New Delhi: Concerned over weaknesses in manufacturing sector, the Planning Commission on Thursday pitched for further liberalization of FDI policy and improvement of business regulations to step up GDP growth rate to 9-9.5% in the 12th Plan from 8.2% in the current plan.
“Tune-up FDI and trade policies to attract quality investment in critical areas”, the Commission said in a presentation before Prime Minister Manmohan Singh at the meeting of the full Plan panel here.
Regretting that manufacturing performance has remained “weak”, the Commission said that India need to target a growth of 11-12% in this sector in the 12th Plan (2012-17).
“(Manufacturing) need a growth of 11-12% per year to create necessary jobs”, it said, adding greater value addition and better use of technology was essential to promote growth and improve trade balance.
Noting that land and infrastructure constraints were major problems, the Commission called for setting up of National Manufacturing Investment Zones and better business regulatory framework to ensure broader spread of industrial base.
“Exclusive manufacturing zones, more liberal foreign direct investment and trade policies together with a better regulatory frame work are among the prescription,” it said, suggesting measures for reviving the slowing down in the manufacturing sector.
During the presentation, deputy chairman Montek Singh Ahluwalia cautioned manufacturing was not promising desirable outcome and it can have cascading affect unless new initiatives are taken to catalyze this sector.
Regarding regulations, the presentation stressed on the need for improving business regulatory framework to ensure improvement in ‘cost of doing business’ and issues related to transparency.
“It is generally felt that more transparency is needed and industry needs regulations for shedding fears of uncertainty and political manipulations,” it said.
The Plan panel said that the country’s economic growth during the current Plan period (2007-12) is likely to average 8.2%. This is lower than the original target of 9% growth set for the 11th Plan.
However, the Planning Commission termed the 8.2% growth as “still remarkable” in view of the global economic downturn during the period.
The Plan panel highlighted the fact that despite efforts the UPA government has not been able to introduce FDI in multi-brand trade because of opposition from some sectors.
“It is generally felt that liberal FDI would not only check over profiteering but also regulate labour force engaged in the sector,” it said.
The commission observed that problems also arose in Special Economic Zones due to the fear among sections of the population that such zones would take away productive agricultural land.
For micro, small and medium enterprises (MSMEs), the Commission has supported the idea of promoting clusters to enhance productivity of the sector.
Among other suggestions, the Planning Commission said that the government must target a 4% growth in agriculture during the 5 years period starting 2012.
For this purpose farmers need to be provided with better rural infrastructure including storage and food processing facilities.
In addition, the panel also suggested expanding the Rashtriya Krishi Vikas Yojana for development of the farm sector.