Q. 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.
Question from UPSC Mains 2023 GS3 Paper
Model Answer:
Manufacturing Sector and MSMEs in India
The Indian government has recognized the critical role of the manufacturing sector, particularly Micro, Small, and Medium Enterprises (MSMEs), in driving faster economic growth and increasing the sector’s share in GDP. Several policies and initiatives have been implemented to boost manufacturing and support MSMEs:
Production Linked Incentive (PLI) Scheme: This flagship program aims to make Indian manufacturers globally competitive by offering incentives on incremental sales. It covers 14 key sectors, including electronics, pharmaceuticals, and automotive, encouraging domestic production and reducing import dependence.
Make in India: Launched in 2014, this initiative promotes India as a global manufacturing hub by improving ease of doing business, developing infrastructure, and opening up FDI in various sectors. It aims to increase the manufacturing sector’s contribution to GDP to 25% by 2025.
National Manufacturing Policy: This policy focuses on enhancing the share of manufacturing in GDP to 25% and creating 100 million jobs by 2022. It emphasizes the development of National Investment and Manufacturing Zones (NIMZs) as integrated industrial townships.
MSME-specific initiatives:
1. MSME Samadhaan: An online portal to address delayed payments to MSMEs from government departments and CPSEs.
2. Udyam Registration: A simplified online registration process for MSMEs, integrating them into the formal economy.
3. Credit Guarantee Scheme: Provides collateral-free credit to MSMEs, enhancing their access to finance.
4. Fund of Funds for MSMEs: A Rs 10,000 crore fund to provide equity funding for MSMEs with growth potential.
5. CHAMPIONS portal: A technology-driven platform to assist MSMEs in addressing their grievances and accessing support services.
Skill India Mission: This program aims to upskill the workforce to meet the demands of the manufacturing sector, enhancing productivity and competitiveness.
Digital India: This initiative promotes the adoption of digital technologies in manufacturing, improving efficiency and global competitiveness.
Ease of Doing Business reforms: Simplification of regulatory processes, single-window clearance systems, and labor reforms to create a more conducive business environment.
While these policies demonstrate the government’s commitment to boosting manufacturing and supporting MSMEs, challenges remain. Implementation gaps, infrastructure bottlenecks, and global economic uncertainties continue to impact the sector’s growth. The COVID-19 pandemic has further highlighted the need for resilient supply chains and digital transformation.
To fully realize the potential of these policies, sustained efforts are required in areas such as improving credit access, enhancing technological capabilities, and addressing skill gaps. Additionally, fostering innovation, promoting R&D, and integrating Indian manufacturers into global value chains will be crucial for achieving the desired increase in the manufacturing sector’s share in GDP and driving faster economic growth.
