The Cabinet on Tuesday cleared the National Manufacturing Policy, proposing to set up a clutch of National Investment and Manufacturing Zones (NIMZs) and promising fiscal support for small and medium enterprises (SMEs). The policy aims to raise the share of manufacturing in GDP from the present 16% to 25% in a decade.
Akin to integrated industrial townships, the NIMZs will get government support to create world-class infrastructure and the benefit of single-window clearances and relatively flexible labour rules. The zones will rely on clean and energy-efficient technologies.
Commerce and industry minister Anand Sharma said the seven investment regions along the Delhi Mumbai Industrial Corridor will be notified as NIMZs, apart from five other locations being identified. Sharma told FE that he was in talks with the finance ministry for fiscal incentives which were part of the policy but were yet to be notified.
Official sources said NIMZ managements ? special purpose vehicles led by government officials ? would find it easier to fire workers and will have to make only smaller payouts if companies in the zones close down.
The Cabinet clearance came after the ministries concerned which had earlier clashed on certain provisions of the policy relating to labour and environment resolved their differences.
Each NIMZ will have at least 5,000 hectares and will be self-governing, autonomous bodies. They will be public private partnership ventures (PPPs) with state-of-the-art infrastructure and land use on the basis of zoning. These, sources said, would generate millions of jobs and promote inclusive growth, a key goal of the UPA government. While the Centre will provide incentives for infrastructure development, states will identify land and equity-holders in the zones.
The proposed fiscal incentives will focus on SMEs. These include tax pass-through status for venture capital funds, a separate fund under SIDBI, rollover relief from long-term capital gains tax to individuals on sale of a residential property if the proceeds are invested in the equity in a start-up SME manufacturing company etc. Further, there will be weighted standard deduction of 150% on expenditure incurred on PPP projects for skill development. There are also sundry other benefits for SMEs such as part-funding of water and environmental audits.
The Indian economy is now heavily reliant on the service sector, but must shift towards manufacturing to push the GDP growth to double-digit level and absorb the more than 10 million people joining the workforce annually in the coming years.