Commitment to R&D must be in the DNA of the industry, independent of any fiscal incentive since it is about global competitiveness and profitability, said the Economic Survey of 2024 released ahead of the union budget on Monday.
“Two common requirements across industries relate to incentivising R&D and innovation and improving the skill levels of the workforce. With respect to both, industry must take the lead…With active collaboration between industry and academia and emphasis on vocational education in curriculums, India can meet the skill shortage more effectively than hitherto,” stated the survey.
Private players have been seeking subsidies/concessions from the government to ramp up their R&D capabilities as its current dilapidated state makes it tough for domestic industries to compete with global companies.
On skilling of the workforce, the survey noted that 64% of India’s fast-growing population is under 35, and many lack the skills needed by a modern economy. It added that about one in two graduates are not yet readily employable straight out of college.
The Eco Survey also shed light on the state of Medium and Small Industries. It stated that the industrial growth accelerated in FY24, with manufacturing and construction leading the way.
“Industrial GVA at constant prices in FY24 was 25% higher than the pre-Covid FY20 levels, affirming broad-based recovery and consolidation. This was supported by greater credit offtake, a thrust on capital formation to shore up infrastructure-oriented sectors, and a supportive policy framework,” said the survey.
It added that in the last decade, there were considerable changes in the sectoral composition of India’s manufacturing landscape. Some consumer-oriented industries like automobiles, wood products, furniture and pharmaceuticals have made large gains in output share and production-oriented sectors like machinery, chemicals, non-metallic minerals, and rubber and plastic products have also had share gains, balancing the growth dynamics. At a same time, sectors like petroleum products, textiles, beverage and tobacco have witnessed gradual decline in their output share.
Going forward, the survey stated that invigorating ongoing efforts to impart greater efficiencies, skills, and dynamics to labour-intensive segments like textiles, food processing, and MSMEs would lend greater balance to industrial expansion.
“Incentivising R&D investment, greater formalisation of smaller manufacturers, alleviating their supply chain bottlenecks, facilitating market access and improving access to finance will also foster industrialisation. Further reduction in the compliance burden for MSMEs will considerably improve their growth prospects,” said the survey.