Context
India’s share of global manufacturing exports is approximately 3%, with annual exports around $25 billion, constituting less than 1% of the global share despite a 4% share in global demand. To achieve the targets of 5% by 2030 and 10% by 2047, reforms in land, labour, and taxes are essential, alongside other measures.
1. Land Reforms
Current Challenges
- Cumbersome, time-consuming, and costly land acquisition processes
- Inconsistent and unclear land titling and records
- Rigid zoning regulations
Required Reforms
- Streamlining Land Acquisition: Introduce a single-window clearance system to expedite the process.
- Land Titling Reforms: Implement a nationwide, digitized land titling system to provide clear, undisputed titles, reducing disputes and legal challenges.
- Flexible Zoning Laws: Reform zoning regulations to allow mixed-use development and greater flexibility in land use, enabling efficient allocation for industrial purposes.
2. Labour Reforms
Current Challenges
- Rigid labour laws
- Dominance of the informal sector
- Skill gaps in the workforce
Required Reforms
- Simplifying Labour Laws: Consolidate and simplify labour laws into a coherent, flexible framework, such as the four labour codes, to ease business compliance while protecting workers’ rights.
- Formalization of the Workforce: Encourage formalization through incentives and better enforcement of labour standards to improve productivity and working conditions.
- Skill Development Initiatives: Expand programs like the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) to create a skilled workforce tailored to modern manufacturing needs.
3. Tax Reforms
Current Challenges
- Complex tax system
- High tax compliance burden
- Inverted duty structure
Required Reforms
- Simplification of GST: Rationalize GST rates and reduce tax slabs to create a predictable tax environment.
- Reduction in Corporate Tax Rates: Continue lowering corporate tax rates and offer targeted incentives to attract domestic and foreign investment in manufacturing.
- Addressing Inverted Duty Structure: Ensure raw materials attract lower duties than finished products to encourage domestic manufacturing and enhance global competitiveness.
Additional Reforms Required
To meet the ambitious targets, reforms beyond land, labour, and taxes are necessary:
- Infrastructure Development: Enhance industrial infrastructure to support manufacturing growth.
- Ease of Doing Business: Simplify regulations to improve business efficiency.
- Technology and Innovation: Promote adoption of advanced technologies.
- Skilling and Human Capital Development: Strengthen workforce training programs.
- Trade Policy and Export Promotion: Develop policies to boost exports and global integration.
Conclusion
These reforms will attract domestic and foreign investment, ensuring India’s manufacturing sector becomes globally competitive. Collectively, they create a conducive environment for sustainable economic growth, enabling India to achieve its targets of 5% global manufacturing share by 2030 and 10% by 2047.