“India will come out with a national manufacturing policy within this year, hopefully before June,” Indian Commerce and Industry Minister Anand Sharma said recently. The country will also be taking other initiatives along with states to promote the manufacturing sector, Sharma added.
Sharma’s statement came following recent comments urging action by pro-manufacturing organizations within the country. The Federation of Indian Chambers of Commerce and Industry (FICCI, www.ficci.com) President Harsh Pati Singhania has called for introducing a technology-focused manufacturing policy for the country at the earliest possible date. Recognizing the urgent need for upgrading technology in various manufacturing sectors, Singhania said that the country needs to provide appropriate incentives to promote technology upgrades in the manufacturing sector.
Recently, Chairman of the National Manufacturing Competitiveness Council (NMCC, http://nmcc.nic.in) V. Krishnamurthy also called for early formulation of a manufacturing policy to encourage industry and value addition. NMCC, in fact, is assisting the Indian government in formulating such a policy. “This policy will also help produce skilled people and encourage employment. It will also promote domestic research and development and create an atmosphere where innovation is recognized,” Krishnamurthy said.
Technology key
The FICCI believes that the cornerstone of such a policy should be achieving technology upgrades, which it says is key to the competitiveness in manufacturing. FICCI suggested that as is the case in other countries, government could identify high technology areas in manufacturing that could be promoted through tax incentives.
The FICCI recommends that investment in such high-technology areas should be subject to a lower corporate tax rate, or that income tax exemption could be provided for a period of five years in the high technology areas such as aerospace, advanced electronics, biotechnology, advanced materials, equipment and instrumentation.
The Confederation of Indian Industry (CII, www.cii.in) wants the policy to address issues such as tax simplification, promotion of value addition, technology transfers and coordination of monetary and fiscal policies. “To have a manufacturing policy that cuts across multiple sectors is a very difficult task,” CII director general, Chandrajit Bannerjee, said. “There are four major issues that we are concerned about. The most important is the simplification of taxes. Then, there is the cutting of transaction costs for manufacturing companies. Also, inter-state movement of goods should be made easier,” he added.
December improvement
Today, India is targeting sustained gross domestic product (GDP) growth of 9 percent to 10 percent, which necessitates the growth of the manufacturing sector to be at least 13 percent to14 percent per annum consistently. Recent statistics look better than those posted during much of last year. Pointing to improvement in key economic activity, manufacturing for the month of December moved to its highest point since May 2009, according to an HSBC survey.
The HSBC Markit Purchasing Managers’ Index (PMI) said, “December data pointed to a substantial increase in new business received by Indian manufacturers. Growth was the most marked for 15 months.” The PMI also said that manufacturers had raised production for the ninth consecutive month in December at a significant pace.
Uday Lal Pai, [email protected], is a freelance journalist based in India.
