Accelerating the Growth of Manufacturing Strategies for Accelerating Growth of Manufacturing in

India in the 12th Five Year Plan and Beyond

2

Present Status - Contribution of manufacturing to India’s GDP and employment is very low

India’s manufacturing GDP growth lower

than that of many other countries

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

South Korea

18%

Share of mfg. GDP

Japan

40%

26%

Germany 17%

India 15%

Russia 16%

Egypt 16%

Brazil 16%

Argentina 18%

Hungary 26%

Turkey 26%

Malaysia 28%

Poland 30%

China 34%

Thailand

Source: Economic Intelligence Unit, Data Monitor, Euro-monitor, BCG analysis

Employment Distribution (%)

0%

35%

15%

73%

18%

50%

13%

2%

85%

12%

54%

34%

11%

2%

87%

100%

20%

19% 28%

22%

40%

60%

80%

38%

2% 4%

34%

76% 77%

9%

64%

19%

17%

Manufacturing Agriculture Services

Indian manufacturing contributes to only

~12% of total employment

Indian manufacturing contributes to only

~12% of total employment

Note: All figures are for FY 2008-09; India manufacturing employment data varies from 12-14% across data sources

3

Major Challenge – Ineffective Paradigms of Industrial Policy

No Industrial Policy Picking Winners Centrally Planned Economy

Input-output matrix with control of investments and outputs: The Indian approach prior to the mid 1980s

Big bets on national champions and technologies

Leaving it completely to the ‘market’

The three

‘rails’ of

Manufacturing

Policy

Stakeholder involvement

Implementation

Learning

Ineffective Models

Solution: Rethinking ‘Industrial Policy’ and Our Approach

A national

ecosystem

that facilitates

competitive

abilities of

enterprises

4

Approach adopted - Action Plan

5

Focus given not only to ‘vertical’ sectors but also to

‘horizontal’ issues that cut across sectors

6

Strengthening the Manufacturing Ecosystem:

Hard Infrastructure

Key recommendations

• Special National Investment and Manufacturing Zones in key areas across

the country

• ‘Cluster Coordination Cell’ at apex level to build capacity of Cluster Associations

• Develop National Land Use policy with framework for land valuation and

acquisition

NIMZ

1

Clustering &

aggregation

2

Land

3

1 of 3

• Develop a National Water Regulator, overarching Water Act, and mandate

‘Water returns’ for water intensive industries Water

4

• Green Technology Fund, ‘National Waste Management and Recycling

Programme’, promote Emission Trading, and Green government procurement Environmental

sustainability

5

7

Strengthening the Manufacturing Ecosystem:

Soft Infrastructure

Technology &

Depth

Business

regulatory

framework

Human resource

development

Key recommendations

• Improve industry academia collaboration, FDI policies to facilitate technology

transfer, strengthen IP regime and standards

• Skill development with industry participation, reducing cost of compliance with

labor laws, institutionalizing social security, and improving institutions of

employer-employee relations

• Mandate ‘Regulatory Impact Assessment’, create a ‘National Business

Facilitation Grid’ and National Policy on Business Development & Regulation

6

7

8

2 of 3

8

Strengthening the Manufacturing Ecosystem:

Special categories of Enterprises

3 of 3

Promoting

MSMEs

Reforming role &

mgmt of PSEs

Key recommendations

9

Boost

manufacturing

exports

• Streamline assistance of MSME Cluster Development Program

• Improve access to finance and technology

• Improve Indian standards and modernize infrastructure at ports and airports

• Move to higher-value added products in traditional markets, export to new Asian and

African markets & conducive trade agreements

• Develop a Single Holding Structure (SHS) to facilitate governance

• Empower PSEs to have autonomy in recruitment, select partners for JVs and

companies for acquisition

Special attention to exports

11

10

9

Sectors have been classified in four categories for Sector-Specific Recommendations

• Defence Equipment

• Aerospace

• Ship building & Ship repair

• Capital Goods

• Steel

• Mineral exploration & development

• Fertilizer

• Cement

• Automobiles

• Electronics

• Drugs, Pharma & Medical devices

• Chemicals

• Petrochemicals

• Paper

• Textiles

• Food processing industry

• Leather & Leather goods

• Gems & Jewellery

Sectors of Strategic

importance

A

Sectors for Basic Inputs

B

Sectors for Depth & Value

Addition

C

Sectors for Employment

Generation

D

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1. Increase the rate of job creation in manufacturing to create ~100M

additional jobs by 2025

2. Increase "depth" in manufacturing, with focus on the level of domestic

value addition

3. Enhance global competitiveness of Indian manufacturing through

appropriate policy support

4. Ensure sustainability of growth, particularly with regard to the

environment

5. Increase manufacturing sector growth to ~2-4% more than GDP growth

to make it the engine of growth for the economy and increase share to

~25% of overall GDP by 2025

Expected Outcomes: 5 key long-term objectives

11

Industries Chapter, 12th Five Year Plan (Chapter 13)

http://planningcommission.nic.in/plans/planrel/12thplan/pdf/vol_2.pdf

Planning Commission

http://planningcommission.nic.in/

http://www.facebook.com/PlanComIndia

Department of Industrial Policy and Promotion (DIPP)

http://www.dipp.gov.in/

National Manufacturing Competitiveness Council (NMCC)

http://www.nmcc.nic.in/

National Skill Development Corporation (NSDC)

http://www.nsdcindia.org/

Additional Information