Draft Manufacturing Policy receives PM's in-principle nod

Hanging in balance for about a year, the draft National Manufacturing Policy today got in-principle nod from a high-level committee headed by Prime Minister Manmohan Singh. He, however asked a committee of secretaries to “fine-tune the policy” following objections from the environment and labour ministries.

The primary objective of the policy is to increase the share of manufacturing to 25 per cent of the gross domestic product (GDP), from the existing 16 per cent. The government feels the sector has the potential to mitigate India’s huge unemployment problem.

The meeting, which went for about two hours at the PM’s residence, was attended by Finance Minister Pranab Mukherjee, Commerce and Industry Minister Anand Sharma, Minister of state for Environment and Forest Jairam Ramesh, Deputy Chairman of Planning Commission Montek Singh Ahluwalia, Minister of Corporate Affairs Murli Deora and Chairman of the Economic Advisory Council C. Rangarajan.

“We have presented the draft policy to the Prime Minister and he has recommended it to a committee of secretaries,” Sharma told reporters after the meeting.

He said the committee of secretaries has been asked to “fine-tune” the policy and report the recommendations to the PM within the next 30 days, so that it can be brought before the Cabinet.

“The draft National Manufacturing Policy was given in-principle approval at a meeting of the high level committee on manufacturing, held under the chairmanship of the Prime Minister,” said an official press release.

“The Prime Minister observed that the policy measures proposed would reduce the compliance burden on industry. At the same time, these measures have to be formulated while adequately taking care of the environmental and labour welfare concerns.”

It has almost been a year since the Department of Industrial Policy and Promotion (DIPP) released a discussion paper on the issue. Several rounds of discussions and consultations were held before the Prime Minister intervened.

The main issue was the suggestion to create massive National Manufacturing and Investment Zones (NMIZ). The NMIZs, which were expected to be far bigger than Special Economic Zones (SEZs), would come up across India, said the DIPP. The suggestions that the labour laws and environment rules in the NMIZs should be relaxed was opposed by environment and labour ministries.

The new policy is expected to attract huge foreign investments and encourage large-scale industrial activity. Foreign investment inflows have seen a decline in 2010-2011 compared to 2009-10. Besides, this would result in job creation, which remains a primary concern for the government.

According to the draft policy, creating a new and forward-looking policy would result in 100 million jobs by 2025.

The draft policy had also stated that special focus would be given to machine tools, heavy electrical equipment, heavy transport, earth moving and mining equipment.

Time-bound programmes would also be initiated for building strong capacities with R&D facilities and also to encourage growth and development of such capacities in the private sector while strategically strengthening the public sector to complement private initiatives. The growth of small and medium enterprises (SME) would also be encouraged and incentivised.