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News: The recent released Budget 2022-23 carries forward the government’s vision of empowering Indians and enabling economic activity.
This article discusses how manufacturing can help India in empowering people and increase the growth rate.
How manufacturing exports can help India’s empowerment push?
First, the weakening of manufacturing in many developed nations has caused social divisions and devastation of communities. That is why the Production Linked Incentive (PLI) scheme is extended to ensure higher economic growth and better living standards for people.
Second, manufacturing provides more room than services for less-skilled and less-educated individuals. For instance, the prospects are not bright for less skill-intensive services such as tourism, aviation, and tourism traffic, which are badly hit by COVID. Thailand which was mostly relied on tourism is dependent on merchandise exports to mitigate the shock.
Third, in India, the revival of manufacturing is essential for mass employment and income growth. Upgrading the sector’s expertise, increasing exports, and adding high value-added service exports are also mutually related.
What is the challenge in relying on service exports?
The Global Trade Update 2022 published by UNCTAD states, During Q4 2021, trade in goods increased by almost US$200 billion. During the same period, trade in services rose only by US$50 billion, a value just above pre-pandemic levels.
Also, India’s export of goods was up 25% in the fourth quarter of 2021, whereas export of services was up 7%. Further, growth in the export of engineering goods in April 2021-January 2022 was higher by nearly 38%.
What steps have been taken by the government to spur manufacturing growth?
One, the government has been pursuing formalization of the economy for enhancing incomes and offering workers wage security. For instance, the government is providing for the payment of employers’ provident fund contributions subject to conditions and limits.
Two, the rapidly rising enrollment in the E-Shram portal is a sign that the government aims to bring better access to many formal benefits available, credit facilities, etc., to millions of workers.
Three, the creation of physical and digital infrastructure and process reforms such as Gati Shakti will lower costs of logistics over time. It will enable goods made in the interiors to be shipped globally.
What is the way forward?
First, state governments should review the rules and laws to help entrepreneurs to focus on generating jobs and profits and aid economic growth. For instance, the Observer Research Foundation and Teamlease show that the majority of laws that attract criminal punishment are in the domain of states.
Second, the commercial sector has to recognize that making profits and increasing labor income are equally important. Hence, it has to improve the complexity and sophistication of India’s manufactured products.
Also, Indian businesses must utilize a low-tax regime, low real interest rates, and a regime determined to improve business conditions.
Source: This post is based on the article “Manufacturing exports can gain from India’s empowerment push” published in Livemint on 22nd Feb 2022.