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Manufacturing India PDF Print E-mail
Friday, 10 June 2011 00:00
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With each industrial unit in the country needing to comply with 70-odd (decidedly odd, given that there’s a ‘humidity register’ that needs to be maintained as well as a ‘record of lime washing and painting’) legislation, each of which finally requires a licence or a registration certificate, it’s no wonder industry feels as stifled as it does. Most returns need to be filed on a monthly, quarterly or annual basis, taking the total to around 100 a year. Then there are the inspections. For smaller firms, all of this can take up around a fifth or more of management time. It is to fix this, primarily, that the PM unveiled the national manufacturing policy yesterday, a policy whose avowed aim is to raise the share of the manufacturing sector from around 16% of GDP right now to around 25% by 2025. This will, at one stroke, fix many of India’s problems, of creating jobs for the semi-skilled work force that is growing by leaps and bounds. With around 12 million new persons likely to enter the job force each year by 2015, that’s a lot of jobs which need to be created—since the service sector, by and large, requires a more educated work force, manufacturing is the ideal solution.

 

National Investment and Manufacturing Zones (NIMZ), the key to achieving this, are industrial parks so huge they can even accommodate an SEZ or two. Like SEZs, they will have a processing area and a residential area, they will have state-of-art infrastructure and logistics; a cluster approach, BCG analysis shows, will confer a 3-8 percentage point increase in competitiveness; NIMZs will have various tax benefits, and a designated CEO will have various powers delegated to him/her, making it possible for several clearances to be given at the CEO level itself instead of going to various government departments.

That’s the theory. The reality has to be seen. Environment clearances aren’t going to be easy, nor will getting land for the large NIMZs, as can be seen from the experience of several high-profile SEZs—in other words, what looks great on paper can turn out to be quite a nightmare in reality, along with the attendant issues of tax arbitrage. The intent is to make it easy for firms in the NIMZs to exit, and for labour laws to be flexible (the trade union Act is not to apply for instance), but a lot really depends on what each state government allows. The biggest issue, of course, is that manufacturing requires a lot more than just state-of-art infrastructure. China’s manufacturing success has been driven by an educated work force, of scores of patents being filed by R&D professionals. The NIMZs, to the extent they take off, are the skeleton required for a manufacturing-led India. For the skeleton to move, we need a brain.

 

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