|Introduction: Contextual introduction.|
Body: Explain some challenges with industrial policy. Also explain what can be done to strengthen the industrial policy.Conclusion: Write a way forward.
Industrial Policy is defined as the strategic effort by the state to encourage economic transformation, i.e. the shift from lower to higher productivity activities, between or within sectors. India aims to grow its manufacturing gross value added (GVA) by about 3 times to reach $1 trillion by 2025-26.
- Lack of Efficient Infrastructure and Manpower: High technology based Infrastructure andskilled manpower are crucial for enhancing manufacturing competitiveness in the globalized economy. E.g. overburdened rail transport.
- The MSME sectorseems to be relatively less favourably placed in terms of credit availability and credit cost of working capital as compared to the medium and large scale industrial and services sectors.
- India is still dependent on foreign imports for transport equipment, machinery (electrical and non-electrical), chemicals and fertilizers, plastic material etc.
- Industrial locations were established without reference to cost-effective points and are often politically motivated.
- Even 30 years after the liberalization of the private sector, the government is again handing out subsidies and licenseswhile putting up tariff walls.
- Due to ineffective policy implementation characterized by red-tapeand strained labour-management relations most of these public sector enterprises are running in loss.
What can be done?
- Job creation: Many of the industries currently chosen to be under PLI are highlycapital and skill intensive. Goal of job creation for our massive numbers of unskilled workers should be considered and unnecessary subsidies should be avoided.
- Discipline the firms: We have to be strict with non-performing firms. If necessary, we can withdraw support from them. It requires extra efforts that go beyond thetraditional culture of bureaucracy in India.
- Soft industrial policies: like encouraging research and development, extension services, vocational training, improving regulations and infrastructure are needed to improve productivity. These policies need to be customised to local decentralised contexts, to help small and medium sized firms.
- Focus on green products: for job-creation. E.g. renewable energy generation and storage, bioplastics, technologies of drip irrigation and rainfall harvesting, the reinforcement of sea walls, green energy-powered three-wheeler public transportation etc.
The industrial policy should involve creating industry that is equipped with innovation, technology, financially viable and environment friendly and whose benefits are shared by all sections of the society.