Q1. Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (10m) – Economy
Introduction:
MSMEs contribution to the country’s GDP is nearly a third of the country’s GVA and it contributes nearly half of the country’s exports. This sector absorbs more than 40% of the workforce and also fosters innovation and industrialization.
Despite the presence of multiple policies on the manufacturing sector, its contribution in GDP has stagnated around 15%.
Body:
How Manufacturing sector can help to increase economic growth
- Ancillary sector to agriculture growth
- Can provide base for service sector
- Employment generation – use of skilled resource
Present policies of government to boost manufacturing sector
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- Make in India Initiative: It promotes manufacturing and attracts foreign investment, simplified regulations, improves infrastructure, and ease the process of doing business.
- Ease of Doing Business: Reforms such as the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC), have had a positive impact on MSMEs.
- Startup India: It provides various incentives and support to startups, which often operate in the MSME space.
- Raising and Accelerating MSME performance (RAMP) programme: This is a programme with an outlay of Rs. 6,000 crore to be rolled out in 2023-24 to provide financial and technical support to MSMEs for improving their quality, technology, innovation, and market access.
- MUDRA Yojana: To boost credit to MSMEs
- Production Linked Incentives Scheme was launched to develop the core manufacturing sector at par with global manufacturing standards.
- Industrial Corridor Development Programme
- Special Economic Zones Policy: Aims at boosting domestic manufacturing and exports.
Way Forward:
- Encourage MSMEs to focus on exports through incentives and simplified procedures.
- Boost R&D and innovation in manufacturing via incentives and research partnerships.
- Simplify and digitise compliance processes for MSMEs.
Conclusion:
Enhancing the manufacturing sector’s GDP contribution, especially through MSMEs, is essential for faster economic growth. While government policies have initiated progress, a holistic approach addressing infrastructure, finance, and skills development is needed.
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