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Committee to consider tax incentives to boost manufacturing

"The prime minister is keen that we succeed in manufacturing, especially in labour-incentive sectors, which leads to job creation," the official said.

Last Updated: Dec 17, 2013, 08.17 AM IST
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"The prime minister is keen that we succeed in manufacturing, especially in labour-incentive sectors, which leads to job creation," the official said.
"The prime minister is keen that we succeed in manufacturing, especially in labour-incentive sectors, which leads to job creation," the official said.
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NEW DELHI: The Committee on Manufacturing, chaired by Prime Minister Manmohan Singh, is likely to consider tax incentives and subsidies at its next meeting in January to make the sector more competitive, a senior official who is part of the panel told ET.


The committee, which has already worked out a plan to reinvigorate the textiles industry and indigenously develop a civilian aircraft, is also likely to focus on measures needed to substitute imports in sectors such as telecom equipment and shipbuilding.

"The prime minister is keen that we succeed in manufacturing, especially in labour-incentive sectors, which leads to job creation," the official said.


Committee to consider tax incentives to boost manufacturing


Experts have blamed India's widening current account deficit (CAD) mainly on sluggish growth in manufacturing and high imports.

Manufacturing expanded by 1% in the quarter to September against a 2.8% contraction in the previous quarter. Industrial growth in the first eight months of 2013-14 was zero. India's CAD widened to 4.8% of GDP in 2012-13.

The government has recently taken several measures, including those aimed at curbing gold imports, to bridge the CAD. It is now trying to put in place a long-term plan that will create a policy environment where CAD remains below 3% of GDP by the end of 12th Five-year Plan and revive manufacturing, which will help create 100 million jobs by 2022, the official quoted earlier said.

The government fears that India's electronics import bill may touch $320 billion by 2020 when the domestic demand is projected to be $400 billion, possibly exceeding that of crude oil, if domestic manufacturing is not encouraged. Currently, India imports $33 billion of electronic goods.

The domestic shipbuilding industry, which is estimated to be worth $92 billion, is import dependent. Ship-repairing is even more labour intensive and skill intensive and the government is of the view that India is well placed to supply cheap skilled labour that can compete with the best in the world.

Experts say the government needs to put in place a comprehensive framework to boost manufacturing.

"Government needs to have a multi-pronged strategy to address the twin issues of high imports and job creation. While it is a good idea to nurture manufacturing in high-end sectors like telecom and shipbuilding, the big part of employment creation will come from sectors like textile, construction, gems and jewellery and education," said DK Joshi, chief economist at Crisil.

Madan Sabnavis of Care Ratings said if the government really wants to make manufacturing robust, it needs to look at a mix of 10-12 sectors to attain the twin objectives of job creation and lower imports. "The specific policies have to come for both traditional sectors that involve medium and small enterprises and high-end sectors if manufacturing has to grow at a robust pace," Sabnavis said.

The government has already initiated consultations with stakeholder on the framework, the official quoted earlier said.

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