Manufacturing panel calls for autonomy, infrastructure

In order to achieve the targeted 12 per cent growth rate in the manufacturing sector, a draft strategy paper by the National Manufacturing Competitiveness Council suggests the need for full managerial and commercial autonomy for the public sector, fewer inspections, and better infrastructure. The paper also stresses the importance of addressing the inverted duty structure to meet the objective.

However, according to NMCC chairman V Krishnamurthy, "Even with a growth rate of 12 per cent, the share of manufacturing in GDP is expected to reach only 23 per cent by 2015."

Krishnamurthy said the growth target would create 1.60 million direct jobs with the current employment elasticity. This could increase to 2.9 million direct jobs if the elasticity could be increased to the level that was in the 1980's, he added.

On the draft's silence on disinvestment, Krishnamurthy said the council favoured any measure which would make the public sector more effective.

While the paper highlights the need to attract more FDI, it is silent on sectoral initiatives required to achieve the objective. Asked if the commission supported FDI in retail, Krishnamurthy said though the paper had not dealt with it, he felt investors coming into the country should be free to invest in retail as well.

Economist Bibek Debroy who is also on the panel of the NMCC said the draft strategy was in favour of continued labour reforms. "We are focussing on do-able reforms like reducing the number of inspections," he said adding that power reforms, indirect tax reforms and reducing the inspector raj were the three crucial measures needed to push growth.

Member Secretary V Govindarajan said the commission had planned to focus on sectors like telecom equipment, handicrafts, infrastrucure (ports), power, cement, fertilisers, biotechnology and steel. Other issues like innovation policy, tax issues, labour issues, academia-industry collaborations would also be looked into.

The draft also favours a concept of economic regions replacing Special Economic Zones. "With liberalisation across the board, liberalisation in selected enclaves (EOUs, SEZs and AEZs) has become somewhat irrelevant. It is suggested that the concept of economic regions with world class infrastructure but no fiscal concessions be considered," the paper says.

The paper also calls for a review of the reservation policy for the small-scale and withdrawal of all other taxes like central excise, central sales tax, octroi, state-level sales tax, entry tax, stamp duties and transportation tax.