New export-oriented industrial policy to focus on textile, leather sectors

Policy also aim to seize millions of jobs, lower down the value chain, that are shifting out of China to other developing nations

The proposed industrial policy, currently being prepared by the commerce and industry ministry, may have special provisions for manufacturing in the textile, leather sectors to leverage growth, and focus on spreading out export hubs across the country which are currently getting concentrated in a few states.

It will also tie in existing government initiatives and serve as a focal point for various industry-wise policies. “It will absorb the 2011 national manufacturing policy and focus on technological issues of Industry 4.0, apart from furthering the government’s push of the Digital India initiative,” a senior Department of Industrial Policy and Promotion (DIPP) official said.

While the government had floated an initial discussion paper on the proposed industrial policy in August 2017, it has not yet released a final draft of the policy in the public domain. The commerce and industry ministry had back then announced this final draft will be put out by January 2018.

“We will follow the due process and release a detailed draft. We are currently weighing the inputs from other ministries and stakeholders,” a senior DIPP official said. The initial document focused on the creation of jobs, the promotion of foreign technology transfer, the growth of micro, small, and medium enterprises, and the establishment of a goal to attract $100 billion foreign direct investment annually.

It will also have a special focus for sectors such as apparel and footwear in which India maintains a manufacturing edge, albeit one that is slipping. “Despite India being one of the largest exporters in both sectors, manufacturing jobs in Bangladesh, Indonesia, and several African countries are seeing an increase, while in India we are seeing a slowdown in growth. So, the policy will have special provisions to boost these sectors,” a senior DIPP official said.

The $36-billion textile export sector, the third-largest foreign exchange earner for India after petroleum products and gems and jewellery, clocked only 0.75 per cent growth in 2017-18, after a contraction in the past two years. On the other hand, outbound trade of leather articles rose 3.46 per cent to $2.42 billion, recovering from the contraction witnessed in 2016-17.

The proposed policy may also act on the suggestion of successive Economic Surveys over the past three years which have repeatedly pointed to a slowdown in low skilled jobs in neighbouring China. India will also aim to seize millions of jobs, lower down the value chain, that are shifting out of China to other developing nations as Beijing makes adjustments to its own industrial policy under the pressure of growing basic wages and greater specialisation in high-end manufacturing, the official added.

Export-led growth

The policy is also expected to reaffirm the government’s belief in export-led growth and as a result will have an extensive impact on overall trade norms, with ease in trade and diffusion of export hubs among the government’s top priorities, a commerce department official pointed out.

Earlier this year, the Economic Survey pointed out that the five states of Maharashtra, Gujarat, Karnataka, Tamil Nadu, and Telangana account for a whopping 70 per cent of India’s exports. “The Centre plans to stop this ghettoisation of exports through incentives as well as channel digital technology to extend exports from rural and traditionally backward areas,” he added.

Domestic procurement push

A further push for adopting mandatory domestic procurement norms by the government may also be there in the policy. The Federation of Indian Chambers of Commerce & Industry had suggested back in February that state governments should also adopt these norms.

Currently, the Public Procurement (Preference to Make in India) Order 2017, that came into effect back in June last year, stipulates that only local suppliers will be eligible for all government goods purchases less than an estimated ~5 million. A further list of 90 items is currently being drawn up to be placed under the mandatory category in preferential procurement.

The current industrial policy was framed back in 1991, the government led by P V Narasimha Rao essentially junked the previous licence raj. But critics have said the policy was hastily prepared at a time when the economy was battling an economic crisis. Back then, large fiscal deficits had a spillover effect on the trade deficit culminating in a serious external payments crisis.