India’s new industrial policy which will be rolled out in the coming months will have a deep focus on technology and innovation to boost manufacturing and economic growth.
Sources in Niti Aayog, the government’s policy thinktank, told FactorDaily that while Make In India was focussed largely on programs and schemes, the industrial policy will look at the long-term development of manufacturing and create employment.
The industrial policy, which the Department of Industrial Policy and Promotion and Niti Aayog is working on will be built in a way that Indian manufacturing is future ready, and that cannot be done without technology.
“The idea is to prepare for future industries. For example, the way fintech, artificial intelligence and internet of things are converging (towards) manufacturing,” said one source.
The policy will have three broad pillars: competitiveness, sustainability and inclusion. For all the three pillars technology, the first source said, will be critical. The cost of running industries need to come down if India has to compete with the likes of China, and sustain its momentum, the source added.
“The policy tackles deeper issues and also focuses on core manufacturing… Make-in-India promoted manufacturing and entrepreneurship,” said a second source. Technology is one of the advantages India has, and the new policy hopes to bring that into its fold.
“Globally, artificial intelligence, machine learning, and the internet of things are impacting manufacturing in a big way… those need to be considered if a policy is being made today for the future,” the second source said.
The policy, widely expected to be rolled out before the model code of conduct kicks in ahead of the 2019 general elections, has not been finalised and consultation is still on, sources said.
In August 2017, the department had floated the draft of the industrial policy to attract foreign direct investments in the tune of $100 billion, create new jobs, and to reduce regulations to bring in new industries. The new policy hopes to reduce reduced regulations and pave way for higher use of technology, that will, in turn, create jobs and help in the modernisation of industries. It has been reported that all ministries and departments were part of the inter-ministerial consultations.
The policy is likely to set up an institutional mechanism to encourage commercial utilisation of research done using government funds. It has also been reported that there are proposals of having an overarching body at the centre that will be able to make quicker decisions on labour laws, taxation provisions, and land leasing.
The industrial sector makes for 29% of India’s gross domestic product (GDP), however, it is only a lot less compared to China’s 44%.
Make In India came at a time when there was a weakening of the global trade except in China and India. It identified 25 sectors where India should focus on to build itself as a manufacturing economy. It also looked at developing the country’s startup ecosystem. However, surveys showed that most startups didn’t benefit from the Startup India mission.
The other areas where the policy is likely to focus is on promoting India as a leader in emerging technologies and “build innovative technology in manufacturing” that will spur economic growth. The policy will also focus on further strengthening the existing enterprises, infrastructure and aid in building high-quality enterprises. It also plans to tackle the capital issue and ensure that medium and small business by giving access to affordable funds. And lastly, ensure enhancing skills for future manufacturing.
The discussions of the new policy started in March, and at present inputs are being taken by the DIPP from various stakeholders to bring out the first draft of the policy, which will be floated before the cabinet soon.
“While the industrial policy looks at newer areas of technology and ensuring affordable capital, it continues to look at ease of doing business, which Make-in-India focussed on,” the first source said.
The new industrial policy will be a major upgrade from the policy of 1991 and will look at better enforcement of intellectual property rights, which is key if manufacturing has to focus on technology.
However, critics said that India has made many pushes to build itself as a manufacturing hub, but the programs haven’t taken off leaving the country largely as a service economy rather than positioning it as a manufacturing economy.
“Manufacturing in India hasn’t growth, neither in depth nor in breadth. The problems are not in defining what the policy should be about, but is in the execution of it,” said a senior member of one of India’s top industrial lobbies. “Investment in technology is good, but the government can do only up to a limit.”
He also added that if India has to become a manufacturing economy it is important to make structural changes. “Incremental changes won’t help much… Moreover, manufacturing never took off because we ignored the turf advantages that India had,” he said.
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