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"Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-Product (GDP) in the post-reform period." Give reasons. How far the recent changes in Industrial are capable of increasing the industrial growth rate? (250 words) [UPSC 2017]
Introduction In the post-reform period, India's industrial growth rate has lagged behind the overall Gross Domestic Product (GDP) growth. This disparity has been a concern for policymakers aiming to boost industrial sector performance. Reasons for Lagging Industrial Growth Regulatory and Policy ChalRead more
Introduction
In the post-reform period, India’s industrial growth rate has lagged behind the overall Gross Domestic Product (GDP) growth. This disparity has been a concern for policymakers aiming to boost industrial sector performance.
Reasons for Lagging Industrial Growth
Despite economic reforms, regulatory hurdles and bureaucratic red tape have impeded industrial growth. For instance, complex labor laws and inconsistent tax policies have created an unfriendly environment for business expansion.
Inadequate infrastructure such as poor transportation networks, unreliable power supply, and inefficient logistics has constrained industrial efficiency and competitiveness. The Logistics Performance Index for India highlights persistent issues in this area.
Access to finance remains a challenge for many industries, particularly small and medium enterprises (SMEs). High-interest rates and stringent lending norms have restricted their ability to invest in new technologies and expand operations.
Many Indian industries have been slow to adopt modern technologies and innovative practices, which has affected their productivity and global competitiveness. This is evident in the relatively lower research and development (R&D) expenditure compared to global standards.
Recent Changes and Their Impact
The PLI scheme introduced for sectors like electronics, pharmaceuticals, and textiles aims to boost manufacturing by offering incentives based on incremental production. For instance, the scheme has attracted significant investments in the electronics sector, leading to job creation and technological advancements.
The NIP aims to improve infrastructure, with an investment of ₹111 lakh crore in areas like transportation, energy, and urban development. Enhanced infrastructure is expected to reduce logistical costs and improve industrial efficiency.
Initiatives like Startup India and Make in India focus on fostering innovation and attracting foreign direct investment (FDI). These policies have led to increased entrepreneurial activity and foreign investment in industrial sectors.
The government has implemented reforms to improve the ease of doing business, such as simplifying tax regulations and reducing compliance burdens. These reforms are designed to make the industrial environment more conducive to growth.
Conclusion
See lessWhile industrial growth has lagged behind overall GDP growth due to regulatory, infrastructural, and financial challenges, recent changes like the PLI scheme, NIP, and ease of doing business reforms hold promise. If effectively implemented, these measures could significantly boost the industrial growth rate and enhance India’s global competitiveness.
Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (150 words)[UPSC 2023]
Introduction For achieving faster economic growth, the manufacturing sector must play a pivotal role in India’s GDP, with MSMEs (Micro, Small, and Medium Enterprises) being key contributors. Currently, the manufacturing sector contributes around 17% to India's GDP, and increasing this share is vitalRead more
Introduction
For achieving faster economic growth, the manufacturing sector must play a pivotal role in India’s GDP, with MSMEs (Micro, Small, and Medium Enterprises) being key contributors. Currently, the manufacturing sector contributes around 17% to India’s GDP, and increasing this share is vital for job creation and sustainable growth.
Government Policies to Boost Manufacturing and MSMEs
The government has launched the PLI scheme to incentivize large-scale manufacturing in sectors like electronics, pharmaceuticals, and textiles. This policy aims to increase domestic production and global competitiveness, benefiting MSMEs through the supply chain.
Under Make in India, the government promotes local manufacturing by simplifying regulations and improving infrastructure. This initiative supports MSMEs by encouraging FDI and providing tax incentives for local industries.
The Atmanirbhar Bharat initiative focuses on making India self-reliant, especially by promoting local manufacturing and encouraging MSMEs to enhance production capacity and adopt digital tools.
Schemes like Emergency Credit Line Guarantee Scheme (ECLGS) and MUDRA Yojana provide financial assistance to MSMEs, helping them recover from economic shocks and scale up operations.
Conclusion
See lessThe government’s policies, through initiatives like PLI, Make in India, and Atmanirbhar Bharat, are focused on boosting the manufacturing sector, particularly MSMEs, to achieve higher economic growth. However, further improvements in infrastructure, innovation, and ease of doing business are required to maximize the sector’s potential.