Construction and Manufacturing could be our Growth Propellants

Context: A high economic growth over the next decade would need the traditional sectors of construction and manufacturing to play a leading role. 

Potential of Construction and Manufacturing 

• As an employment generator:  
• Construction can generate 24 million non-farm jobs by 2030, (16 million from real estate and 8 million from infrastructure).
• Manufacturing could generate 11 million new non-farm jobs by 2030.
• Growth in Gross Domestic Product (GDP): Manufacturing could generate one-fifth of the incremental annual GDP (about $750 billion).

Steps to trigger growth in Construction and Manufacturing

• Infrastructure Spending: of about 8% of GDP for the next 10 years; government share at 6% of the GDP.
• Affordable Housing: Building 25 million affordable homes over a decade.
• Reforms in real estate sector: by increasing incentives for home ownership and creating rental stock. 
• At Central Level: Substantially raising tax deductions limits on mortgages and rental incomes and introducing tax incentives for investments in rental housing stock.
• At State Level: measures include 
• Rationalizing stamp duties and registration fees (like Maharashtra has done) and introducing regulatory amendments in rent-control policies, 
• Launching digitally-enabled, single-window clearances to reduce time delays in affordable housing construction,
• Bringing the goods and services tax on modern construction methods (like pre-fabrication) in line with in-situ buildings. 
• Reducing the land price to average income ratio: which is high in cities like Mumbai (6.0), Bengaluru(3.8) as compared to Bangkok (0.5) and Beijing (0.2). 
• Release underused but buildable public-sector land. (About 400,000 hectares of land-holding is with defence, railways and port trusts alone.)
• Reform zoning regulations: to increase the low floor space index accompanied with infrastructure planning.
• Capitalize on the shifting global supply chains and the increasing use of digital and automation:
• Introduce targeted, time-bound and conditional incentives : like the production-linked incentives for domestic handset manufacturing—to reduce the cost disadvantage.
• Establishing port proximate manufacturing clusters: by the coastal states by provisioning of land at lower cost, plug and play infrastructure and common utilities.
• Reducing factor costs of power(subsidies) and logistics(high cost of 13-14% of GDP): by
• Enabling franchised and privatized distribution company (or “DISCOM”) models, 
• Reducing cross-subsidy surcharges,
• Establishing multi-modal freight ecosystems. 

Conclusion: Manufacturing and construction could be pivotal in driving India’s growth over the next decade.