Achieving the highly laudable twin objectives of the New Manufacturing Policy (NMP), namely stepping up the share of manufacturing in GDP from 16 % to 25 % and creating 100 million new jobs within a decade, seems a tall order. Quadrupling of manufacturing output and a six-fold increase in employment would need many more policy interventions and programmes than the mere setting up of dozen or so industrial zones or townships, the singular operative component of NMP. The need of the hour is to devise a National Manufacturing Plan cutting across all ministries and states, and its vigorous implementation.

Undoubtedly, the incentives talked of in NMP would soon be notified, and action initiated to identify and set up the National Investment and Manufacturing Zones (NIMZs). But this would be inadequate to get anywhere near the policy goals. To make the growth process inclusive, industrialisation has to be less regionally skewed and the benefits of liberalisation made to flow downwards at a much faster pace. The facilities promised for acquisition of green technologies?including the patented ones by SMEs, relief in capital gains tax for investing in start-ups, and favourable treatment to venture capital funds focusing on manufacturing?should all be offered to investors outside the NIMZs. Probably the money spent this way?in fact, only the loss of prospective revenue?might be more effective in creating job opportunities in rural areas and small towns than the money spent through MGNREGA and other national rural-social schemes.

In any case, it is not going to be easy under the proposed land acquisition law to acquire land for large-sized industrial zones. Other than for infrastructural projects, acquiring land through the use of eminent domain of the state is not conceived in the Bill currently before the Parliament. The still vague concept of smart cities in the Delhi Mumbai Industrial Corridor is also likely to be hit by the changes in law.

More importantly, utmost care has to be taken to ensure that NIMZs do not go the SEZ way. There is no need to sanction hundreds of them and dilute their utilitarian value. The incentives promised to investors in NIMZs should not be nullified later on as has been done in SEZs through the imposition of MAT, equal in impact to the promised income tax relief. NIMZs are being proposed without any legal backup, and investors are not going to be excited about the promised concessions, given the developments in SEZs that had the SEZ Act of 2005 to support.

The experience of investment zones of China seems to be the inspiration for us. Besides world-class physical and business infrastructure, the Chinese state took care of transportation needs, abundant and subsidised electricity, and also facilitated tapping at will for both skilled and unskilled workforce. A hire-and-fire labour policy, the artificial pegging down of the renminbi, and an all-pervasive ?export culture? ensured global competitiveness and markets for the manufactured products of these zones. Our NMP would need to incorporate many such experiences to make the NIMZs equally successful.

The author is former secretary, Union Ministry of Commerce and Industry

Recently, we commemorated two decades of our economic reforms launched in 1991. But these reforms bypassed our manufacturing sector, with its share remaining at 15% of India?s GDP over the last two decades. The recently announced NMP is indeed a milestone in India?s journey of reforms. After the announcement, domestic and foreign investors have shown a lot interest in understanding it in greater detail.

The policy has addressed critical issues of the regulatory environment, financing for SMEs, technology, skill development and, most importantly, infrastructure for India?s manufacturing sector. The policy is different in the sense that it has tried to focus on achievable and specific instruments rather than a general statement of intentions.

The main instrument of this policy would be the creation of NIMZs. These zones would be self-governed and would meet the needs of urbanisation and industrialisation. Worldwide, economic growth has been driven for the last two centuries in many countries through creating such growth centres and hubs. The policy has put to rest the apprehension of investors that it would discriminate against units outside the NIMZs.

Unlike the SEZ policy, NMP neither provides any separate fiscal incentive for locating units in NIMZs nor envisages the setting up of hundreds of NIMZs in the next ten years.

The policy has tried to address the major concern of availability of finance for our SME sector, which contributes almost 45% to India?s manufacturing output. The policy has suggested a number of proposals for improving access to finance for SMEs. One of the important factors behind China?s success in manufacturing has been that its financial environment has ensured funding is easily accessible to manufacturers, even for relatively risky ventures. The proposal to provide relief from long-term capital gains tax to individuals on sale of residential property and on reinvesting in the equity of a SME company will unleash the potent capital available with a large number of SMEs. Other proposals, like tax pass-through status for venture capital funds with a focus on SMEs in the manufacturing sector, will certainly incentivise small entrepreneurs to come forward with new ventures that could lead to industrial transformation in the country.

Another major reform introduced by NMP is an insurance instrument for labour dues at the time of exit, which could free manufacturers? assets of labour encumbrances so as to be reallocated speedily. Further, NMP has suggested the rationalisation and simplification of procedures at the NIMZ level. This would certainly ensure that the time taken to set up business in these zones is far less than in areas outside the zones. Also, the consolidation of returns and forms would ensure a single window for the units in zones.

Today, India is ranked poorly, at 132 out of 183 countries, in the World Bank?s Doing Business 2012 rankings. We are behind countries like Vietnam, Pakistan, Nepal and Sri Lanka. India?s attempt to accelerate growth and raise manufacturing?s share in GDP to 25% by 2022 is laudable. The key to NMP would be implementation and here the states need to come forward to encourage manufacturing and thereby create employment.

The author is president, Ficci