Issue

It is about opportunity for India in manufacturing sector because of the void which has been created as china is drifting away manufacturing sector.

Analysis

• According to reports, manufacturing now makes up only 17% of India’s overall GDP, compared to over 30% in China, which underlines the opportunities that we have for ourselves with the government hoping to get that number up to 25% by 2020.
• While China has raced far ahead of India, today its manufacturing is slowing down, wages are rising and the labour force in the country is dwindling.
• Indian labour force is just coming of age. It is estimated that by 2030, India will have the largest labour force in the world.

Importance of manufacturing sector

• Manufacturing industries help in modernising agriculture, which forms the backbone of our economy.
• Manufacturing industries also reduce the heavy dependence of people on agricultural income by providing them jobs in secondary and tertiary sectors.
• Industrial development is a precondition for eradication of unemployment and poverty from our country.
• It brings down regional disparities by establishing industries in tribal and backward areas.
• Export of manufactured goods expands trade and commerce, and brings in much needed foreign exchange.
• Countries that transform their raw materials into a wide variety of furnished goods of higher value are prosperous.

Things in favour of India

India has the second largest population with 1.2 billion people but it is also the youngest, making it a perfect destination to become the next global superpower.

Challenges (Bottlenecks)

• Poor Infrastructure
• Inadequate supply of skilled manpower
• Credit constraints
• High tax rates and compliance costs,
•  Excessive bureaucracy and pervasive corruption,
• Restrictive labour regulations

Solution

• Initiatives like Make in India and Digital India promise a brighter future for the country despite being in their early stages (Make in India campaign has aimed at harnessing the country’s young workforce and building on its inherent potential).
• Government need to undertake next-generation tax reforms for businesses planning to Make in India.
• It is also required to start a line item-by-item cost and policy comparison, including IPRs (intellectual property rights), with China and other competing countries.

Benefit of Make in India

• Success of Make in India can reduce India’s current account deficit.
• The top three imports to India include crude oil, gems and jewelry and electronics.
• Not much can be done about crude oil and gold. But import of electronics item could be reduced.

National Policy on Electronics (NPE)

Government of India (GoI) has launched the National Policy on Electronics 2012 (NPE 12) with the vision to make India a globally competitive destination for Electronics System Design and Manufacturing (ESDM). Besides, India has large young talent, low wage costs and Government of India.

The National Telecom Policy 2012 (NTP, 2012) works in conjunction with NPE, 2012 and provides for creating a design and manufacturing ecosystem for telecom equipment.

ITA (Information Technology Agreement) goods

The Information Technology Agreement (ITA) is a plurilateral trade agreement that requires participants to eliminate their tariffs on a specific list of information technology (IT) and telecommunications products. The agreement covers approximately 97 percent of world trade in defined IT products.

Electronic Hardware Technology Park (EHTP) Scheme

For encouraging exports of electronic hardware items including hard disk drives, computers, television, etc., such parks have been developed by the Ministry of Communications & Information Technology.

Electronic sector analysis

• As electronic goods emerging as India’s fastest growing sector, the country needs to use the capabilities developed thus far to successfully export products.
• The National Policy on Electronics (NPE), 2012, aims to address the issue with the explicit goal of transforming India into an ESDM (Electronic System Design and Manufacturing) hub.
• It is recommended that the respective state governments come up with daughter policies, in sync with NPE, for establishing a conducive environment for growth of the ESDM sector.
• ITA (Information Technology Agreement) goods have to compete in a zero-duty environment in the world market but Income tax on the profit derived from exports make the industry less competitive. Thus it is suggested that the Electronic Hardware Technology Park (EHTP) schemes should have a special chapter on ITA goods.
• Local handset manufacturers have been affected by ITA 1. Manufacturers who import handsets under ITA 1 pay zero Basic Customs Duty (BCD). To incentivize manufacturing and create a level playing field for Indian manufacturers, domestically manufactured ITA 1 products should be treated as “deemed exports” in terms of the provisions of the Foreign Trade Policy (FTP) 2015–2020.

Conclusion

Outside China, India is the most potent market as far as high local demand and manufacture are concerned. If conducive environment is provided along with the Make in India initiative, more and more large manufacturers will be interested to shift base to India