The manufacturing sector plays a crucial role in driving economic growth and development. In India, the Micro, Small, and Medium Enterprises (MSMEs) are significant contributors to the manufacturing sector, employment generation, and exports. The government of India has implemented several policies to enhance the share of the manufacturing sector in GDP, with a particular focus on MSMEs. Here’s an overview of the current policies and initiatives aimed at achieving this goal:
1. Make in India Initiative
Objective: Launched in 2014, the "Make in India" initiative aims to transform India into a global manufacturing hub by encouraging domestic and international companies to manufacture their products in India.
Key Features:
Focus on 25 sectors, including automobiles, textiles, and electronics.
Simplification of regulatory processes and creation of a conducive environment for investment.
Promotion of innovation and skill development to boost productivity.
Impact: Aims to increase manufacturing's share of GDP from 17% to 25% by 2025.
2. Production Linked Incentive (PLI) Scheme
Objective: The PLI scheme offers incentives to boost domestic manufacturing and attract large-scale investments in critical sectors.
Key Features:
Applicable to 13 sectors such as electronics, pharmaceuticals, and textiles.
Provides financial incentives based on incremental sales of products manufactured in India.
Aims to create manufacturing champions and generate employment.
Investment: ₹1.97 lakh crore ($26 billion) earmarked for the scheme.
Expected Outcome: Additional $520 billion in manufacturing exports over the next five years.
3. Atmanirbhar Bharat Abhiyan (Self-reliant India Mission)
Objective: This initiative was launched to make India self-reliant by enhancing domestic production capabilities and reducing dependency on imports.
Key Features:
Support for MSMEs through credit guarantees and equity infusion.
Encouragement of local manufacturing through public procurement policies.
Focus on infrastructure development and digitalization to support manufacturing.
4. MSME Sector Support
Funding and Finance: The government has launched various schemes to provide financial support to MSMEs, such as the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and the Emergency Credit Line Guarantee Scheme (ECLGS).
Ease of Doing Business: Initiatives to simplify registration processes, reduce compliance burdens, and provide digital platforms for business operations.
Skill Development: Programs like the Skill India Mission aim to equip the workforce with the necessary skills for manufacturing and industry-specific requirements.
Contribution to GDP: MSMEs account for around 30% of India's GDP.
Employment: Provide employment to about 110 million people, over 40% of the workforce.
Exports: Contribute approximately 48% to India's total exports.
Financial Support: Emergency Credit Line Guarantee Scheme (ECLGS) has sanctioned loans worth over ₹4.5 lakh crore.
5. Infrastructure Development
Industrial Corridors: Development of industrial corridors to provide world-class infrastructure and support manufacturing clusters.
Five corridors with a $100 billion investment potential to enhance infrastructure.
Logistics and Supply Chain: Efforts to improve logistics efficiency through Projects like Bharatmala and Sagarmala are expected to improve road and port infrastructure with investments of over ₹5.35 lakh crore and ₹8 lakh crore, respectively.
6. Export Promotion
Incentives for Exporters: Schemes like the Merchandise Exports from India Scheme (MEIS) provide incentives to exporters to increase competitiveness.
Free Trade Agreements (FTAs): Negotiation of FTAs to enhance market access for Indian products.
7. Ease of Doing Business
Progress: India's Ease of Doing Business ranking improved from 142nd in 2014 to 63rd in 2020.
Reforms: Implementation of over 7,000 reforms across states to simplify regulations.
8. Skill Development
Skill India Mission: Trained over 11 million individuals since 2015, focusing on manufacturing skills.
Challenges and Considerations
Despite these efforts, several challenges need to be addressed to further boost the manufacturing sector:
Infrastructure Bottlenecks: Logistics costs are about 14% of GDP, compared to a global average of 8%, highlighting the need for continued infrastructure investment.
Access to Finance: MSMEs often face difficulties in accessing affordable credit, impacting their ability to expand and innovate.
Technology and Innovation: Encouraging technology adoption and innovation to enhance productivity and competitiveness. India's R&D expenditure is about 0.7% of GDP, indicating a need for greater investment in research and innovation.
Regulatory Environment: Further simplification of regulatory processes and reduction of bureaucratic hurdles are necessary to attract investments.
Conclusion
The government's policies and initiatives aim to enhance the manufacturing sector's contribution to GDP, with a strong emphasis on MSMEs. While significant progress has been made, continuous efforts are required to address existing challenges and create an enabling environment for sustainable manufacturing growth. This will not only boost economic growth but also create employment opportunities and strengthen India's position in the global market.
