Create Conducive Environment to Sustain The Momentum of Economy Anand Sharma

Addressing the Members of the Consultative Committee of the Ministry of Commerce and Industry here today, Shri Anand Sharma, Union Minister of Commerce and Industry, has said that I am confident that in partnership with industry, academia and all stakeholders, we will be able to create a conducive environment, which would sustain the momentum of our economy and manufacturing in particular. The Agenda of todays Meeting was on Indian Industrial Production in the wake of Global Economic Crisis and the performance of Manufacturing Sector. The Minister informed the Members that sustained recovery of manufacturing at this juncture is very encouraging, as this has only brightened the prospects of an accelerated growth of GDP, and has made us as one of the driver of global recovery. Shri Jyotiraditya M. Scindia, Minister of State for Commerce & Industry and senior officials of the Ministry attended the Meeting. Members who attended the Meeting were: S/Shri Bal Kumar Patel, Harin Pathak, Chandu Lal Sahu, R. Thamaraiselvan, Kristappa Nimmala, Manohar Tirkey, M. Srinivasulu reddy, T.K. Rangarajan, Mahendra Mohan, Y.P. Trivedi, and M. Rajasekara Murthy, Shri Scindia said that the governments highest priority is to reduce the transaction costs for manufacturing sector and exporters.

Interacting with the Members, Shri Sharma said that there are some genuine concerns of industry, particularly appreciating rupee, hardening interest rate, inadequate availability of physical infrastructure and shortage of critical skills in some important sectors, which are constraining competitiveness of Indian industry. He further added that the government is conscious of these constraints and taking calibrated steps to have a judicious policy mix that would sustain industrial recovery and at the same time result in fiscal consolidation.

Highlighting the importance of manufacturing sector, Shri Sharma stated: An economy of our size and scope cannot ignore the manufacturing sector. A modern manufacturing sector is essential for the development of our economy and, in particular, our technological base. The share of manufacturing in national income has shown only a marginal improvement from 15.8% in 1991 to 16% currently. This should be somewhere in the range of 25% to 35%. This requires manufacturing sector to keep growing in double digits in the next decade, The Minister added that manufacturing will be the engine of growth to absorb people who need to move out of agriculture in pursuit of higher incomes. Besides the employment imperative, the development of the manufacturing sector is critical from the point of view of ensuring that the growth model of India is sustainable.

As regards the manufacturing policy, the Minister informed the Members: We are working on launching a National Manufacturing Policy by the end of this year and we have already circulated a discussion paper, inviting comments from all stakeholders in this regard. We also intend to establish National Manufacturing and Investment Zones (NMIZs) to push the manufacturing share in our GDP. The proposed National Manufacturing Policy for these NMIZs would act as the key enablers in driving the growth of the sector in India. Main objectives of NMIZs are: (i) To promote investments in the manufacturing sector and make the country a hub for both domestic and international markets; (ii) To increase the sectoral share of manufacturing in GDP to 25% by 2022. (iii) To double the current employment level in the sector; and (iv) To enhance global competitiveness of the sector.

Speaking on the impact of the global economic crisis, Shri Sharma said that the manufacturing industries were particularly affected as a result of the general slowdown in the second half of 2008-09 and added that the growth of industries with higher export intensity, such as textiles handicrafts, leather, gems & jewellery and auto components were particularly hit. He further stated that to counter the adverse fall out of the global slowdown on the Indian economy, appropriate fiscal and monetary policies were initiated. The total size of the fiscal stimulus package was estimated at 3.5% of GDP in 2008-09 and amounted to Rs.186,000 crore. He said that the stimulus measures were aimed to moderate both the demand and supply side constraints facing the economy and in particular the industry. On demand side, Government reduced excise duty rates by 6% in two phases and the service tax by 2%. As a combined impact of various fiscal stimulus measures and the supporting monetary policy the industrial sector was able to reverse the declining trend in its growth since June 2009. Industrial growth continued to become strong and broad based and was particularly buoyant in emerging segments, he added.

During the meeting, Shri Trivedi desired to know the advantages of the manufacturing zones. In response to this, Shri Sharma replied that NMIZs will create more jobs and upgrade the infrastructure facilities. Shri Harin Pathak raised the issue of job recovery after global economic meltdown and expressed concerns on increasing the number of services on which service tax is imposed. While Shri M.S. Reddy highlighted the plight of tobacco farmers, Shri Manohar Tirky raised the issue of tea exports and farmers not getting the right price. Shri Mahendra Mohan and other members raised the issue of inviting more FDI to improve the investments in the country and to create investment climate for investors. Shri Rajasekhar Murthy enquired as regards the need for creating excess liquidity and raised the concerns regarding inflation. Shri Rangarajan informed the Minister that growth must reflect on manufacturing and employment and also emphasised on the creation of more jobs especially in the manufacturing sector. Shri Sharma replied to all the members that a single FDI policy document was released recently to facilitate foreign investors.