NEW DELHI: The Narendra Modi Government 2.0 will soon roll out a New Industrial Policy, third India will have since independence with a focus on jobs creation through a package for the micro, small and medium enterprises (MSMEs) while also encouraging a new wave of industries using artificial intelligence and internet of things through policy initiatives. The policy, which has been in the works since 2016, calls for incentives to create jobs, develop skills and R&D by companies as it promises to create millions of jobs and try to push the share of manufacturing in GDP to 25 per cent, up from the current 16.5 per cent.
A separate commerce ministry paper proposes a detailed sector-wise strategy for import substitution in electronics, telecommunications, electrical equipment and raw materials used in pharmaceuticals called Active Pharmaceutical Ingredients or APIs, which amounts to a large chunk of India’s annual import bill.
The New Industrial Policy which has been crafted by the department of industrial policy and promotion also calls for rationalising taxes and creating cheaper sources of financing, so as to make it easier for new industry to be set up. Rationalisation of both GST and corporate taxes are being recommended as part of the package and also a “separate windows for MSME finances, allowing SMEs to access foreign funding in an easier way”, said Industry ministry officials.In the run-up to the elections, MSMEs have already been given several incentives and more sops are on the anvil including subsidies for training and apprentices. However, the challenge, officials said, will be in creating jobs even while encouraging Industrial revolution 4.0 which aims at using artificial intelligence, IoT and robotics in manufacturing.
Officials said the foreign direct investment policy will also be reworked to encourage retention of FDI in Indian industry and accessing technology from parent companies. “The policy needs tweaks to ensure greater technology transfer and absorption, leveraging of strategic global linkages and innovation … we do not want to be a dumping ground for sub-standard technologies,” said officials.
Emphasis will be given to brand building alongside assistance to industry in improving quality and scaling up. “We want value addition to go up, this helps localise industry and creates industrial clusters around large companies. To incentivise we shall use both fiscal and procurement policies,” said officials. “Indian industry needs to create value chains not only domestically but also globally which means they have to integrate in global chains.”
The inverted duty structure which often taxes raw materials at higher rates will be sorted out as far as possible in consultation with the finance ministry and will reflect in the forthcoming budget. However, officials said, their earlier bid to replicate in other industries, a version of the 1990s tax regime for automobiles, which rewarded those who localised production with lower taxes, will be difficult given cases India was facing at the WTO on its taxation policy for ICT products and components. “Even using the procurement policy to incentivise local production is becoming difficult under WTO rules, but many countries including the USA have been successfully pushing their own domestic content by opting for policies like America first and where possible we will too.”