least. It also means investment levels will have to rise equally dramatically. A policy will have to be put in place to ensure banks start giving loans for vocational education, and the current skills policy will need upscaling on an urgent and dramatic basis In short, Indias industrial revolution will require a dramatically different style of government.