Over 100 and counting: Govt policies for industrial sector

Feb 25 2013, 08:27 IST
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SummaryThe other gate for inflow of policies for the industrial sector is the state budgets

The Centre and the states together have over one hundred policies for the benefit of the industrial sector. This is a disproportionately large number of policies many of which contradict each other for a sector which accounts for just 14.39 per cent of the GDP.

In contrast, there are less than 10 policies for the services sector, the mainstay of the Indian economy, which accounts for almost 64 per cent of the GDP (2011-12).

Senior government officials chanced upon the huge number of policies for the industrial sector while they were crafting another policy the National Manufacturing Investment Zone.

The proliferation of policies in recent years is because many ministries use each Budget and foreign trade policies to announce fresh policies without terminating the earlier ones. Budget 2013-14 is set to be presented to Parliament on Thursday. The other gate for inflow of policies for the industrial sector is the state budgets.

Consider this:

* Just on foreign direct investment, there were 11 policy statements issued by several government departments in 2012, excluding the overarching policy circular released in the same year.

* There are six policies for handling explosives, including the Explosives Act of 1884.

* The Salt Cess Act of 1953 still continues in the books.

The huge number of policies at the Centre (see chart) includes those for exports, agricultural and food promotion like agro processing zone schemes, mega food parks and so on, apart from focus product schemes under the foreign trade policy.

In addition, there are special schemes for backward area development and for products like textiles. The frequency of policies and schemes has expanded in the 90s as the share of manufacturing in the economy has receded.

These policies are repeated by the state governments. West Bengal, for instance, has 12 policies for micro and small industries. Tamil Nadu has eight policies for small industries, although it has introduced a single window clearance system for industries.

Arpita Mukherjee, professor at ICRIER, agreed that most of these policies have become superfluous and even contradict each other. India has not been able to attract investment in manufacturing despite several such incentives and schemes. A study conducted by us found that in food and logistics supply chain there are over 50 schemes for investment promotion, across states and the Centre. Despite that, some Indian companies (Dabur) have set up operations in Sri Lanka after evaluating different state policies in

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