{"id":28140,"date":"2024-08-23T17:25:29","date_gmt":"2024-08-23T11:55:29","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=28140"},"modified":"2024-08-30T16:26:19","modified_gmt":"2024-08-30T10:56:19","slug":"need-for-a-new-industrial-policy-in-india","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/editorial-analysis\/23-08-2024\/need-for-a-new-industrial-policy-in-india","title":{"rendered":"Need for a New Industrial Policy in India"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>In recent years, there has been a <strong>resurgence of interest in industrial policy<\/strong>\u2014a topic that often walks a<strong> tightrope between government intervention and market forces<\/strong>. India, like many other countries, is grappling with the need for <strong>a fresh approach to industrial policy<\/strong>\u2014one that can facilitate <strong>sustained economic growth <\/strong>and transform the nation into <strong>a global manufacturing hub.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>India\u2019s Historical Industrial Policies<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Licence-Permit Raj Era:<\/strong> Post-Independence, India\u2019s industrial policy was characterised by what became infamously known as the \u2018License-Permit Raj\u2019.&nbsp;<\/li>\n\n\n\n<li>The<strong> Industries (Development and Regulation) Act of 1951<\/strong> mandated government approval for every industrial decision, resulting in excessive bureaucracy.<\/li>\n\n\n\n<li>The<strong> Monopolies and Restrictive Trade Practices (MRTP) Act of 1969<\/strong> and the <strong>Foreign Exchange Regulation Act (FERA) of 1973 <\/strong>further restricted growth and isolated Indian industries from global competition.\n<ul class=\"wp-block-list\">\n<li>Unfortunately, these policies stifled innovation and hindered progress.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>On the other hand, <strong>laissez-faire approaches<\/strong> left gaps in addressing market failures and public goods provision, resulted in <strong>inefficiency and stifled innovation.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Shift Towards Liberalisation<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The 1980s marked a shift towards liberalisation, and the landmark reforms of 1991 dismantled barriers like industrial licensing and reduced import tariffs.\n<ul class=\"wp-block-list\">\n<li>These changes aimed to boost efficiency and encourage private investment.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>However, India\u2019s manufacturing sector still faced challenges related to infrastructure, labour laws, and regulatory complexities.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Need for a New Industrial Policy<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Industrial Policies<\/strong> are conceptualises as <strong>policies and government interventions<\/strong> specifically designed to alter the <strong>composition of economic activities<\/strong> in pursuit of <strong>predetermined public objectives.<\/strong><\/li>\n\n\n\n<li>These objectives typically encompass <strong>enhancing innovation, increasing productivity, and fostering economic growth<\/strong>.<\/li>\n\n\n\n<li>However, they may also extend to objectives such as facilitating the <strong>climate transition, improving labour market outcomes, reducing regional disparities and expanding export capacity.<\/strong><\/li>\n\n\n\n<li>A defining feature of industrial policy is its <strong>inherent selectivity<\/strong>, wherein policy makers exercise allocative discretion \u2014 strategically prioritising certain sectors or industries over others to induce structural transformation, albeit with the implicit trade-off that some sectors may be de-prioritised.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Role of Industrial Policy<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Strategic Interventions: <\/strong>Industrial policies should be purposeful. Governments can strategically intervene to correct market failures, promote innovation, and guide resource allocation.<\/li>\n\n\n\n<li><strong>Balancing Act:<\/strong> It\u2019s about finding the sweet spot\u2014enough regulation to address inefficiencies but not so much that it stifles growth. Economic progress must not be sacrificed.<\/li>\n\n\n\n<li><strong>Public Objectives:<\/strong> Industrial policies can target specific sectors, such as automakers, energy companies, or semiconductor manufacturers. These policies may create new costs or provide incentives for R&amp;D and manufacturing investments.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Features of the New Industrial Policy<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Make in India:<\/strong> The policy aims to <strong>transform India into a manufacturing hub<\/strong> by promoting domestic production and attracting foreign investment. It encourages industries to set up manufacturing units within the country.<\/li>\n\n\n\n<li><strong>Smart Technologies:<\/strong> The new policy incorporates modern technologies like the <strong><em>Internet of Things (IoT), <a href=\"https:\/\/www.nextias.com\/blog\/artificial-intelligence-ai\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/artificial-intelligence-ai\/\">artificial intelligence (AI)<\/a>, and robotics<\/em><\/strong>. These technologies enhance productivity and competitiveness in manufacturing.<\/li>\n\n\n\n<li><strong>Ease of Doing Business:<\/strong> Simplifying regulatory processes and reducing bureaucratic hurdles are essential components. Streamlining approvals and licences can attract more investment.<\/li>\n\n\n\n<li><strong>Sectoral Missions: <\/strong>Initiatives like the <strong>Semiconductor Mission and Gati Shakti <\/strong>focus on specific sectors, fostering growth and innovation.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Related Concerns<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Global Trends and Shift: <\/strong>Worldwide, there\u2019s a rethinking of market-driven approaches, because of <strong>technological disruption, economic stagnation, and geopolitical competition<\/strong>.&nbsp;<\/li>\n\n\n\n<li><strong>China\u2019s Rise:<\/strong> China\u2019s rapid industrialisation has prompted both admiration and concern. As it becomes a global manufacturing powerhouse, other countries are reevaluating their own strategies.<\/li>\n\n\n\n<li><strong>Technological Changes:<\/strong> <strong><em>Automation, digitalisation, and Industry 4.0<\/em><\/strong> underscore the need for government involvement. Industrial policies can shape economic activities, enhance innovation, and boost productivity.<\/li>\n\n\n\n<li><strong>Weak Manufacturing Base: <\/strong>Countries worldwide recognise that a robust manufacturing sector is crucial for sustained economic growth. No major economy has achieved poverty reduction or long-term prosperity without a <strong>strong manufacturing base.<\/strong>\n<ul class=\"wp-block-list\">\n<li>India\u2019s recent manufacturing push, including initiatives like<strong> \u2018<a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/27-09-2022\/8-years-of-make-in-india-programme\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/ca\/current-affairs\/27-09-2022\/8-years-of-make-in-india-programme\">Make in India<\/a>\u2019 <\/strong>aligns with global trends.<\/li>\n\n\n\n<li>While the <strong><a href=\"https:\/\/www.nextias.com\/blog\/production-linked-incentive-pli\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/production-linked-incentive-pli\/\">Production Linked Incentive (PLI) scheme<\/a><\/strong> is often seen as an industrial policy, it <strong>primarily offers financial incentives to boost manufacturing in specific sectors<\/strong> and <strong>does not fully address<\/strong> the broader structural challenges needed to transform India into a global manufacturing hub.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Declining Manufacturing Employment: <\/strong>Advanced economies are grappling with this challenge. They seek ways to maintain competitiveness and create jobs.<\/li>\n\n\n\n<li><strong>Challenges Faced By Fourth Industrial Revolution: <\/strong>India\u2019s new industrial policy acknowledges the challenges and opportunities posed by the Fourth Industrial Revolution.\n<ul class=\"wp-block-list\">\n<li>It aims to position India as a global leader in emerging technologies such as artificial intelligence, blockchain, and drones.<\/li>\n\n\n\n<li>The policy emphasises ease of doing business, production-linked incentives, and sectoral missions. By leveraging digital technology, India aims to leapfrog into the global supply chain.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background has-fixed-layout\" style=\"background-color:#ebecf0\"><tbody><tr><td><strong>Do You Know About Washington Consensus<\/strong><br>&#8211; It emerged as a <strong>set of economic policy prescriptions<\/strong> promoted primarily by institutions based in Washington, D.C., including the <strong><a href=\"https:\/\/www.nextias.com\/blog\/international-monetary-fund-imf\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/international-monetary-fund-imf\/\">International Monetary Fund (IMF)<\/a>, the <a href=\"https:\/\/www.nextias.com\/blog\/world-bank-group-wbg\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/world-bank-group-wbg\/\">World Bank<\/a>,<\/strong> and the United States Department of the Treasury.<br>&#8211; It was<strong> first introduced in 1989 <\/strong>by economist John Williamson and laid out <strong>Ten Broad Policy recommendations<\/strong> <strong>(Decalogue of Consensus Policies)<\/strong> that constituted this <strong>\u201cstandard\u201d reform package<\/strong> that were meant for<strong> crisis-hit developing countries<\/strong>, aiming to guide their <strong>economic recovery and growth<\/strong>.<br>It includes:<br>1. <strong>Fiscal Policy Discipline:<\/strong> Keep those fiscal deficits in check relative to your GDP.<br>2. <strong>Redirect Public Spending:<\/strong> Move away from indiscriminate subsidies and focus on essential services like primary education, healthcare, and infrastructure.<br>3. <strong>Trade Liberalisation: <\/strong>Open up your markets, embrace global trade, and let those goods flow.<br>4. <strong>Privatisation: <\/strong>Sell off state-owned enterprises and let private hands manage them.<br>5. <strong>Financial Liberalisation: <\/strong>Free up your financial markets\u2014let capital flow, but keep an eye on stability.<br>6. <strong>Monetary Policy:<\/strong> Tame inflation, stabilise your currency, and keep the money supply in check.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Conclusion and Way Forward<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India\u2019s industrial policy is no longer trapped in the maze of bureaucracy. Instead, it seeks a balanced approach\u2014enough regulatory nudge to correct market failures while allowing businesses to thrive.<\/li>\n\n\n\n<li>As India continues its journey toward economic transformation, a dynamic and forward-looking industrial policy remains crucial.<\/li>\n\n\n\n<li>A well-crafted industrial policy\u2014one that balances pragmatism with ambition\u2014can propel India forward.&nbsp;<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background has-fixed-layout\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>Daily Mains Practice Question<\/strong><br><strong>[Q]<\/strong> Given the changing global economic landscape, technological advancements, and India&#8217;s aspirations to become a global manufacturing powerhouse, critically evaluate the need for a new industrial policy.&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-75\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.nextias.com\/previous-year-upsc-mains-papers?utm_source=google&amp;utm_medium=blog&amp;utm_campaign=utm_blog_pyqmains\">Check UPSC Mains Previous Year Papers PDFs<\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<p><a href=\"https:\/\/www.thehindubusinessline.com\/opinion\/the-case-for-a-new-industrial-policy\/article68555451.ece\" target=\"_blank\" rel=\"noopener\">Source: BL<\/a><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.nextias.com\/ca\/wp-content\/uploads\/2024\/08\/Daily-Editorial-Analysis-23-08-2024.pdf\">Download PDF<\/a><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>In recent years, there has been a resurgence of interest in industrial policy\u2014a topic that often walks a tightrope between government intervention and market forces. India, like many other countries, is grappling with the need for a fresh approach to industrial policy\u2014one that can facilitate sustained economic growth and transform the nation into a global manufacturing hub.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-28140","post","type-post","status-publish","format-standard","hentry","category-editorial-analysis"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/28140","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=28140"}],"version-history":[{"count":4,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/28140\/revisions"}],"predecessor-version":[{"id":28548,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/28140\/revisions\/28548"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=28140"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=28140"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=28140"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}