Factory floored

The Indian economy has always been oddly anomalous. Its growth story,so remarkable over the past two decades,has not been led by manufacturing,as is,and has been,the case almost everywhere else. No,here growth is led by the service sector,while manufacturing has stuttered along,showing decent growth numbers,but adding little to employment. While in other countries on the path to development,the proportion of the workforce in manufacturing has gone to well above 30 per cent,in India,it is stuck at 15-16 per cent. For formal manufacturing,the number is even lower. Yet factory jobs are essential to social change,to urbanisation,to satisfying increasing aspirations. Thus the most important challenge to the Indian economy is,in fact,to revitalise manufacturing.

It is good,therefore,that the National Manufacturing Policy has been cleared by the Union cabinet. The policy,as drafted,attempts to partially correct several of the reasons why industrial growth has been strangled in India. It isn’t just the unavailability of land,or the crippling red-tapism that surrounds environmental and other such permissions. It is also the archaic labour laws,drafted to protect insiders in a static manufacturing sector,not to empower the aspirational in a sector that’s growing. The new “national investment and manufacturing zones”,or NIMZ,will reportedly allow considerable flexibility in labour laws,with attitudes to contract labour,for example,being decided at the state level for the first time. In addition,the procedure to shut down factories will become easier,allowing for the rapid redeployment of capital instead of its slow decay. Workers’ rights,instead of requiring that sick factories continue to exist on paper,will now be addressed with transfers and job insurance.

These are useful ideas. The policy claims it will add 100 million new jobs. The number at least sounds big — but is not exactly ambitious for a country of 1.2 billion that’s both rapidly urbanising,and going through a youth bulge. Yet implementation will be tricky. For one thing,the litany that no agricultural land will be acquired for these zones continues to be sung,which half-cripples the policy before it begins. The larger question,of course,is this: if the government believes that these are the rules that create jobs and growth,why are these not pushed for extension across the entire country?