Sound manufacturing policy plays a key role in shaping up the growth prospects of any economy. A well set of framework or guidelines on the manufacturing front improves the output and trade balance (exports increase) of any nation. This in turn increases the national income. However, for India manufacturing has never been the engine for growth (manufacturing contributes 16% to the GDP). Being a heavily populated country, consumption takes that honor. However, if India has to continue its growth supremacy concrete steps have to be taken in improving the share of manufacturing output to the overall GDP.
Facilitation of growth in manufacturing needs an effective industrial policy. A sound industrial policy has a set of regulated guidelines that promote business confidence and increase competitiveness in the long run. And this comes through collaboration and learning. Ability to integrate these values in environmental ecosystem is a key challenge for the policy makers as collaboration is difficult in the Indian context (rigid bureaucracy) and learning comes over time/experience.
Further, there are many other areas like industrial relations, land acquisitions and employment issues which the policy makers should address in order to bolster the growth in the manufacturing sector.
Industrial relations will involve collaboration with state governments and employee unions. Land acquisition issues involve dealing with bureaucracy and civil society (environmentalists). Further, in order to bolster manufacturing output pecuniary benefits (tax advantages) to corporates for starting up manufacturing zones should not be restricted to Special Economic Zones (SEZs). Thus, it appears that the quantum of manufacturing output is directly correlated with the industrial policy framework. However, participation from the other stakeholders (state governments, civil society and concerned ministries) is equally important. Without collaboration from them implementation will become a major issue.
Thus, we believe integration amongst various stakeholders and implementation are key challenges for the manufacturing policy to steer the India growth story from here on. If the policy makers are able to address them, manufacturing could be our next engine of growth.