To Give Manufacturing a Leg-Up : Daily Current Affairs

Relevance: GS-3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Key Phrases: Manufacturing hub, Quarterly Employment Survey, National Infrastructure Pipeline, National Industrial Corridor Development Programme, Customs administration, Central Board of Indirect Taxes and Customs, bonded manufacturing programme, Human capital, Digital Ecosystem for Skilling and Livelihood, National Skill Qualification Framework.


  • Manufacturing is among the major economic activities that involve value addition that has consequential positive multiplier effects on the economy. India has the fifth largest manufacturing base in the world and thus the public policy focus on manufacturing is understandable. It is also important because manufacturing has a high employment elasticity of output which is crucial for the creation of employment opportunities.
  • As per the second quarter report of the Quarterly Employment Survey conducted by the Union Ministry of Labour, the manufacturing sector accounted for nearly 39 per cent of all the employment generated in the selected nine sectors.
  • A multi-pronged approach has been adopted to support manufacturing. India’s focus on large-scale infrastructure investments will itself create enormous growth opportunities.

How to Give Manufacturing a Boost?

  • Investment in Infra Projects:
    • The focus on infrastructure development has an indirect impact on the manufacturing sector. The large infra projects currently underway can help towards this end. For instance, the National Infrastructure Pipeline (NIP) built on a whole-of-government approach, is already in place covering the FYs 2019-25. The statistics available on India Investment Grid reveal that there are 15,454 projects available involving a total project cost of $1,981.83 billion as on May 5, 2022.
    • The National Industrial Corridor Development Programme is spearheading the integrated development of industrial smart cities having a plug and play infrastructure along with multi-modal connectivity. Research has shown that investment in hard infrastructure also results in a reduction in logistics cost of manufacturing. Also, a number of Production-Linked Incentive (PLI) schemes have been announced since 2020 for various sectors that incentivise manufacturing with a goal to achieve ‘Atmanirbhar Bharat’.

Measures Related to Customs Policy:

  • The Customs administration can also play a role in helping the growth of manufacturing. Through judicious use of import policy, production within the country can be regulated with the objective of generating greater employment in the economy. Exports to international markets, facilitated by Customs, can also be boosted by the domestic surplus generated from the manufacturing capability within the country.
  • The Central Board of Indirect Taxes and Customs (CBIC) has also brought forward a new and improved version of the programme focused on manufacturing and other operations in bonded warehouses. Advantages of manufacturing in bonded warehouses include saving working capital, which is usually scarce in case of small enterprises and helping in better positioning of micro, small and medium enterprises in the international market by shortening the delivery schedule in the global supply chain.
  • The bonded manufacturing programme has been revamped by CBIC to enable organisations gain competitive advantage, which in the words of the internationally acclaimed strategic thinker, Michael E. Porter, are two-fold - cost advantage and differentiation advantage.
  • Domestic manufacturing within India is also being encouraged through statutory measures like the Customs (Import of Goods at Concessional Rate of Duty) Rules, which have also been amended from time to time to take into account the dynamic needs of the industry and trade.
  • As acknowledged in the Budget speech 2022, a sunset phase has been envisaged for project import regulations with a view to providing a conducive environment for the growth and development of domestic industrial base. Certain exemptions have been carved in case of advanced machinery which is not manufactured within the country.
  • Through a comprehensive mix of Mutual Recognition Agreement-Authorised Economic Operators (MRA-AEO) and Regional Trade Agreements/Free Trade Agreements (RTAs/FTAs), Indian entrepreneurs can capture a greater value of the regional and global value chains.

Bonded Manufacturing Programme

  • Under this programme, a manufacturing unit can import goods (both inputs and capital goods) under Customs duty deferment with no interest liability. Having no investment threshold and export obligation are the other attractive features of this scheme. The duties are fully remitted if the goods resulting from such manufacturing operations done in bonded warehouses are exported. The import duty is payable only in the event where the finished goods or the imported goods are cleared in the domestic market (ex-bonding).
  • The onboarding to the bonded manufacturing programme is fully digital and the microsite for the same is available on ‘Invest India’ portal. Due to the end-to-end digitalization of the registration process, the entry barriers to first-time entrepreneurs are significantly reduced.
  • There are a number of global parallels to the bonded manufacturing programme implemented by India. In the US, bonded warehouses are designated by the US Customs and Border Protection agency, in terms of 19 US Code 1555.

Investment in Human capital:

  • Moreover, the vast pool of human capital available in India at various skill levels offers a distinct competitive advantage to firms that conduct manufacturing activities within India. Manufacturing is not only a business but also a major livelihood option for the majority of people as more than 45 per cent of the manufacturing output is obtained from the MSME sector in India.
  • Indian scientists and computer engineers who perform “wonders” in the West need to be attracted back to India to help develop its technical infrastructure and build advanced hardware and software products locally. The existing culture of doing pure academic science work, or going abroad to monetise skills, has to be overhauled with the requisite wherewithal provided to convince our brightest minds that they can develop and commercialise their technologies here.
  • In its next round, the focus could perhaps shift to the development of identified technologies in each critical industry rather than on increasing the production of specified parts and components.
  • Focus on reducing the skill gap. Less than a fifth of the workers entering the workforce annually are skilled. If we have to improve productivity, we need to invest in vocational training not just for new entrants into the workforce, but also for retraining the existing workforce.

Focus on Skilling in present Budget-22:

  • Digital Ecosystem for Skilling and Livelihood – the DESH-Stack e-portal: An e-portal to skill, reskill and upskill citizens through online training. There will be API-based trusted skill credentials, payment and added discovery layers to find relevant jobs and entrepreneurial opportunities.
  • Realignment of the National Skill Qualification Framework (NSQF): It will be aligned with dynamic industry needs so that employability will be boosted with the help of skilling programmes and partnerships with the industry.
    • Skilling programmes and partnership with the industry will be reoriented to promote continuous skilling avenues, sustainability, and employability.
  • Starting focused relevant courses: In select industrial training institutes (ITIs), in all states, the required courses for skilling will be started.

Way Forward:

  • It is, therefore, imperative that all the stakeholders concerned, not only the senior management of companies but also their supply chain managers, are acquainted with the benefits of the various policy initiatives taken by the government to boost domestic manufacturing. Through concerted efforts of all stakeholders, India would be able to become a manufacturing hub, sooner than later.

Source: The Hindu BL

Mains Question:

Q. Discuss the role of manufacturing sector in providing employment in India. Suggest measures to boost manufacturing sector. Examine. (250words).