Q. 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. (150 words, 10 Marks)

 

Q. 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. (150 words, 10 Marks)

Answer: 

Introduction

According to 2023 manufacturing industry outlook,The manufacturing sector is an important part of India’s GDP, accounting for around 17% in 2022. The MSMEs, contribute around 40% to manufacturing and are responsible for economic growth, jobs and growing exports. Given this, the government has initiated various programmes and benefits to support these sectors.

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Essentiality of increase share of the manufacturing sector in GDP for Faster economic growth due to following reasons

• Rural Development: Manufacturing plays a pivotal role in rural development. Initiatives like the establishment of Agro-based industries and Rural Self Employment Training Institutes (RSETIs) foster rural entrepreneurship, empowering rural areas economically.
• Economic Resilience: In economic downturns, diverse manufacturing sector, can offer economic resilience. Eg: during the COVID-19 pandemic, many small enterprises quickly adapted to produce essential items like masks and sanitizers.
• Employment Generation: In India, for instance, according to a report by the Ministry of MSMEs, the sector has created around 11 crore jobs. Tailoring units, handicraft businesses, and small manufacturing units are examples where employment is generated at a large scale.
• Innovation: MSMEs have been the cradle for many innovations. Companies like Flipkart and Zoho initiated as small enterprises and have brought about significant innovative solutions in e-commerce and software development sectors, respectively.
• Exports: MSMEs contribute markedly to the export earnings; in India, it accounts for about 48% of total exports, showcasing products like jewelry, handloom, and spices which have a considerable demand globally.
• Reduce dependence on other countries: It will reduce import from other countries and support to balancing the fiscal deficit.

Present Policies of the Government and Their Contributions

• Make in India (2014) : It aimed at promoting India as a global manufacturing hub. Eg: the mobile manufacturing saw remarkable growth with companies like Samsung setting up its largest mobile factory in the Noida boosting manufacturing sector and creating numerous jobs.
• MSME Samadhaan: This platform has provided a space for MSMEs to file their delayed payment grievances directly, fostering a prompter payment culture. Through this, many businesses have been able to alleviate their financial bottlenecks and sustain operations.
• Udyam Registration: Initiated to simplify the registration process for MSMEs, it has eased the entry of numerous new ventures into the formal sector. Eg: home-based businesses have found it simpler to register and thereby avail government benefits and schemes.
• GST: The inception of GST streamlined tax structures, which, for example, mitigated the cascading effect of taxes, potentially reducing the tax burden on MSMEs, and encouraging compliance due to a simpler tax regime.
• Startup India: Since its launch, it has fostered a nurturing environment for startups, offering fiscal incentives and establishing a robust ecosystem, encouraging entrepreneurship. Zomato, a food delivery service, is a notable success story that blossomed under this initiative.
• Cluster Development Program: It has boosted competitiveness and promote synergy through cluster development, offering infrastructural facilities. Eg: Leather clusters in Kanpur have seen significant improvements in terms of technology adoption and infrastructural development.
• Government e-Marketplace (GeM): This initiative has enabled many MSMEs to reach out to government buyers, expanding their market reach and fostering a transparent procurement process, thus giving a considerable boost to MSME sector growth.
• Digital MSME Scheme: Implemented to encourage digital literacy and facilitate the adoption of digital technologies in MSME operations. For instance, businesses have been able to automate inventory management, thus saving time and reducing errors.

Conclusion

These innovative suggestions could potentially accelerate the growth of the manufacturing sector and MSMEs, thereby contributing positively to the country’s GDP. It is pivotal to create a nurturing environment where policies are not just well-framed but are also effectively implemented to foster growth and development.