Question.
Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the government in this regard.
(UPSC 2023 General Studies Paper 3 (Main) Exam, Answer in 150 words)
Answer.
As per the Manufacturing Industry Outlook 2023, the Manufacturing Sector's GDP share is about 17 %. The Micro, Small, and Medium Enterprises ( MSMEs) contributes about 40 % of manufacturing sectors.
The share of the manufacturing sector in GDP has remained stagnant since the 1991 LPG (liberalization, privatization, and globalization) reform.
Faster economic growth requires an increased share of the manufacturing sector in GDP, particularly in the MSMEs sector because it can contribute to export-led growth and can generate huge jobs.
Strengthening the manufacturing sector, including MSMEs, will contribute to building a resilient supply chain. Diversification in production capabilities enhances a country's ability to respond to global disruptions.
The present policies of the government in this regard are as follows:
Make in India:
Make in India initiative was launched in 2014 by the Union Government of India.
It aims to promote manufacturing and position India as a global manufacturing hub.
It focuses on ease of doing business, fostering innovation, and attracting foreign direct investment in manufacturing.
Incentive to MSMEs:
Various policies and initiatives were initiated to target the MSME sector specifically. It includes financial support, cheaper credit, a Public Procurement Policy, exceptions from labor law, a GST compensation scheme, and technology upgradation.
GST reforms:
The implementation of the Goods and Services Tax ( GST) aims to simplify the tax structure and create a unified market. This is expected to benefit the manufacturing sector, including MSMEs, by reducing tax complexities and promoting ease of doing business.
The Production Linked Incentive ( PLI) Scheme:
The PLI schemes are designed to boost manufacturing in key sectors by providing financial incentives to companies that enhance their production capabilities. These schemes are targeted at increasing manufacturing's contribution to GDP.
Digital India and Industry 4.0:
The government is focusing on digital India and Industry 4.0 integration of technology in manufacturing processes. This enhances efficiency, innovation, and competitiveness, and will increase the export potential.
Skill Development:
Skill India Initiative aims to provide the quality of workforce in the manufacturing sector, including MSMEs.
In Summary, No country in the world has developed without industrialization. India aspires to become developed by 2047, therefore India requires faster growth in the manufacturing sector, particularly in the MSMEs sector.
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