The National Manufacturing Policy (NMP) cleared by the Union Cabinet on Wednesday is expected to give much-needed impetus for investments by India Inc.
Speaking to Business Line on Thursday, Mr B. Muthuraman, President, Confederation of Indian Industry, said though the country required 50-100 National Investment and Manufacturing Zones (NIMZ), the purpose of the policy will be more than fulfilled even if the Government could create one NIMZ in each State.
“The policy is a well-thought process. Given India's population, agriculture may not be able to provide large-scale employment like the manufacturing sector, which is a proven wealth creator even in rural areas,” he said.
The manufacturing sector currently provides employment to just 12 per cent of the employable population in the country and this is expected to touch 25 per cent once the policy rolls out.
India has long been an agriculture-based economy with manufacturing contributing just 16 per cent to the GDP. The sector accounts for 34 per cent of GDP in China, 40 per cent in Thailand and 25 per cent in Brazil. Even in developed economy like Germany manufacturing contributes 17-18 per cent to GDP, he said.
“With the State Government acquiring the land and all basic clearance accorded in a time bound manner, investments are expected to flow once the policy is cleared by Parliament,” he added.
Welcoming the easier exit norms for units in the NMP, Mr Muthuraman said clear cut compensation for employees in industries that are being shut down and creation of sinking funds were innovative measures which would eventually pave the way for labour reforms.
The policy also allows exemption to small and medium enterprises from long-term capital gains if the sale proceeds of a residential property are reinvested in the equity of a new start-up company.
On the issue land acquisition, Mr Muthuraman said CII has advised the Government on ways to keep a check on land acquisition cost while providing adequate compensation for the displaced. The new Land Acquisition Bill being planned by the Government is expected ease much of the hardship, he said.
The Government plans to set up seven NIMZs to start with. A few States including Gujarat, Maharashtra, Andhra Pradesh and Rajasthan have created large land banks in anticipation of the NMP rollout.