Mumbai: Industry representatives have high hopes from the government’s new manufacturing policy (NMP), but say effective execution is crucial if it is to enhance the role of manufacturing in India’s economic growth.
“It’s a very good beginning, but we must remember it’s only a beginning,” B. Muthuraman, vice-chairman of Tata Steel Ltd, said on Sunday at the India Economic Summit of the World Economic Forum in Mumbai.
Improving efficiency: (From left) Baba N. Kalyani of Bharat Forge Ltd; Arun Maira, member of the Planning Commission’ and B. Muthuraman of Tata Steel Ltd.Photos: Abhijit Bhatlekar/Mint
Unveiled on 26 October after months of wrangling between ministries, industries and labour organizations, NMP seeks to raise the share of manufacturing to 25% from 16% of the gross domestic product (GDP) within a decade and create 100 million jobs.
India’s industrial output grew 1.9% in September over a year earlier, its slowest pace in two years, on the back of poor performance by the manufacturing sector.
Baba N. Kalyani, chairman and managing director of Bharat Forge Ltd, said states need to understand the importance of manufacturing in bolstering economic growth.
“The danger of this policy (NMP) is that it falls in the hands of the state administration and they go by the book, which means the large industrial policy outside the purview of the NMP will get orphaned,” he said.
Also Read | Other Stories on India Economic Summit 2011
Muthuraman too said state governments need to be convinced that manufacturing is fundamental to growth. No country has gone through a solid phase of economic growth without manufacturing, he said.
The Tata Steel executive suggested that land owners be involved in policy consultations as problems in land acquisition often hobble manufacturing plans, even though a mere 3% of the country’s total land area was being used by manufacturing units.
India’s manufacturing growth has been capital-intensive rather than labour-intensive, said Rajat M. Nag, managing director general of the Asian Development Bank, Manila. “We need not only manufacturing led growth but a labour-intensive manufacturing growth.” Nag said enterprises have to grow bigger to enjoy scale, investment and technology. Good governance, he said, will play a crucial role in implementing NMP effectively.
Arun Maira, member of the Planning Commission, said NMP aims to create an enabling environment for manufacturing by addressing deficiencies in infrastructure. “Policy is not made, it accumulates as a result of many decisions a country takes as it moves forward progressively,” he added.
Panellists also discussed labour law reforms as crucial to boost manufacturing.
Muthuraman said Tata Steel has never faced labour unrest at its plants in its 100-year history despite substantially trimming the workforce.
“You have to treat people like an asset that appreciates with time and take responsibility,” he said.
Kalyani said addressing the skill gap and containing attrition in the sector is a far bigger challenge.