Potential of NewManufacturing Policy

The Centre's resolve to roll out a New Manufacturing Policy (NMP) has been welcomed in knowledgeable quarters but frankly nobody seems to have a clue about its contours much less about its minutiae. One hopes it is something ground-breaking. There is a feeling the NMP has been triggered by the Chinese manufacturing success story. China used its formidable manufacturing prowess to not only become the world's manufacturing hub but also to provide employment to its teeming masses. India perhaps rightly apprehends that the much talked about demographic dividend might well turn out to be a curse if the growing unemployment problem is not addressed. And like China, it wants to use manufacturing to catapult its youth to financial empowerment. Laudable thinking indeed.

The NMP would be path-breaking if it gives impetus for the following:

Corporate farming must be dovetailed with the food processing industry. This could have several spin offs. Rural and disguised unemployment would be meaningfully addressed and this would be feat given the growing rural disenchantment with the nation's fixation with urbanisation. Corporate farming may be encouraged specially for those companies committed to setting up food processing industries thus contributing at once to the minimisation of monumental waste and decay of agricultural produce and tackling rural unemployment.

The Direct Taxes Code Bill , 2010 (the DTC) needs to be in step with the NMP and further its cause. Corporates entering farming and carrying on food processing must be given tax sops. Economists often cavil at tax sops but there is no gainsaying the fact that even in advanced countries there has been economic progress coupled with inclusive growth on the back of carefully crafted tax incentives.

Small and medium enterprises (SMEs) should be encouraged to function as a foil for the growth of manufacturing. Anciliarisation has often been the key to the growth and success of large enterprises. It can in addition provide self-employment to those looking for jobs as well as to those raring to go it alone.

The NMP can also be used to douse fires of discontent engendering violence and terrorism. It is common knowledge that frustrated youth often take to violence. Their energies can be sublimated for growth of the nation as well as for keeping the youth honourably employed. The naxal violence that has been rocking the nation can be contained through agrarian reforms and financial empowerment of the youth.

On agricultural policy, we need to pull out agriculture from the morass it finds itself in. Our food production tends to be extremely volatile with surplus and deficiency alternating. There is always a knee-jerk reaction to agriculture and food products in policy circles. Therefore, it is tad curious that the government initiating NMP has not thought it appropriate to unveil an agricultural policy.

The food inflation refuses to abate and the reason is not excessive money sloshing around as the RBI seems to believe. The supply side constraints need to be eased for which multi-pronged but holistic strategies need to be put in place that encompass land use, irrigation, rural electrification, cold storage and retailing. We need to have a holistic and integrated approach to agriculture and food production rather than viewing the various facets of them separately through narrow prisms. More ideally, agricultural policy should be dovetailed with the NMP so that agriculture and manufacturing reinforce each other.

(The author is a Delhi-based chartered accountant.)