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Plan panel underlines need to rev up manufacturing sector

G. Srinivasan

The Plan panel Deputy Chairman, Mr K.C. Pant, has stressed that industrial development strategy for the Tenth Plan should foster conducive investment climate and optimise resource allocation besides ensuring enhanced flows into high growth areas and putting in place "efficiency-enhancing policies".

NEW DELHI, Aug. 18

THE Planning Commission has underlined the urgent need to build capacity for international competitiveness of Indian manufacturing sector, provide a level playing field through access to domestic capital markets and protection against dumping, eliminate regional and inter-State imbalance, besides raising India's share in world exports.

Official sources told Business Line here that in its final draft chapter on industry to be incorporated into the Tenth Plan document, the Plan panel Deputy Chairman, Mr K.C. Pant has stressed that industrial development strategy for the Tenth Plan should foster conducive investment climate and optimise resource allocation, besides ensuring enhanced flows into high growth areas and putting in place "efficiency-enhancing policies".

The Planning Commission has said the index of industrial production (IIP) compounded annual growth rate during the Ninth Plan was high in the case of beverages, tobacco and related products, non-metallic mineral products, chemicals, wool, silk and manmade fibre and leather products, moderate in the case of rubber, plastic, petroleum and coal products, machinery (other than transport), transport equipment and parts, metal products and parts, paper and paper products and low in the case of textile products (including apparel), food products, basic metal and alloys, other manufacturing industries, cotton textiles and wood and wood products.

The causes of industrial slowdown stemmed from a series of internal and external factors. The former includes slackening of aggregate demand, infrastructure constraints, lack of investments and competitiveness, which include technology, interest rate, rigidity in policy and red tape. The latter includes global slowdown, market access (non-tariff barriers) and cheaper imports.

Stating that the Tenth Five Year Plan target would have been a challenging task even under business-as-usual scenario, the Plan panel was of the view that emerging external milieu made it even more daunting - - - WTO (free trade, tariffs, QR and FDI), market access (Standards, accreditation and certification) and green preferences for products and processes on grounds of environment, health and safety. However, the emerging external milieu is in a sense an "immense opportunity, not a threat".

The Plan panel also refutes some general misconceptions about Indian manufacturing being "uncompetitive". On the other hand, India's inherent competitive advantages include entrepreneurship, skilled manpower, language, technological base and large domestic market (economies of scale, as in the case of China).

This is borne out by large Fortune 500 companies which have started sourcing initiatives in India and these companies include DCX, Ford, Cummins, General Motors, Fiat, Toyota, ABB, Sharp, GE, HP, Emerson Electric and Kodak. The Plan panel has said that since August 1991 till December 2002, the sectoral share of FDI has flown into fuels (power and oil refinery) at 28.07 per cent, followed by telecommunications at 20.16 per cent, computer software at 6.37 per cent and services sector at 6.14 per cent.

It is stated that the Government role during the Tenth Plan would be to phase itself out as producer, promote infrastructure, provide enabling environment and be a watchdog and regulator, while the role of industry is to recognise the need to create strategy, look outwards for markets, undertake greater market research to look inwards for improvement, implement world class process - 5s, TQM, TPM, Kaizen and apply technology and innovation to increase productivity and efficiency.

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