India prioritises 15 sectors, including semiconductors and labour-intensive ones.
Nearly USD 1 billion will be invested in manufacturing hubs to fund advanced sectors.
Focus on cutting bureaucratic red tape, expediting approvals, and aligning tariffs.
Divergent policies by India’s federal & state governments have weighed on investment.
India intends to triple the nation’s exports within the next nine years, by 2035. This is done by boosting manufacturing through structural changes instead of hefty spending, said two sources who are government officials.
This occasion becomes Indian Prime Minister Narendra Modi’s third such attempt, with the South Asian nation prioritising its manufacturing in 15 sectors. This includes high-end semiconductors and metals, as well as the labour-intensive leather industry. The aim is to lift India’s growth and boost annual goods exports to USD 1.3 trillion, as shared.
Modi’s government has twice before failed to even double the share of manufacturing to 25% of gross domestic product. This was previously implemented through the ‘Make in India‘ campaign launched 12 years ago in 2014, along with a USD 23 billion package of incentives introduced 6 years ago in 2020.
During previous years, several government initiatives to boost manufacturing growth have been modest, with incremental progress at their best. What may be required is a bold, focused & cohesive strategy to drive transformational change, as shared by a government official who was involved in drafting the policy.
The government intends to invest about USD 1 billion to build infrastructure for about 30 manufacturing hubs across the targeted sectors. This is while providing grants of USD 218 million for advanced areas, such as chips and energy storage. This information was shared by the officials who asked to remain anonymous, as they weren’t authorised to speak to the media.
The preparation of the policy is the responsibility of the Finance Ministry and the government think tank NITI Aayog, who did not respond to requests for comment.
Funding on this occasion is modest, as the plan now focuses on easing regulatory and compliance burdens. This has been the biggest impediment to Indian manufacturing, instead of doling out subsidies, said the source officials.
Financial support towards industries would be decided on a case-by-case basis with recommendations from a new government panel to administrative departments. They added that this replaces the pre-budget fiscal packages of earlier schemes.
The new structure is termed the National Manufacturing Mission. It was announced in last year’s national budget, although details were not disclosed then. Details may be announced with the intended budget on 1 February, although the decision on the intended disclosure would be made closer to the date, said the source officials.
The panel’s initial focus will be to ensure faster regulatory clearance. The source officials also stated that the panel will focus on securing approvals for land, in addition to providing cheaper financing for large projects. The panel is intended to be chaired by a minister and will include bureaucrats, such as the cabinet secretary, according to the source officials.
It will oversee the building or manufacturing hubs for the 15 sectors. This involves work with state governments to assure steady and cheap electricity supplies for such units, the sources said.
Manufacturing hubs have been identified. The officials shared that these hubs have been identified based on existing infrastructure, geographic advantages, and proximity to ports.
The divergent policies of both India’s federal & state governments have weighed on investment, besides hampering manufacturing. States have implemented varying regulations for labour, in addition to those for business compliance. This has increased costs for companies that have spread their operations over multiple states.
The proposed panel is expected to coordinate with states in easing regulations such as those needing multiple permits for energy, land, and water.
It is expected to recommend cutting red tape by reducing overlaps between quality and standard checks. The sources also suggested that the panel should align tariffs with industry needs, in addition to national priorities.
