Govt may tweak manufacturing policy to make it investor friendly

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The new government is expected to review the National Manufacturing Policy (NMP) to make it more investor friendly. The department of industrial policy and promotion (DIPP) is readying a set of suggested changes in this regard, a senior official told Business Standard, such as tax breaks and other fiscal benefits.

When the NMP was rolled out in 2011, the aim was to raise the contribution of manufacturing to GDP from 16 per cent then to 25 per cent by 2022. However,. It fell to 12.85 per cent in 2013-14 (advance estimates) from 14.06 per cent the previous year. The policy also intends to create an additional 100 million jobs and support required skill development programmes.

At present, the NMP states a series of fiscal incentives, including tax sops, will be offered but only to small and medium enterprises. The incentives would be case-to-case, depending on the preparedness of a particular state that wants to attract industry and make it a manufacturing hub.

"The fine print of the policy has not gone down well with international as well as domestic investors," the official added. Apart from offering some tax incentives, the new government is likely to focus on "proper and transparent implementation of the policy which did not happen under the (outgoing) regime", the official said.

DIPP's draft note will also highlight how to make creation of the proposed National Investment and Manufacturing Zones (NIMZ) a success, so that it does not meet the same fate as the Special Economic Zones.

According to a note by business chamber Ficci, implementation of NIMZs needs expediting and government should consider upgrading existing industrial clusters into such NIMZs. The latter had been visualised as integrated industrial townships of at least 50 sq km (5,000 hectares) each, with modern infrastructure. At least 30 per cent of the total land area in these zones was to be devoted to manufacturing units.

The policy was launched with the idea that other initiatives such as relaxation of the foreign direct investment (FDI) regime in some key sectors, a new Goods and Services Tax (GST) and a new Land Acquisition Act would also take-off in a big way. While GST is yet to be rolled out, industry was not happy with the new land law. And, FDI relaxation in a dozen-odd sectors last year is yet to yield much. This resulted in an NMP that has failed to rope in much of credible investment. The draft will also talk of making labour laws more flexible, to enable easier dismissals.

The Bharatiya Janata Party poll manifesto said it would create a conducive environment for pushing growth in the manufacturing sector.