Roadmap for Answer Writing Introduction: Briefly define the manufacturing sector’s contribution to GDP and the significance of MSMEs. State the purpose of the answer: to assess how current policies support growth in this sector. Importance of Increasing Manufacturing Sector Share: Rural Development: Explain how manufacturing ...
Model Answer Introduction The industrial growth rate in India has lagged behind the overall growth of Gross Domestic Product (GDP) in the post-reform period. While the industrial sector contributes significantly to the economy, accounting for 27.6% of GDP, its growth has remained stagnant at aroundRead more
Model Answer
Introduction
The industrial growth rate in India has lagged behind the overall growth of Gross Domestic Product (GDP) in the post-reform period. While the industrial sector contributes significantly to the economy, accounting for 27.6% of GDP, its growth has remained stagnant at around 2-3%, compared to GDP growth rates exceeding 6-7%.
Reasons for Lagging Industrial Growth
- Inadequate Infrastructure:
The industrial sector suffers from a significant deficit in physical infrastructure, necessitating an investment of $1 trillion to improve capacities and efficiency. - High Logistics Costs:
Poor quality of industrial infrastructure has led to high logistics costs, making Indian goods less competitive globally. India spends 2-3 times more on logistics than its competitors. - Restrictive Labour Laws:
Complex and rigid labour laws create challenges for employers, often leading to legal complications that hinder industrial growth. - Complicated Business Environment:
A multi-layered tax system with high compliance costs adversely affects the competitiveness of manufacturing. India ranks poorly in regulatory aspects according to the Ease of Doing Business (EoDB) 2020 report. - Low Investment in Technology:
The reliance on inefficient and outdated technologies results in low productivity and higher costs, further disadvantaging Indian products in international markets.
Recent Changes in Industrial Policy
The Department of Industrial Policy and Promotion (DIPP) has introduced several initiatives aimed at revitalizing industrial growth:
- Policy Goals: The National Manufacturing Policy aims to increase the manufacturing sector’s contribution to GDP to 25% by 2025, while the foreign trade policy aims to double exports.
- Investment in Technology: The policy seeks to attract $100 billion in Foreign Direct Investment (FDI) annually, up from $60 billion in 2016-17, to enhance technological access.
- Targeting Key Sectors: Focus on sectors like automobiles, electronics, and renewable energy to create commercially viable industries.
- Tax Benefits: New manufacturing units benefit from a reduced corporate tax rate of 15%.
- Labour Market Flexibility: Enhancements in labour market policies aim to increase job creation in the formal sector.
While these initiatives are long-term measures, they are expected to positively impact industrial growth in the future.
Conclusion
The industrial growth rate in India has lagged due to various structural challenges. However, recent policy changes by the DIPP aim to address these issues and stimulate growth in the industrial sector.
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Model Answer Introduction The manufacturing sector is vital for India’s economic landscape, contributing approximately 17% to the GDP in 2022. Micro, Small, and Medium Enterprises (MSMEs) account for about 40% of manufacturing output, playing a significant role in job creation, exports, and overallRead more
Model Answer
Introduction
The manufacturing sector is vital for India’s economic landscape, contributing approximately 17% to the GDP in 2022. Micro, Small, and Medium Enterprises (MSMEs) account for about 40% of manufacturing output, playing a significant role in job creation, exports, and overall economic growth. Recognizing this importance, the Indian government has implemented various policies aimed at bolstering this sector.
Importance of Increasing Manufacturing Sector Share
Government Policies Supporting the Manufacturing Sector
Conclusion
The current policies reflect a robust framework aimed at enhancing the manufacturing sector’s contribution to India’s GDP. By creating a supportive environment through effective implementation of these initiatives, the government can significantly accelerate the growth of MSMEs and manufacturing, ultimately driving economic development.
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