Plan panel says 9.8% manufacturing growth in the 12th Plan will help deliver 9% growth in next five years.
Suggesting that the automotive sector’s success should be replicated in other spheres, the Planning Commission says the manufacturing sector needs to grow by an average 9.8 per cent annually in the coming 12th Five-Year Plan to deliver nine per cent economic growth annually in the next five years.
Officials said the approach paper to the 12th Plan, finalised by the full Planning Commission recently, wanted the cost of doing business in India to come down to attract more investments in manufacturing.
It attributed high cost to the plethora of forms and inspections that manufacturers have to comply with. “Some of these are due to legislations required to be reviewed for long such as the Factories Act,” a key official said.
The approach paper said the success of Indian auto sector could be attributed significantly to the long-term plan prepared a few years ago, by the Society of Indian Automobile Manufacturers, the Association of Component Manufacturers of India and the Ministry of Heavy Industries. “Such plans are required in other sectors as well,” the official said.
The approach paper, officials said, talked of good processes for consultation between producers and policy makers and coordination among the policy makers. As such, the paradigm of planning in manufacturing must shift to improving processes for consultation and coordination.
It said with rapid changes of technologies in various industries, and the open international trade environment within which domestic manufacturers must compete, responses by producers and policy makers must be dynamic.
The approach paper said the design of processes of consultation, coordination and learning must fit a country’s political and economic structures. China’s policy approach fits its political economy as do Japan’s, Korea’s and Germany’s, the paper said.
The document also talked about multiplicity of ministries dealing with different aspects of industry — commerce, labour, environment, science and finance.
It said manufacturing faces a challenge to provide more flexibility to employers to adjust employment levels but employees should also be provided more fairness and security.
Officials said the solution could not be restricted merely to modifying laws such as the Industrial Disputes Act to permit hire and fire.
New institutional arrangements are required to provide security for employees before existing legal safeguards for them can be reduced or altered. As such, the evolution of such institutions, as well as development of employee-employer contracts founded on new principles, requires wider stakeholder involvement and consensus.
At the national and state levels, unions and employers’ associations must engage in a well-conducted constructive dialogue to build trust and find new institutional solutions.
Such solutions could take the forms of unemployment insurance and staffing companies, the paper said. Earlier, Prime Minister Manmohan Singh had talked of hard decisions to achieve nine per cent economic growth a year on an average in the 12th Plan, beginning from April 2012.
He had said the target of economic growth could be raised to 9.2 per cent if global economic condition improves and domestic inflation came down by the end of 2011-12.
The approach paper does not give a scenario of 9.2 per cent economic growth rate. But, it expected manufacturing to grow by a whopping 11.5 per cent to yield 9.5 per cent economic growth a year on an average in the 12th plan.