New Delhi: The government approved industrial zones with easier environmental and labour norms, served up a bonanza for farmers in poll-bound Punjab in the form of higher support prices for wheat, and allowed a 1% interest subsidy on small home loans—moves aimed at winning over industry and voters, according to analysts.
The timing of the announcement, on the eve of Diwali, the Hindu festival of lights, suggests that the United Progressive Alliance is keen to improve popular sentiment that has been affected both by several corruption scandals and persistent inflation. And the analysts added that the moves can’t but help the cause of the Congress, which leads the coalition, in elections due in key states—Punjab, Gujarat, Delhi and Uttar Pradesh.
According to information and broadcasting minister Ambika Soni, some of these were part of the Congress election manifesto and the rest were part of the promises made in the Union budget.
Commerce minister Anand Sharma (File photo)
“The main objective of a national manufacturing policy is to increase the sectoral share of manufacturing in GDP (gross domestic product) to at least 25% by 2022, to create 100 million additional jobs by the same time and to enhance India’s competitiveness in the global market while maintaining environmental protection,” said commerce minister Anand Sharma.
Sharma added that differences with the labour ministry on certain issues were ironed out by a ministerial group.
“Industrial infrastructure development is envisaged not only generally, but also through the creation of large integrated industrial townships called National Investment and Manufacturing Zones with state-of-the-art infrastructure, land use on the basis of zoning...,” said a statement issued by the government.
The statement has, however, clarified that the land for these zones, seven of which are to be created, will preferably be wasteland that is infertile and not suitable for cultivation, and that such land will not be near ecologically fragile areas.
Sharma also announced fiscal incentives largely aimed at making it lucrative and easy for banks, venture capital firms, even insurance firms to fund the developers of the zones.
Executives in manufacturing companies welcomed the policy, but said it was unclear just how it hoped to achieve its stated objectives.
R.C. Bhargava, chairman of Maruti Suzuki India Ltd, said manufacturing would play an important role in generating jobs and driving economic growth because the services sector, the traditional growth driver over the past decade, is “teetering”. But “if the contribution expected from this sector is 25%, then it has to grow at 12-14%—double than its current pace. How will that happen?”
Indeed, the 25% target marked a “substantive jump”, said Bharat Heavy Electricals Ltd’s chairman and managing director B.P. Rao, and “enabling policies have to be put in place to reach that level”.
Another executive questioned the ability of the government to facilitate the creation of the promised industrial zones. “A lot of changes need to be done as far as creation of these mega, mega industrial zones are concerned. It needs a totally different mindset and approach,” said Arvind Saxena, director (marketing and sales) at Hyundai Motor India Ltd.
The cabinet also raised the minimum support price (MSP), or the floor price that becomes the basis for procurement, of wheat, barley, lentils and oilseeds for the marketing season 2012-13.
“While the idea was to give more cushion to Indian farmers for growing these foodgrains, substantial care has been taken that this should not fuel inflation,” said law minister Salman Khurshid while briefing the media.
The MSP for wheat has been raised by Rs 165 per quintal to Rs 1,285, for gram, by Rs 700 to Rs 2,800 a quintal, Rs 550 for lentil (masoor), also to Rs 2,800, and mustard seed by Rs 650 to Rs 2,500 a quintal.
Madan Sabnavis, chief economist at Credit Analysis and Research Ltd, said the increase could fuel inflation. “Just at a time when the Reserve Bank increases interest rates to curb inflation, the MSP comes in higher than expected, which can only stoke inflation,” he said.
Sabnavis added that higher wheat prices will directly add to inflation because they will be carried forward to things such as bakery items. He also said that with limited land under pulses and oilseeds, a higher support price cannot incentivize farmers.
The cabinet also announced its commitment to lay a countrywide optical fibre network to connect village-level administrative bodies, or panchayats.
“The cost of the initial phase is likely to be around Rs 20,000 crore and a similar amount will be contributed by the private sector,” said R. Chandrashekhar, telecom secretary.
In line with what finance minister Pranab Mukherjee announced in the budget, the cabinet also approved 1% interest subvention on housing loans up to Rs 15 lakh, with the cost of the house not exceeding Rs 25 lakh. Both caps were increased by Rs 5 lakh each, which will bring more individual buyers under the subsidy limit.
The cabinet also approved the recommendations of the Justice Majithia wage board, which was constituted to review the salaries of journalists and non-journalists employees at newspapers and news agencies. A case related to this is before the Supreme Court and the apex court’s order will decide whether the recommendations will stay or be rejected.
K. Sreenivas Reddy, secretary general of the Indian Journalists Union, a body that represents the interests of 20,000 journalists, welcomed the Union cabinet’s decision, but added that it is too soon to celebrate given that the approval has come with certain corrections and rectifications. “We need to figure just what the changes are,” he said.
Reddy works for Visalandhra, a Telugu daily with 100-150 employees. According to him, nearly 80% of the employees working in various Andhra Pradesh newspapers are under the purview of the wage board.
Publishers have a different take. In an earlier response to Mint, Akila Urankar, president of Business Standard Ltd, which publishes financial daily Business Standard, said that the government should not decide wages for any industry.
Abhilasha Ojha, Amrit Raj, Ruchira Singh and Utpal Bhaskar also contributed to this story.