Sansad TV: Manufacturing- Destination India | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Introduction

• In today's world, India is considered a highly attractive destination for investment due to its emphasis on innovation, digitization, automation, policy reforms to encourage ease of doing business, and increasing investments. The Indian manufacturing sector has seen significant growth and has become a major focus area for the government, with initiatives such as Make in India and Performance Linked Incentive aimed at increasing domestic productivity and strengthening India's position in the global supply chain.
• The government's role has shifted from being an authority to a co-operating business partner, resulting in increased foreign direct investment (FDI) in sectors such as Pharmaceuticals, Medical devices, Defence, and Automobiles. As a result of these reforms, there has been a significant improvement in job markets, ease of doing business, and investor confidence in the Indian economy. 
• India is now one of the top three destinations for Greenfield FDI in the world, with top global companies setting up operations in the country. The country's ranking on the World Bank's Ease of Doing Business Index has also improved drastically, climbing from 142nd rank in 2014 to 63rd rank in recent times. With a focus on investment, innovation, entrepreneurship, and world-class production, India is poised to become a global leader in manufacturing.

Issues of manufacturing sector amid Lockdown

• In April, India experienced its sharpest contraction in manufacturing activity on record due to the COVID-19 lockdown causing a significant drop in demand and major disruptions in the supply chain. As a result, India's gross domestic product is expected to decline for the first time since the mid-1990s this quarter.
• The severe deterioration in demand conditions was indicated by record contractions in output, new orders, and employment. In response, factories cut jobs at the fastest rate in the survey's history, suggesting a high likelihood of recession. Despite a record drop in both input and output prices, there was no increase in demand. Small enterprises faced low productivity due to their size and the lockdown, preventing them from achieving economies of scale, and the jobs created were low-paying ones.
• Additionally, India faced numerous regulatory obstacles, unfavourable land and labour laws, inadequate transport, communication, and energy infrastructure, and strong competition from South-East Asian and other South Asian countries. The country was also impacted by global technological and geo-economic changes and the recent appreciation of the rupee, which had a negative effect on Indian industry and the economy.

Opportunities For India

• Although India is currently facing many challenges, there are also potential opportunities that are arising. To achieve a quick recovery, it is important for the government, private sector, and citizens to work together and take a comprehensive approach.
• As many companies plan to move out of China, this creates a significant opportunity for India to attract new investment, but efforts must be made to ensure a welcoming environment for investors. Making things easier for investors should be a priority.

Government Initiatives and Aatmanirbhar Bharat Abhiyan:

• The Indian government has launched several initiatives to boost the country's manufacturing sector and create a favorable business environment. The Make in India initiative aims to make India a global manufacturing hub, while the 'Zero defect zero effect' program promotes top-quality products using clean technology for MSMEs. The SKILL INDIA program focuses on job creation and entrepreneurship through multi-skill development.
• Additionally, labor reforms have been implemented through various schemes like Shram Suvidha Portal, Random Inspection Scheme, Universal Account Number, and Apprentice Protsahan Yojana. The Defense Procurement Policy (DPP) prioritizes indigenously-made defense products. The Technology Acquisition and Development Fund (TADF) under the National Manufacturing Policy (NMP) facilitates the acquisition of Clean, Green, and Energy Efficient Technologies by MSMEs. Pradhan Mantri MUDRA Yojana (PMMY) provides loans to small-scale businesses.

Aatmanirbhar Bharat Abhiyan: the right impetus:

• In line with these initiatives, the Aatmanirbhar Bharat Abhiyan aims to create a conducive business climate by improving infrastructure and logistics, simplifying land and labor laws, and enabling single window clearances. These efforts are expected to attract foreign capital and technology, create jobs, and boost exports.
• Focusing on Skill and Scale will help India become both quality and cost competitive and serve a global customer base. Sectors such as pharma, electronics, automobiles, and defense machinery have significant potential for India to be self-reliant and capture a decent slice of the global supply chain.

Way Forward

• To boost the manufacturing sector in India, it is crucial to improve investor confidence, physical infrastructure (including transport and power systems), and access to finance for smaller businesses. Additionally, regulations surrounding firm entry and exit and labor flexibility should be enhanced. Low-cost manufacturing is a priority, and increased R&D spending will be necessary to achieve a 25% share of manufacturing in GDP.
• Value addition at all levels is key to maximizing positive externalities, and the FDI policy should be reviewed to promote technology transfer and innovation. To increase job creation in the formal sector, performance-linked tax incentives and attractive remuneration should be offered. Lastly, the industry demands a curriculum that includes soft-skills and value-based training.