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Chapter # 4.Industry

Objectives

  • Double the current growth rate of the manufac-turing sector by 2022.
  • Promote in a planned manner the adoption of the latest technology advancements, referred to as ‘Industry 4.0’, that will have a defining role in shaping the manufacturing sector in 2022.

Current Situation

India is the fifth largest manufacturer in the world with a gross value added (GVA) of INR 21,531.47 billion in 2017-18 (2nd advance estimate for 2017-18 at 2011-12 prices). The sector registered a compound annual growth rate (CAGR) of around 7.7 per cent between 2012-13 and 2017-18.1

The government has taken several initiatives to promote manufacturing. Among these are the Make in India Action Plan aimed at increasing the manufacturing sector’s contribution to 25 per cent of GDP by 2020,2 the Start-up India initia-tive to promote entrepreneurship and nurture innovation, and the Micro Units Development and Refinance Agency (MUDRA) and Stand-up India to facilitate access to credit. It has also un-dertaken massive recapitalisation of public sector banks3 to ease availability of credit to micro, small and medium enterprises (MSMEs). Besides, it has undertaken major infrastructure projects, such as the setting up of industrial corridors, to boost manufacturing.

The Department of Industrial Policy & Promotion (DIPP) has been engaging with states/UTs to enhance the ease of doing business. Following concerted efforts of the government, the World Bank ranked India 100th among 190 countries in the Ease of Doing Business (EODB) in 2018. This was a jump of 34 positions since 2014.

While these indices are useful for comparison, actual improvement in EODB will come only with greater coordination between the centre and states.

The foreign direct investment (FDI) regime has been substantially liberalized, significantly improving India’s rank in terms of annual FDI inflows from 14 in 2010 to 9 in 2017. However, India receives only 25 per cent of the FDI that China gets and only 10 per cent of what the USA receives. FDI inflows into the manufacturing sector reached about 35 per cent of total FDI.4

Manufacturing as a percentage of the gross domestic product has remained at about 16 per cent. Improvement are evident in recent quarters, where manufacturing growth at 6.9 per cent and 8.1 per cent in Q2 and Q3 2017-18 (year-on-year as compared to 2016-17) outpaced GDP growth. Figure 4.1 shows the trend in manufacturing as a percentage of GVA from 2011-12 until 2017-18.

Constraints

The main constraints on achieving the objectives set for India’s industry in 2022-23 are the following:

  • Regulatory uncertainty: Regulatory risks and policy uncertainty in the past have dented investor confidence.
  • Investment: There has been a cyclical slow-down in fresh investment since 2011-12.
  • Technology adoption: The adoption of new technologies like artificial intelligence, data analytics, machine-to-machine communications, robotics and related technologies, collectively called “Industry 4.0”, are a bigger challenge for SMEs than for organized large-scale manu-facturing. Data security, reliability of data and stability in communication/transmission also pose challenges to technology adoption.
  • Exports and insufficient domestic demand: There has been no export driven industrial growth. Domestic demand alone may not be ad-equate for sustained, high value manufacturing.
  • Challenges to doing business: Despite recent improvements in our global EODB rank, it continues to be a drag on the system. This is also true of investment conditions in the states. Getting construction permits, enforcing con-tracts, paying taxes, starting a business and trading across borders continue to constrain doing business.

Way Forward

Demand generation, augmentation of industrial infrastructure and promotion of MSMEs

  • The government can play a crucial role in creating domestic manufacturing capabilities by leveraging proposed public procurement and projects. Mega public projects such as Sagar-mala, Bharatmala, industrial corridors, and the Pradhan Mantri Awas Yojana (PMAY) can stimu-late domestic manufacturing activities provided the projects are suitably structured and demand is aggregated strategically. This should be accompanied by simplification of the regulatory process. The Madhepura Electric Locomotive Project, a joint venture between the Indian Railways and the French multinational Alstom, provides a good example of how mega projects can be leveraged to boost domestic production. The project enabled effective transfer of tech-nology and the availability of state-of-the-art locomotives for the railways. The Madhepura model is replicable in the defence, aerospace, railways and shipping sectors.
  • Set up a portal to monitor projects beyond a given threshold so that any roadblocks are identified and addressed on a real time basis. State governments should be encouraged or incentivized to contribute data to this portal. NITI Aayog’s Development Monitoring and Eval-uation Office (DMEO) can help set up the portal. An inter-ministerial body with representatives of state governments and project promoters (as special invitees) may be constituted.
  • Efforts should be made to develop self-sufficient clusters of manufacturing competence, with Cluster Administrative Authorities empowered to provide single window clearances to en-trepreneurs and investors. Industrial corridors should address the lack of infrastructure and logistics. Logistics will need to be supplemented with warehousing and other elements of the manufacturing supply chain.
  • NITI Aayog could work with states to prepare manufacturing clusters and develop export strategies based on their sector competitive-ness and resource strengths. A cluster should have supporting industries and infrastructure. It should also develop a local brand and distribution channel through an e-commerce platform. A Cluster Administration Office should be given the responsibility to award factory permissions and compliances.
  • For India to become the world’s workshop, we should encourage further FDI in manufacturing, particularly when it is supported with buybacks and export orders.
  • Streamline discretionary powers vested at different levels of governance by adopting digitized processes and making all approvals electronic in a transparent, time bound manner.
  • Disruptive technology, while leading to job losses in traditional areas, also presents new job opportunities. A greater connect between government-industry-academia is required to identify the changing requirements in manufac-turing and prepare an employable workforce. In the context of employability of engineers, there is a need for thorough review of standards of engineering education and its linkages with industry.
  • E-commerce can be the driver of overall eco-nomic growth over the next decade through its impact on generating demand, expanding manufacturing, employment generation and greater transparency. A Committee, chaired by CEO, NITI Aayog examined issues related to the e-commerce industry5. It made recom-mendations for the sector’s growth including increasing internet access, digitizing payments, further improving transportation infrastructure, logistics and distributed warehousing support. These may be examined for implementation at the earliest.
  • Harmonize Indian quality standards with global standards in many sectors. Lack of harmonization has affected Indian exports and prevented the leveraging of trade agreements adequately. For e.g. the medical device industry would benefit greatly from conformity to standards that are essential for new products to be acceptable to doctors and patients abroad. The issues of regulations and standards setting are also intertwined. The following initiative is required in this regard:
  • Task the Bureau of Indian Standards and Quality Council of India with assessing the improvements in standards and productivity required to achieve global standards.
  • Address the following issues in respect of MSMEs:
  • Setting up of mega parks and manufac-turing clusters in labour intensive sectors with common facilities to reduce costs and improve quality. It is also recommended that state governments should set up plug and play parks (flatted factories) to ensure international productivity standards.
  • Workers of industrial units in the new mega parks should have decent accommo-dation within reasonable proximity of the work place.
  • An expert committee should examine sector-specific pain points and make its recommendations within three months.
  • The Department of Public Enterprises (DPE) should ensure registration of all public sector units (PSUs) on the Trade Receivables Discounting System (TREDS) portal.
  • Initiate a small business research programme in some select ministries for encouraging R&D in MSMEs.

Industry 4.0

  • Launch a major initiative to push industry to adopt Industry 4.0. Industry 4.0 is characterized by increasing digitization and interconnection of products, value chains and business models. It will significantly impact sectors like automobile, pharmaceuticals, chemicals and financial ser-vices and will result in operational efficiencies, cost control and revenue growth. Experts feel that emerging markets like India could benefit tremendously from the adoption of Industry 4.0 practices.
  • In his 2018 Budget Speech, the Finance Minister mandated NITI Aayog to initiate a national programme directing India’s efforts on Artificial Intelligence 6. On a similar note, NITI Aayog could organize a discussion on “Industry 4.0,” inviting leading manufacturing companies from various sectors including automobile/auto components, electrical and electronics, chemicals, cement/steel, etc., along with concerned ministries to discuss plans for adopting Industry 4.0.
  • The Indian Institute of Science, a few select Indian Institutes of Technology (IITs), National Institutes of Technology (NITs) and other premier engineering colleges should create specialized training programmes on ‘Smart Manufacturing’ to address the shortage of high-tech human resources.
  • The Department of Heavy Industry (DHI) should develop the Central Manufacturing Technology Institute (CMTI), Bangalore, as a Centre of Excellence for pursuing R&D in Industry 4.0 technologies and systems. The Department of Science & Technology should spearhead industry-academia R&D projects on cyber physical systems.
  • The development of industries that produce the key building blocks forming the basis of Industry 4.0 could be incentivized. Incentives could be focused on MSMEs that manufacture products including sensors, actuators, drives, synchronous motors, communication systems, computer displays, and auxiliary electromechan-ical systems. Similarly, industries adopting In-dustry 4.0 standards could be provided support for a fixed period of time.
  • Reliability, stability and integrity of smart man-ufacturing systems can be increased by creating Indian standards for the systems and sub-sys-tems for adoption by manufacturers.

Ease of doing business

  • Introduce a “single window” system in all states that provides a single point of contact between investor and government and facilitates all required licences and approvals. It should be based on stakeholder consultation.
  • For efficient approval/inspection process, devel-op a system of accountability for major stake-holders like inspection bodies, testing labs, etc.
  • For geographical planning and ease of environmental clearances, adopt the system of using Geographic Information System (GIS) based maps at all levels to create pre-approved land banks for manufacturing facilities. This is already being practiced in some states. In such designated land banks, standards can be clearly laid down in advance relating to (i) environmental requirements (ii) building bye-laws, and (iii) safety and other norms.
  • Replicate in other states the Gujarat Pollution Control Board (GPCB) Environmental Audit Scheme based on third party certification.
  • To strengthen third party certification systems, develop suitable accreditation agencies.
  • Ensure the seamless integration of the Shram Suvidha portal and state agencies’ portals.

 




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Optimizing the Use of Land Resources-Ensuring that land markets function smoothly, through efficient allocation of land across uses, provision of secu

Chapter # 39. Modernizing City Governance For Urban Transformation

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Chapter # 38. Civil Services Reforms

Objective  civil-services-reforms To put in place a reformed system of recruitment, training and performance evaluation of the civil service to ensur

Chapter # 37. Legal, Judicial and Police Reforms

Objective To ensure the safety and security of citizens and ensure access to effective legal systems and speedy delivery of justice. Current Situation

Chapter # 36. The North-East Region

Objectives The North-East Region (NER) should: Have adequate road, rail and air connectivity, waterways, internet connectivity and financial inclusion

Chapter # 35. Balanced Regional Development: Transforming Aspirational Districts

Objective  Balanced Regional Development: Transforming Aspirational Districts Achieve balanced development in India by uplifting 115 districts, curre

Chapter # 34. Scheduled Castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs), Other Tribal Groups and Minorities

SCs, STs, OBCs, De-Notified Tribes (DNTs), Nomadic Tribes (NTs) and Semi-Nomadic Tribes (SNTs) Objective  To accelerate the socio-economic developm

Chapter # 33. Senior Citizens, Persons with Disability and Transgender Persons

SENIOR CITIZENS  Objective To ensure a life of dignity, social security and safety for senior citizens, enabling them to actively participate in econ

Chapter # 32. Gender

Objective  To create an enabling environment, sans institutional and structural barriers. To enhance the female labour force participation rate to at

Chapter # 31. Nutrition

Objectives  Under POSHAN Abhiyaan, achieve the following outcomes by 2022-23, compared to the baseline of 2015-16 (National Family Health Survey-4):

Chapter # 30. Universal Health Coverage

Objectives  On the strong platform of Pradhan Mantri – Jan Arogya Yojana (PM-JAY): Attain a coverage of at least 75 per cent of the population

Chapter # 29. Human Resources for Health

Objectives  Achieve a doctor-population ratio of at least 1:1400 (WHO norm 1:1000) and nurse-population ratio of at least 1:500 (WHO norm 1:400) by 2

Chapter # 28. Comprehensive Primary Health Care

Objectives  Under Ayushman Bharat, scale-up a new vision for comprehensive primary health care across the country, built on the platform of health an

Chapter # 27. Public Health Management and Action

Objectives  To revamp radically the public and preventive health system in the nation through the following strategic interventions: Mobilize public

Chapter # 26. Skill Development

Obejctives  For harnessing the demographic advantage that it enjoys, India needs to build the capacity and infrastructure for skilling/reskilling/up-

Chapter # 25. Teacher Education and Training

Objectives There cannot be a quality education system without quality teachers. Therefore, a thorough revamp of the entire ecosystem of teacher educat

Chapter # 24. Higher Education

Objectives  Increase the gross enrolment ratio (GER) in higher education from 25 per cent in 2016-17 to 35 per cent by 2022-23. Make higher education

23. School Education

Objectives Universal access and retention: o Hundred per cent enrolment and retention at elementary education and secondary education levels; achieve

Chapter # 22. Sustainable Environment

Objective  The objective is to maintain a clean, green and healthy environment with peoples’ participation to support higher and inclusive economic

Chapter # 21. Water Resources

Objectives By 2022-23, India’s water resources management strategy should facilitate water security to ensure adequate availability of water for l

Chapter # 20. Swash Bharat Mission

Objectives The key objectives of the Swachh Bharat Mission include: 1. Making India Open Defecation Free (ODF) by October 2, 2019. 2. Carrying out ext

Chapter # 19.Smart Cities for Urban Transformation

Objectives  Leverage the ‘Smart Cities’ concept in select urban clusters to: Drive job creation and economic growth. Significantly improve effici

Chapter # 18. Digital Connectivity

Objectives Given the relevance of digital connectivity to economic growth and the need to eliminate the digital divide by 2022-23, India should aim to

Chapter # 17. Logistics

Objectives Achieve multi-modal movement of cargo on par with global logistics standards. Reduce the logistics cost to less than 10 per cent of GDP fro

Chapter # 16.Ports, Shipping and Inland Waterways

Objectives  Double the share of freight transported by coastal shipping and inland waterways from 6 per cent in 2016-171 to 12 per cent by 2025. Incr

Chapter # 15. Civil Aviation

Objectives Enhance the affordability of flying to enable an increase in domestic ticket sales from 103.75 million in 2016-171 to 300 million by 2022.2

Chapter # 14. Railways

Objectives By 2022-23, India should have a rail network that is not only efficient, reliable and safe, but is also cost-effective and accessible, both

Chapter # 13. Surface Transport

Objectives Increasing the coverage and quality of roads and highways is critical to enhancing connectivity and internal and external trade. By 2022-23

Chapter # 12. Energy

Objectives The government’s on-going energy sector policies aim “to provide access to affordable, reliable, sustainable and modern energy”. At t

Chapter # 11. Minerals

Objectives Double the area explored from 10 per cent of obvious geological potential (OGP) area to 20 per cent.1 Accelerate the growth of the mining s

Chapter # 10. Travel, Tourism and Hospitality

Objectives  Increase India’s share in global international tourist arrivals from 1.18 per cent to 3 per cent. Increase the number of foreign touris

Chapter # 9. Housing For All

Objectives Provide every family with a pucca house, with a water connection, toilet facilities, and 24×7 electricity supply and access. Build 2.9

Chapter # 8. Financial Inclusion

Objectives Banking for the unbanked  o Bank accounts: Ensuring universal access to bank accounts, which are a gateway to all financial services.  o

Chapter # 7.Doubling Farmers’ Income (III): Value Chain & Rural Infrastructure

Objectives • Transform the rural economy through the creation of modern rural infrastructure and an integrated value chain system. • Leverage the

Chapter # 6.Doubling Farmers’ Income (II): Policy & Governance

Objectives Create a policy environment that enables income security for farmers, whilst maintaining India’s food security. Encourage the participati

Chapter # 5.Doubling Farmers’ Income (I): Modernizing Agriculture

Objectives • Modernize agricultural technology, increase productivity, efficiency and crop diversification. • Generate income and employment throu

Chapter # 4.Industry

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Chapter # 3. Technology and Innovation

Objectives India should be among the top 50 countries in the Global Innovation Index by 2022-23.1 Five of our scientific research institutions should

Chapter # 2.Employment and Labour Reforms

Objectives Complete codification of central labour laws into four codes by 2019. Increase female labour force participation to at least 30 per cent by

Chapter # 1 Growth (India @ 75)

Objectives Steadily accelerate the gross domestic product(GDP) growth rate to achieve a target of about 8 per cent during 2018-23 This will raise the

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