2020 could be for manufacturing what 1991 was for our economy

Context: While there have been state interventions aimed at industrialization, ranging from the “temples of modern India” to special economic zones, an Indian manufacturing revolution never really took off in earnest.

Current opportunity in front of India to become manufacturing hub:

• Shift from China: due to COVID-induced global supply chain disruptions and international trade wars.
• Availability of Human Resources: An estimated 12-15 million youngsters enter the Indian job market every year, while the service-oriented economy is incapable of absorbing influx of human resources.
• Government support: Government has been taking various steps to increase share of manufacturing to 25% of the Gross Domestic Product (GDP).
• Make in India 2.0 (Atmanirbhar Bharat): It focuses on 27 sectors and 24 sub sectors with export and employment potential such as food processing, electronics, textiles and auto parts.
• Local Procurement: Ministry of Defence has earmarked 101 items to be manufactured and procured locally.
• Infrastructure spending: Centre earmarked INR 111 trillion for infrastructure projects.
• Institutional setup: An empowered group of government secretaries has been constituted to fast-track investments in coordination with the central and state governments.
• Ease of doing business: It is encouraging to see states with a relatively low industry presence doing well in the national rankings.

Steps to be taken:

• Ease of Doing Business in letter and spirit: A recent Teamlease report showed how difficult it is to do business in India, notwithstanding the government’s good intentions. 

• Stability and Consensus: Political stability and consensus between all the stakeholders is needed to implement reforms.

• Implementation of projects: New projects such as infrastructure projects should be implemented in a time bound manner and old projects should be taken on priority.

• Improvement on Factors of Production: India needs to ensure raw material security along with cheaper power and logistics. Priority areas include:

• Land: Innovative solutions such as Land Banks are needed.
• Labour: Need to move ahead on our unfinished agenda of labour reforms, initiated recently by many states. 

• Attracting manufacturing companies: by providing tax incentives (a lower tax rate of 15% or tax holidays) and promoting industrial townships and parks to match China’s scale.

Conclusion: The COVID crisis of 2020 has the potential to lay foundation of a manufacturing revolution in India, if India takes necessary steps in timely manner.