Answer: 

The Industrial sector is one of the main sectors that contribute to India’s GDP. It accounts for 27.6% of India’s GDP. The LPG Lof 1991 was expected to give a great boost to India’s industries. However, Industrial growth rate could not match the pace with the overall growth of GDP as the industrial growth remained around 2-3% while India’s GDP grew above 6-7%.

Industrial growth lagged behind the overall economy because:

• Inadequate infrastructure: Physical infrastructure in India suffers from substantial deficit in terms of capacities as well as efficiency. This is why $ 1 trillion worth investments are sought after in developing infrastructure.
• High logistics cost: Lack of quality of industrial infrastructure has resulted in high logistics cost and has affected cost competitiveness of Indian goods in global markets. India spends 2-3 times more than its competitors on logistics.
• Restrictive labour laws: Labour laws are so complex, rigid and confusing that the employer would somehow end up on the wrong side of the law.
• Complicated business environment: A complex multi-layered tax system, with its high compliance costs and its cascading effects adversely affects competitiveness of manufacturing in India. This is reflected in the fact that India ranks far behind in the regulatory aspect as per EoDB 2020.
• Low investment on technology: Inefficient and obsolete technologies lead to low productivity and higher costs adding to the disadvantage of Indian products in international markets.

Recently Department of Industrial Policy and Promotion (DIPP) has proposed various changes in industrial policy that will focus on increasing the industrial growth rate in following manner –

• Policy goals: The National manufacturing policy aims to raise the share of manufacturing sector in GDP to 25% by 2025. The foreign trade policy 2015-20 aims at doubling India’s exports.
• Investments in technology: The new policy aims to attract $100 billion of FDI in a year, up from $60 billion in 2016-17, it will also aim at retaining investments and accessing technology.
• Targeting sectors: The policy aims to harness existing strengths in sectors like automobiles and auto-components, electronics, new and renewable energy, banking, software and tourism. It also aims to create globally scaled-up and commercially viable sectors such as waste management, medical devices, renewable energy, green technologies, financial services to achieve competitiveness.
• Tax benefits: New manufacturing units are only charged 15% as corporate tax.
• Enhance labour market flexibility with an aim for higher job creation in the formal sector and performance linked tax incentives.

Since most of these initiatives are long term measures, they would need time to show results but the impact would surely be positive in the long run.

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