1. The Manufacturing Opportunity
- Contribution to GDP: 17%
- Employment: 12% of the workforce
- India has 3Ds- democracy, demography and demand for growth of this sector
- Can reduce dependence of people on agriculture(reduction if disguised unemployment ) and create new employment opportunities
- Increasing middle class and young population provides an attractive market for manufacturers
- Low manpower cost makes it less capital intensive
- Low ICOR when compared to heavy industries makes it more viable
- With china+1 strategy gaining more importance in the current geopolitical situation, India can use this opportunity to build its own manufacturing sector
- Biased trade regime: towards capital intensive manufacturing sector like iron and steel since 2nd FYP.
- Complex labor laws reduced investments in this sector.
- Lack of infrastructure to support the sector: high logistic cost, issues in forward and backward linkages.
- Focus was more on assembly rather than manufacturing- imported components are simply assembled with less attention on technology transfer.
- MSME sector is facing tough competition due to cheap imports from China.
- Low labor productivity due lack of skill development-4% of workforce is formally skilled.
- Intellectual property protection and enforcement are risky and expensive in India.
- Make in India initiative to make India into a global manufacturing hub and increase GDP share to 25%.
- PLI scheme extended to 13 sectors to increase domestic manufacturing capacity and increase foreign investment.
- Labor laws have been consolidated into 4 codes to simplify investment and EODB.
- Credit linked capital subsidy scheme for upgradation of tech in MSME sector.
- Dedicated freight corridors to improve forward and backward linkages.
2. Democratize Empowering city government:
- 74th CAA- constitutional status to urban local bodies
- 18 subjects under urban local bodies
- 35% population live in urban centres, nearly 2/3rd of country’s GDP stems from cities
- Democratic transfer of subjects have been done without any mention of financial empowerment
- Earlier 55% of revenue of cities came from octroi. With the introduction of GST , cities are now dependent on grants which covers only 15% of expenditure.
- Poor cost recovery of services: user charges and service provision are caught in a vicious cycle of poor quality services leading to lack of willingness to pay and hence poor collection of user charges and fees.
- The recommendations of state finance commission are largely ad hoc and not based on sound principles of public finance.
- Existence of multiple bodies without effective coordination has led to fragmented governance in financing and expenditure.
Effective decentralisation can be done only be devolution of 3Fs: funds, functionaries and functions.
- Grants from centre must be enhanced and cities should be given autonomy to plan their own development. Eg: Kerala’s people plan.
- The term of elected representatives must be for 5 years for long term policy stability. Electing mayor for one year can lead to instability.
- Planning in cities must take into account new issues: climate change, migrants etc.
- Planning for main cities must take into account sub plans for fringe areas, satellite towns and suburban areas.
- There is a need to move towards ‘good urbanisation’ by integrating policies and linking rural and urban areas.