India’s commerce ministry has sent the final draft of the new industrial policy to the Cabinet for approval, Union minister Suresh Prabhu said.
“We have sent the final Cabinet note. We have also prepared an action plan for the implementation of the policy,” Commerce and Industry Minister Suresh Prabhu told PTI.
The draft industrial policy initially floated in August 2017 by the Department of Industrial Policy & Promotion (DIPP) has three major aims: to create jobs over the next two decades, promote foreign technology transfer, and attract $100 billion FDI annually.
Though the policy does not suggest direct changes in laws, such as those governing labour, it is likely to propose the establishment of a body with representation from the Centre and the States to work on changes whenever required. The policy also suggests the strengthening of municipal bodies.
Commerce minister Prabhu said the policy would include steps to reduce unnecessary regulations. “The New Industrial Policy will encourage the industry to work together with the government to improve productivity, R&D efforts, and efficiency,” the minister said, as per a report in BusinessLine.
What is the New Industrial Policy?
The New Industrial Policy will replace the 27-year-old existing policy. The new policy aims to resolve bottlenecks resulting from inadequate infrastructure, restrictive labour laws, and complicated business environment.
The policy is in sync with the government’s ‘Make in India’ target to increase the share of the manufacturing in the economy to 25% by 2022, from the current 16-17%.
The policy would have some financial implications as the government might provide incentives for use of transformational technologies like artificial intelligence, internet of things, and robotics.
The major reform proposed ahead of the 2019 general elections would address the issue of inverted duty structure and develop alternatives to banks for improving access to capital for micro, small, and medium enterprises (MSMEs).
What are its aims?
The new policy aims at promoting emerging sectors and modernising existing industries. It will also look to reduce regulatory hurdles, cut paper work and support emerging and new sectors. The ministry aims to set up an elaborate machinery, which includes a steering committee, for effective implementation of the policy.
As part of the policy, industrial health clinics could be set up to help micro, small and medium enterprises (MSMEs) with their finances. MSMEs are considered to be the backbone of India’s industrial architecture.
The new policy will replace the industrial policy of 1991, which was prepared in the backdrop of balance of payment crisis.
Prabhu indicated that the fourth industrial revolution is going to displace jobs so “we need to re-skill our workforce”, as per a PTI report.
What sectors will it focus on?
The new industrial policy aims to boost manufacturing sector growth, promote foreign technology transfer, and attract overseas investments. It will focus on futuristic sectors such as artificial intelligence, Internet of things, and robotics.
The new policy also takes into account the competition from China, and specifically addresses productivity and MSMEs. According to the Department of Industrial Policy and Promotion (DIPP), productivity, as measured by value added per worker and average wages in manufacturing, in India is only one-third of that in China.
“Differences in productivities across sectors and across firms within the same sector make matters worse. Workers in India are overwhelmingly employed in low productivity and low wage activities,” the department said, the Economic Times reported.
At the moment, Indian MSMEs are facing tough competition due to cheap imports from China and free trade agreement countries. The new policy will help in alleviating such concerns.
Elton Gomes is a staff writer at Qrius