Industries

Industries

Introduction
● Economic growth of 8.2 per cent in FY24 was supported by an industrial growth
of 9.5 per cent. Among the four sub-sectors of industry, manufacturing and
construction achieved close to double-digit growth, while mining & quarrying and
electricity & water supply also recorded strong positive growth in FY24.
● Sector’s relevance can be identified through various direct and indirect linkages with
other sectors, contributing to economic growth and employment
o Ensures that domestic production can accommodate domestic
demand and reduces reliance on imports. Thereby assisting in improvement of
trade and current account balances
o Industrial growth has multiplier effects, which translates into employment
growth. Some industries, such as textiles and construction, have high
employment elasticities
o Industrial growth spurs growth in services sectors such as banking,
insurance, logistics, etc
● According to Economic Survey 2022-23, industrial income (as measured by
industrial GVA), has kept pace with overall GVA growth in economy since pre-
pandemic year of FY20
○ Manufacturing GVA, which contributes more than 50 percent of industrial
GVA, has grown at an even higher rate when compared to overall GVA.
○ In FY23, Industry sector witnessed modest growth of 4.1 percent compared to
strong growth of 10.3 percent in FY22
○ This is likely on account of input cost-push pressures, supply chain disruptions
and China lockdown impacting the availability of essential inputs and slowing
global economy
○ On a positive note, there are signs of improvement in overall industrial
growth, especially in the manufacturing sector, both yearly and sequentially

Nature of Indian Industrial Sector at the Time of Independence

● Extremely underdeveloped due to centuries of colonial exploitation by British
● The then industrial sector was characterised by following features:
o Concentration of modern industries in metropolitan areas: Most
modern industries concentrated in few metropolitan regions with vast
hinterland being increasingly ruralised
o Lack of infrastructure industries: Practically, there were no heavy and basic
capital goods industries
o Lack of government intervention: There was least government
intervention in favour of industrial sector
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o Private Ownership: Structure of ownership was highly concentrated in few

private individuals/families
o Opposition towards Exports: Export orientation had been seen as being
against country’s interests
o Lack of Human Resources: Technical and managerial skills of available
human resources were in short supply
o Technological deprivation: Obsolete techniques of production were being
used in existing industries
o Lack of Entrepreneurial class: Lack of sufficient indigenous industrial
entrepreneurial class with adequate resources and lack of incentives for using
surpluses for industrial production
o Lack of indigenous capital and investments: industrial development
during pre-Independence era was fuelled mostly by foreign/British capital

Indian Industrial Policy

● After independence, government of India emphasized role of industrialization in
country's economic development in long run
● To improve the weak industrial base that India inherited from the British, the first
industrial policy of the Government of Independent India was announced in April
1948. Subsequently Industrial Policy resolutions were announced in 1956, 1980,
1990 & 1991

Objectives of Indian Industrial policy

● To promote industrialization: Main objectives of Indian industrial policy is to
promote growth and development of the industrial sector; Achieved by encouraging
investment in industries, providing incentives and subsidies, and creating favourable
environment for growth of industries
● To promote economic growth: Aims to boost economic growth by creating
employment opportunities, increasing productivity, and enhancing competitiveness of
Indian industries, leading to increased output, higher incomes, and improved living
standards for people of India
● To achieve self-sufficiency: Aims to achieve self-sufficiency in various sectors by
promoting domestic production and reducing dependence on imports. This will help to
conserve foreign exchange reserves and improve balance of payments position
● To promote balanced regional development: Aims to promote balanced regional
development by encouraging growth of industries in backward regions and reducing
regional disparities in industrial development
● To encourage foreign investment: Indian industrial policy aims to attract foreign
investment by creating favourable investment climate, liberalising foreign investment
norms, and providing incentives and subsidies to foreign investors
● To promote innovation and technological development: Aims to promote
innovation and technological development by providing incentives for research and
development, promoting adoption of new technologies, and creating conducive
environment for innovation and entrepreneurship
● To promote sustainable development: Aims to promote sustainable industrial
development by encouraging adoption of environmentally friendly practices, promoting
renewable energy, and reducing waste and pollution

Evolution of Indian Industrial Policy

● Can be classified into two phases:
○ Pre-1991 Industrial Policy: First phase starting with Industrial Policy
Resolution (IPR) of 1948 continued with some modifications made now and
again till major modification made in 1973 and again in 1980
○ New Industrial Policy, 1991 and Thereafter: Statement on Industrial
Policy in 1991 marked major reversal by giving emphasis to private sector

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Pre-1991 Industrial Policy

Industries Conference, 1947
● Government of India called an Industries Conference in December 1947-
o To consider ways and means to utilise existing capacity more fully
o To harness industry to growing needs of the people in independent India
● Representatives of Central and Provincial governments, industrialists and labour
attended this Conference
● To ensure better relations between management and employees, tripartite
agreement was entered into
o Provided for three-year industrial truce between management and workers

Industrial Policy Resolution, 1948

● Immediately after Independence, it was considered desirable by Government to
announce its attitude towards private capital and to define scope of State participation
in economic activity
● Aimed at removing all uncertainties that would have worked as constraints on
industrial growth in economy
o This announcement took the form of IPR, 1948

Objectives of the IPR 1948

● Development and regulation of industrial investments and production according to plan
priorities and targets
● Protection and encouragement of small industries
● Prevention of concentration of ownership of industries
● Balanced economic development of different regions in the country in order to reduce
disparities in the level of development

Four Categories of Industries under IPR, 1948:

The IPR, 1948 accepted importance of both public and private sectors in industrial
economy of India; Divided industries into following four categories:
● Industries with monopoly of State: Three fields of activity were specified - arms
and ammunition, atomic energy and rail transport
● Mixed sector: Six industries were specified- coal, iron and steel, aircraft manufacture,
ship building, manufacture of telephone, telegraph and wireless apparatus (excluding
radio sets) and mineral oils
● Sectors of government control: Eighteen industries of national importance were
included in this category. Some industries included- automobiles, heavy chemicals,
heavy machinery, machine tools, fertilisers, electrical engineering, sugar, paper, cement
cotton and woollen textiles
● Field of private enterprise: All other industries (not included in above three
categories) were left open to the private sector

Note
● The Industries (Development and Regulation) Act was passed in 1951 to implement
Industrial Policy Resolution, 1948
● It provides for development and regulation of certain industries including metallurgical,
telecommunications, transportation, fermentation (which includes production of
alcohol) among others

Industrial Policy Resolution, 1956

Objectives of IPR, 1956
● Development of heavy and machine building industries
● Expansion of the public sector
● Establishment of a large and growing cooperative sector
● Encouragement to the diffusion of ownership and management of the private sector

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Major Features of the IPR, 1956

● The IPR 1956 is known as the ‘Economic Constitution’ of India
○ Because it was elaborate document and touched virtually all aspects of
Industrial development
○ Provided comprehensive framework for industrial development of country
● Policy was shaped by Mahalanobis Model of growth, which suggested that
emphasis on heavy industries would lead economy towards long-term higher
growth path
● Policy laid foundation for India’s second five-year plan
● The IPR 1956 gave primacy to role of State to assume predominant and direct
responsibility for industrial development
● Stressed importance of cottage and small scale industries for expanding employment
opportunities
● To meet new challenges, from time to time, IPR, 1956 was modified through
Industrial Policy Statements in 1973, 1977, and 1980

Three schedules under IPR, 1956

The IPR, 1956 classified entire industrial sector in three schedules-
● Schedule A: Industries which are to be exclusive monopolies of State-17 industries
listed in this category were Arms and ammunition, atomic energy, iron and steel, heavy
castings, heavy machinery, heavy electrical industries, coal, mineral oils, iron ore etc
● Schedule B: Industries which are to be progressively State owned and in which State
would gradually set up new undertakings. Contained 12 industries like chemical
industry, road transport, fertilisers etc
● Schedule C: All other industries that were left were included in this schedule. Future
development of these industries would be joint responsibility of government and
private enterprise

Industrial Policy Statement, 1973

● Identified high priority industries where investment from large industrial houses and
foreign companies would be permitted
● With a view to prevent excessive concentration of industrial activity in large industrial
houses, this Statement gave preference to small and medium entrepreneurs
over large houses and foreign companies in setting up of new capacity particularly in
production of mass consumption goods
● New classificatory term i.e., core industries was created containing industries which
were of fundamental importance for development of industries such as iron and steel,
cement, coal, crude oil, oil refining and electricity
● Large industries were permitted to start operations in rural and backward areas
with view to developing those areas and enabling growth of small industries around

Industrial Policy Statement, 1977

Laid emphasis on decentralisation and on role of small-scale, tiny and cottage industries
Major features Industrial policy statement, 1977
● Small and cottage industries sector was classified into three categories namely,
o Cottage and household industries which provide self-employment on a
wide scale
o Tiny sector
o Small-scale industries (SSIs)
● Stated the role of large-scale industries would be related to programmes-
○ For meeting minimum basic needs of population through wide-spread dispersal
of small and village industries and
○ To strengthen the agricultural sector
● Towards this end, statement prescribed 4 areas for large sector namely,
(1) Basic industries-essential for providing infrastructure for industrial development of
small scale and large scale industries
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(2) Capital goods industries for meeting machinery requirements of large scale
industries as well as small scale industries
(3) High technology industries: Required production on large scale. Would help in
agricultural development and development of industries like fertilizers, petro-chemical
industries etc
(4) Other industries not covered under list of items reserved exclusively for the small
scale sector

Industrial Policy Statement, 1980

● Focussed attention on need for promoting competition in domestic market,
technological upgradation and modernisation
● Laid foundation for developing competitive export base and encouraging foreign
investment in high-technology areas
○ This found expression in Sixth Five Year Plan
○ Also, due to this policy, MRTP Act (Monopolies Restrictive Trade
Practices) and FERA Act (Foreign Exchange Regulation Act, 1973) were
introduced
● Some specific measures suggested in Policy Statement are as follows-
○ Effective Operational Management of the Public Sector by re-
establishing lost credibility of public sector
○ Promotion of Economic Federalism by setting up of nucleus plants in
backward districts around which ancillary, small- and large-scale industries
would develop
○ Redefinition of Small Units- Limit of investment in tiny units was raised
from Rs. 1 lakh to Rs. 2 lakhs, for SSIs from Rs. 10 lakhs to Rs. 20 lakh and for
ancillary units from Rs. 15 lakhs to Rs. 25 lakhs
○ Removal of Regional Imbalances through dispersal of industries to
backward, rural and urban areas
○ Promotion of Alternative Energy like solar energy, wind power, bio-gas,
tidal power, etc. was delicensed
○ Export Promotion through exemption of export-oriented units from MRTP
Act and allowing duty free import of capital goods and raw materials

Major Features of Pre-1991 Industrial Policy

● Increased role of the State: in consonance with socialistic objectives adopted by
government
o Many sectors like power generation and transport were reserved to public
sector
o Major investments in private sector were to be carried out, not by test of
private profitability, but according to requirements of overall national plan
● Focus on capital goods sector: Role of heavy industry in economic development has
been recognised and thus sought to build capital goods sector rapidly
o Special importance was given to development of steel, heavy engineering,
machine tools and heavy chemicals industries
● Inward Orientation: Industrial policy emphasized technological self-reliance, and for
much of period, extreme inward orientation in sense that if anything could be produced
in the country, regardless of the cost, it should not be imported
o Govt had placed several restrictions on import of foreign technology by Indian
companies
● Protection of Indian industries from foreign competition: by imposing heavy
import duties on foreign goods
● System of Licensing: Government was controlling and regulating growth of industrial
sector through system of licensing
o Licensing was mainly thought to be an instrument for dispersal of industries and
to prevent establishment of excess capacity in industries

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● Restrictions on foreign investment: Foreign investors were not allowed to invest

in any one enterprise more than 25 percent of total capital
● Encouragement to Small scale industries: Several support measures were
provided to small scale industries in form of finances, technology, subsidies,
infrastructure etc
● Development of Financial Infrastructure: Development banks like ICICI, IDBI,
IFCI etc. were set to provide long-term and short-term investments for growth of
industrial sector

Assessment of Pre-1991 Industrial Policy

● Industrial policy environment in India during this period relied on import
substitution, inward-oriented growth, and a system of controls and subsidies
to protect Indian industries
○ Protection, both against potential domestic competition and foreign
competition, was right approach in initial stage of industrialisation in developing
economy like India
● Public sector in India witnessed phenomenal expansion; it came to acquire commanding
heights of economy
● The industrial structure had been diversified
○ Basic and capital goods industries had come up
● High degree of self-reliance had been achieved
○ New growth centres and new generation of entrepreneurs had emerged
Issues with the Policy
● The pre-1991 industrial policy was soon afflicted with most of those problems which
are generally associated with a state-controlled system like:
o Little or no incentive to upgrade technology
o Barriers to entry into individual/private industries that limited possibility of
domestic competition
o Indiscriminate and indefinite protection of domestic industries from foreign
competition
o Administrative hurdles inherent in system of physical controls and multiple
licensing regimes
o Poor performance of public sector enterprises etc
● Major failure of policy of protection was that it did not have built-in mechanism that
could prompt industry to adapt itself to fast-changing technological scene
● Industrial structure of India, under burden of protection, turned out to be high cost and
low-quality that lacked basic ingredients of international competitiveness
● Also generated inefficiencies, under-utilisation of capacities, mismanagement, red-tapism
etc. and shift in the industrial policy was envisaged. Consequently, we saw new
industrial policy in 1991

Industrial Policy (pre-1991) in Brief

Industrial Industrial Industrial Industrial Policy Industrial
Policy Policy Policy Statement, 1977 Policy
Resolution, Resolution, Statement, Statement,
1948 1956 1973 1980

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Division in Division in New Three categories No such

sectors: three classificatio
small and cottage divisions
Industries schedules: n: Core
industries: cottage
with Schedule A: industries
and household
monopoly of Exclusive was created
industries, tiny
State, Mixed monopolies of containing
sector and small-
sector, State industries
scale industries
sectors of Schedule B: which were
(SSIs)
government Mixed sector of Large-scale
control and Schedule C: fundamental
sector: Basic
private Private sector importance
industries, Capital
enterprises goods industries,
High technological
industries
Objectives Industrial Policies
Industrial To accelerate industrial development in country where public and
Policy private sector would work together. It saw Indian economy in socialistic
Resolution, patterns
1948
Industrial Development of heavy and machine building industries, Expansion of
Policy public sector, Establishment of large and growing cooperative sector. In
Resolution, short, state was given primary role for industrial development as capital
1956 was scarce and business was not strong
Industrial Developing rural and backward areas was given priorities with view to
Policy developing those areas and enabling growth of small industries around
Statement,
1973
Industrial Decentralisation was to be emphasised. Role of small-scale, tiny and
Policy cottage industries was recognised. It restricted control of big business
Statement, houses. Also reduction of labour unrest was emphasised. Revival and
1977 rehabilitation of sick units was initiated
Industrial Promoted Economic Federalism. Liberal attitude followed towards
Policy expansion of private industries. To promote exports through
Statement, exemption of export-oriented units from MRTP Act
1980

Industrial Licensing in India:

● Industrial Licensing is written permission from government to industrial unit to
manufacture goods specified in permission letter
● Also specifies such particulars as location of plant, goods to be produced, capacity
of the unit, period within which industrial capacity is to be established, etc
● Primary objective of licensing system is to give effect to industrial policy of
government
● Legislative framework for industrial licensing in India was embodied in three
different Acts namely:
○ Industries Development and Regulation Act, 1951: Made
registration of all industrial units in scheduled industries compulsory
requiring units to obtain certificate of registration within prescribed time.
Also required new industrial units to be established only after obtaining
licence from central government
○ Monopolies and Restrictive Trade Practices Act, 1969: Act seeked
to promote competition among private enterprises by controlling
monopolistic and restrictive trade practices
○ Foreign Exchange Regulation Act, 1973: Seeks to consolidate and

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amend law regulating certain payments, dealing in foreign exchange and the
import and export of currency and bullion

New Industrial Policy, 1991

Need for New Industrial Policy in 1991
● During 1990s, international factors like Gulf War and disruption of USSR led to
critical balance of payment position in country
● Foreign exchange reserves came down to extremely critical level between July 1990
and June 1991
● Under such disconcerting features of Indian economy, Government took measures, one
after another, and announced certain policy decisions in an attempt to redress current
economic difficulties and New Industrial Policy of 1991 was one of them

Objectives of New Industrial Policy 1991

● Basic philosophy of New Industrial Policy (NIP) of 1991 was ‘continuity with change’
and seeks to achieve the following objectives:
○ To consolidate strengths built up during last four decades of economic planning
and to build on gains already made
○ To correct distortions or weaknesses that may have crept in industrial
structure as it has developed over last four decades
○ To maintain sustained growth in productivity and gainful employment
○ To attain international competitiveness

Major Policy Measures of NIP, 1991

● Liberalisation of state control over Industrial sector:
o Industrial Licensing was abolished for all projects, except for 9 industries
namely coal and lignite, petroleum, alcoholic drinks, sugar, cigars cigarettes,
electronic, aerospace and defence equipment, industrial explosives, hazardous
chemicals, and drugs and pharmaceuticals
o Only 5 industry groups like generation of atomic energy, substances notified by
Department of Atomic Energy and railway sector where security and strategic
concerns predominate were reserved exclusively for public sector
● Promotion of Foreign Investment:
o Automatic approval was available to Foreign Direct Investment (FDI) in various
sectors except for few sensitive ones
o FDI was allowed in capital goods, metallurgical, electronics and food processing
industries.
o Automatic permission was to be given to foreign technology agreements in
identified high priority industries
● Reforms in Public Sector:
o The portfolio of public sector investments was to be reviewed with a view to
focus its investments in strategic, high-tech and essential infrastructure.
o A public enterprise which was chronically sick and which was unlikely to be
turned around was referred to the Board of Industrial and Financial
Reconstruction for revival/rehabilitation schemes.
o In order to raise resources and encourage wider public participation, a part of
government’s shareholding in public sector was offered to mutual funds,
financial institutions, general public and workers
● Amendment to MRTP Act:
o Monopolies and Restrictive Trade Practices Act was amended to remove
threshold limits of assets in respect of MRTP companies and dominant
undertakings
o Emphasis was placed on controlling and regulating monopolistic, restrictive and
unfair trade practices
● Promotion of Small Sector Industries (SSI):
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o Allowed equity participation by other or non-SSI industrial undertakings in SSI-

sector, up to 24 percent of total shareholding
o This was done to provide small units access to capital market and to encourage
modernization, technical upgradation, ancillarisation (i.e., producing for the
non- SSI firms) and sub-contracting.

Manufacturing sector
● For developing country like India that relies on manufacturing for its growth and
development, manufacturing sector holds significant importance
● Primary sub-sectors of Indian economy, including food products, basic metals, rubber
and petrochemicals, chemicals, and electrical machinery, constitute the majority of
manufacturing industry
● However, manufacturing sector in India has not performed as well as in other countries
in recent decades, contributing to only 16-17% of the GDP
● India is gradually progressing on road to Industry 4.0 through Government of India’s
initiatives like National Manufacturing Policy which aims to increase share of
manufacturing in GDP to 25 percent by 2025 and PLI scheme for manufacturing which
was launched in 2022 to develop core manufacturing sector at par with global
manufacturing standards

Significance of Manufacturing Sector

● Manufacturing sector has dual role in India's economy- Helps to modernize
agriculture, which is backbone of economy, and, Provides employment opportunities in
secondary and tertiary sectors, thereby reducing people's dependence on agricultural
income
● Industrial development is vital for eradicating unemployment and poverty in
our country. In India, public sector industries and joint ventures were established with
this objective in mind
o These industries were also established in underdeveloped and tribal areas to
reduce regional disparities
● Exporting manufactured goods not only boosts trade and commerce but also
provides much-needed foreign currency
o Countries that can transform their raw materials into higher-value finished
products tend to be more prosperous. Thus, India's prosperity relies on rapidly
expanding and diversifying its manufacturing industries
● Agriculture and industry are not mutually exclusive and can complement each
other. In India, for instance, Agro-industries have boosted agriculture by increasing
productivity.

Contribution of the Manufacturing sector

● According to Economic Survey 2021-22, manufacturing, with an average share of 16.3
percent in nominal GVA over the last decade, has a dominant presence
within industrial sector
o In 2020-21, share of manufacturing fell to 14.4 percent but is expected to
improve to 15.3 percent in 2021-22
● Manufacturing GVA at current prices was estimated at US$ 77.47 billion in
third quarter of FY22 and has contributed around 16.3% to nominal GVA of
during past ten years
● India has potential to become a global manufacturing hub and by 2030, it can
add more than US$ 500 billion annually to the global economy. As per economic
survey reports, estimated employment in manufacturing sector in India was
5.7 crore in 2017-18, 6.12 crore in 2018-19 which was further increased to 6.24 crore
in 2019-20
● In September 2022, Manufacturing Purchasing Managers’ Index (PMI) in India stood at
55.1

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● In FY23 (until September 2022), export of top 10 major commodities (Engineering

goods, Petroleum products, Gems and Jewellery, Organic and Inorganic chemicals,
Drugs and Pharmaceuticals, Electronic goods, RMG of all Textiles, Cotton
Yarn/Fabs./Madeups, Rice, Plastic and Linoleum) stood at US$ 187.2 billion

Challenges of the Manufacturing Sector

● Banks are currently showing reluctance in offering loans for industrial activities.
India's trade regime is skewed towards capital-intensive manufacturing, leading to biased
policies
● Small enterprises suffer from low productivity due to their smaller size, making
it difficult for them to achieve economies of scale
● India’s industrial competitiveness is impacted by cost and quality of power
o Setting up of captive power supply for stable, concurrent and uninterrupted
power is a huge cost burden for all energy-intensive manufacturing units
o Cross-subsidisation has increased industrial power tariffs over the years.
Additional tax burdens for heavy manufacturing industries like coal cess, RPO
and PAT increase the overall energy cost
o According to NITI Aayog report, for energy-intensive manufacturing units,
coal cess, RPO and PAT put together amount to carbon tax of $9.7 per tonne
of carbon dioxide emissions
o Also, in terms of quality of power, India ranks 80 out of 137 countries as per
World Economic Forum
● Indian logistics cost has also impacted Indian Industries
o In India, nearly 60% of cargo travels by road. This is because of over-saturated
railway networks, high rail freights, long transit times, inadequate port depths,
high turnaround time at ports, and poor warehousing facility
● Due to deficit in supply chain management, transportation, production planning,
and maintenance, India's labour productivity is lower when compared to other
nations such as China.
● There is skill mismatch and low productivity of labour in India. Today, 62% of India's
population is of working age, and more than 54% of population is under the age of 25.
However, only 4.7% of India's workforce is formally trained, according to
estimates. Contrast this with the United States (52%), the United Kingdom (68%),
Germany (75%), Japan (80%), South Korea (96%) and China (24%).

Way forward
● Relief and rehabilitation packages must be undertaken, particularly to mitigate
effects of pandemic
● Cash infusions must be ensured to allow companies to create jobs and purchase raw
materials
● Education must be prioritised to attract foreign investment and help economy
overcome challenges
o India is spending about 0.6-0.7% of its GDP on Research & Development
o This is much less than the US (2.8%), China (2.1%), South Korea (4.2%) and
Israel (4.3%)
o Government should give greater emphasis on industrial application-oriented
R&D and greater collaboration with private players
● Growth of labour-intensive industries: Wood, paper products and textile
industries are labour-intensive and mostly do not require any special qualification
o Promoting growth of these industries as short-term solution can ensure
absorption of growing unskilled workers
o Economic Survey 2019-20 suggest that, given India’s comparative
advantage in labour-intensive activities and imperative of creating
employment for growing labour force, there are two groups of industries
that hold greatest potential for export growth and job creation
▪ Textiles, clothing, footwear and toys with unexploited export potential
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▪ Final assembly in range of products, referred to as “network products”

(NP)
● Power: Stable, low cost and uninterrupted power is vital to promote growth of
energy-intensive manufacturing growth
o In India, additional tax for heavy manufacturing industries like coal cess, RPO
and PAT increase the overall energy cost.
o Thus, promotion of investments, renewable energy, research and development
are vital to ensure energy efficiency and sustainability
● Promote MSMEs: MSMEs are vital for country’s economic and social development
o One way to improve competitiveness among MSMEs is cluster approach, which
addresses general problems of taxation, interest rates or FDI policies and
simplified labour laws
o Increasing accessibility to credit for MSME sector by categorising it under
priority sector can also promote its growth.

Initiatives for Industrial Development and Manufacturing in India

National Manufacturing Policy (NMP), 2011
● Announced in 2011 with objective of enhancing share of manufacturing in GDP from
16% to 25% within decade and creating 100 million jobs
● National Investment & Manufacturing Zones (NIMZs) are important instrumentality of
manufacturing policy
● Objectives of NMP, 2011
○ Enhance share of manufacturing sector in GDP from 16% to 25%
○ Incentives for small and medium enterprises
○ Industrial training and skill up-gradation for workforce
○ Simple procedure for closure of units.
○ Increase global competitiveness of Indian manufacturing firms
○ Ensure sustainability of grow
● Important instrument of NMP
○ Setting of National Investment & Manufacturing Zones (NIMZs) using
clean energy efficient technology with:
■ state-of-the-art infrastructure
■ land use on basis of zoning; clean and energy efficient technologies
■ necessary social and institutional infrastructure in order to provide
productive environment to persons transitioning from primary to
secondary and tertiary sectors
○ Industrial Township as self-governing bodies
○ Creation of special Purpose Vehicle to carry out functions mentioned
in policy
○ Technology Acquisition and Development Fund for production of environment-
friendly machines.

Make in India
● Make in India initiative was launched in 2014 to facilitate investment, foster innovation,
build best in class infrastructure, and make India a hub for manufacturing, design, and
innovation
● Primary objective of this initiative is to attract investments from across globe and
strengthen India’s manufacturing sector
Pillars of Make in India Key schemes launched to support Make
in India Program
● New Process: Recognizes ‘ease of ● Skill India Mission: Aims to skill 10
doing business as single most million in India in various sectors annually.
important factor to promote Aims to widen this percentage through
entrepreneurship various skill development programs in
● New Infrastructure: Facilitating India

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infrastructure is crucial requirement ● Startup India: Aims to build an

for growth of industry. Government ecosystem that fosters growth of startups,
planned to develop industrial driving sustainable economic growth, and
corridors and smart cities which will creating large-scale employment.
provide infrastructure based on Government has introduced various
state-of-the-art technology with relaxations for entrepreneurs
high-speed communication ● Digital India: Aims to transform India
arrangements into knowledge-based and digitally
● New Sectors: Identified 25 sectors empowered economy
in manufacturing, Infrastructure, and ● Pradhan Mantri Jan Dhan Yojana
service activities. Various sectors (PMJDY): Emphasizes on financial
such as railway, defence, and inclusion to ensure access to financial
construction have been opened for services such as banking savings & deposit
FDI accounts, remittances, credit, insurance,
● New Mindset: Initiative intends to and pension in an affordable manner
make change by making government ● Smart Cities: Aims to transform and
a facilitator, not regulator by rejuvenate Indian cities and create 100
bringing a paradigm shift in how smart cities in India
Government interacts with industry. ● AMRUT: Stands for Atal Mission for
Government will partner with Rejuvenation and Urban Transformation;
industry in the economic Objective is to build basic public amenities
development of India and to make 500 cities in India

Foreign Direct Investment Policy

● Reviewed on an ongoing basis, with a view to making it more investor-friendly
● To attract higher levels of FDI, Government has put in place a liberal policy on FDI,
under which FDI up to 100%, is permitted, under automatic route, in most
sectors/activities
● Significant changes have been made in the FDI policy regime in recent times, to ensure
that India remains an increasingly attractive investment destination.

Recent FDI Policy reforms

● FDI in defence sector is allowed up to 74 percent through automatic route (from
earlier 49 percent) for companies seeking new industrial licences. FDI beyond 74
percent and up to 100 per cent will be permitted under Government route
● In petroleum and natural gas sector, foreign investment up to 100 percent under
automatic route is permitted in cases where Government has accorded an ‘in-principle’
approval for strategic disinvestment of Public Sector Undertaking (PSU) engaged in
Petroleum and Natural Gas Sector
● In Telecom sector, 100 percent FDI is allowed under automatic route.

Ease of doing Business

● Ease of doing business is key to entrepreneurship, innovation and wealth creation
● An index published by World Bank- aggregate figure that includes different parameters
which define ease of doing business in a country
● Aggregate figure that includes different parameters which define ease of doing
business in country
● Research presents data for 190 economies and aggregates information from 10 areas of
business regulation:
○ Starting a Business of all
○ Dealing with Construction Permits
○ Getting Electricity
○ Registering Property
○ Getting Credit
○ Protecting Minority Investors
○ Paying Taxes
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○ Trading across Borders

○ Enforcing Contracts
○ Resolving Insolvency
● In September 2021, World Bank reported that it would discontinue practice
of issuing Doing Business report following an investigation prompted by internal
reports of “data irregularities” in its 2018 and 2020 ( (released in 2017 and 2019,
respectively)edition
○ In three reports, released in 2017, 2018 and 2019, India ranked among top 10
economies showing “the most notable improvement”. Latest report, published
in October 2019, placed India at 63rd in Doing Business, compared with
77th in 2018 and 100th in 2017.

India and Ease of Doing Business

● As India leapfrogs towards five trillion-dollar economy by 2024-25, simplifying and
maintaining business-friendly regulatory environment is essential
● To ease constraint and gaps in regulatory processes involved in doing business, it is
necessary to assess country’s progress vis-à-vis other leading economies on various
parameters
● India has made substantial gains in World Bank’s Doing Business rankings from 142 in
2014 to 63 in 2019
○ India has progressed on seven out of 10 parameters. Goods and
Service Tax (GST) and Insolvency and Bankruptcy Code (IBC) top list
of reforms that have propelled India's Rise in rankings
● To further enhance ease of doing business in India, more than 39,000 compliances
have been reduced and more than 3,400 legal provisions have been
decriminalised. Positive changes have led to this impressive improvement in India’s
ranking in the EoDB index
● Jan Vishwas (Amendment of Provisions) Bill, 2022: To promote trust-based
governance at all levels, Indian Finance Minister introduced Jan Vishwas Bill to
amend 42 Central Acts
○ Objective is to “decriminalise” 183 offences across 42 legislations and
enhance the ease of living and doing business in India
○ Under the Bill, several offences with imprisonment terms in certain Acts
have been decriminalised by imposing only a monetary penalty.
● Budget 2022-23: To realise vision of “Make AI in India and Make AI work for
India”, three centres of excellence for Artificial Intelligence will be set-up in top
educational institutions
○ National Data Governance Policy: To facilitate innovation and research by
start-ups and academia, National Data Governance Policy will be brought out,
which will enable access to anonymized data
○ Phase III of e-courts will be launched for effective administration of justice

Challenges to Ease of Doing Business in India

● Economic Slowdown: Viability of business depends on vitality of economy in which it
is embedded
● Regulatory Procedure and Related Delays: Too many regulatory measures
imposed by Government on private sector has resulted in lengthy procedure and delays
in getting final clearance of new industrial project. On Government level, decision
making system is poor delays completion of large investment project
● Electricity: Demand is currently more than supply. As economy booms, and there is
potential for power outages. Power is essential for manufacturing sector and service
sectors
● Poor implementation of law: With introduction of Companies Act 2013, law
makers had intended to introduce modular law to Indian economy, but stringent
provisions led a setback to implementation. Increase in compliance burden has, to a
great extent, curbed incorporation of companies in India
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● Land acquisition issue: Land acquisition remains complex, because of the difficulties
in establishing legal ownership. There are many litigations due to inheritance,
fragmented holdings, and demands by sellers to be paid in cash.
● Skill gap in India: Accessing the right skills is a challenge. Further, employment laws
in India are complex. At present, there is huge variety of laws which need to be
consolidated

Way Forward
● Government should ease regulations
● Tariffs should be made predictable and transparent
● Focus should be on reducing paper work
● Digitisation of bureaucracy and ease of opening and closing business should be focus
● Law reforms should be initiated with aim to make labour laws and corporate laws easy
and simple
● Infrastructure investment should be increased
● New sectors like railways and defence should be gradually opened to private sector
● Land reforms and digitisation of land should be completed to ease land acquisition

Atmanirbhar Bharat Abhiyaan

● In the year 2020, Prime Minister gave a call to nation giving kick start to Atmanirbhar
Bharat Abhiyaan (Self-reliant India campaign) and announced Special economic and
comprehensive package of INR 20 lakh crores - equivalent to 10% of India’s GDP
● The aim is to make the country and its citizens independent and self-reliant in all
senses. Five pillars of Atma Nirbhar Bharat – Economy, Infrastructure, System,
Vibrant Demography and Demand have been outlined
● Aims towards cutting down import dependence by focussing on substitution while
improving safety compliance and quality goods to gain global market share
● Self-Reliance signifies neither any exclusionary or isolationist strategies but involves
creation of helping hand to whole world
● Mission focuses on importance of promoting “local” products
● Along with Atma Nirbhar Bharat mission, government took several bold reforms such
as Supply Chain Reforms for Agriculture, Rational Tax Systems, Simple & Clear Laws,
Capable Human Resource and Strong Financial System which will help in achieving self-
reliance in a faster way

Make in India 2.0

● Second phase ‘Make in India 2.0’
is focusing on 27 sectors, which
include 15 manufacturing sectors
and 12 service sectors
● Amongst these, 24 sub-sectors
have been chosen while keeping
in mind Indian industries’
strengths and competitive edge,
need for import substitution,
potential for export and
increased employability
● Efforts are on to boost growth of
sub-sectors in holistic and
coordinated manner
● PLI scheme: Production Linked Incentives (PLI) scheme is an initiative under the
flagship Atmanirbhar Bharat Abhiyaan
○ The objective of PLI scheme is transforming domestic manufacturing by
augmenting its capacity and competence. Aims at creating more jobs, attracting
greater investments, reducing imports and making India a global manufacturing
hub
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○ According to Economic Survey 2022-23, the scheme is expected to attract

capex of approximately ₹3 lakh crore over next five years.
■ It has potential to generate employment for over 60 lakh in India and
increase share of the manufacturing sector in total capital formation,
which currently stands at around 17-20 percent between FY12 and
FY20.
○ Sectors under which PLI scheme has been announced currently constitute
around 40 percent of total imports. The scheme, spread across 14 sectors,
can enhance India’s annual manufacturing capex by 15 to 20 per cent
from FY23.
○ As of 31st December 2022, 717 applications have been approved under 14
Schemes.
○ Key sectors such as Large-Scale Electronics Manufacturing,
Pharmaceuticals, Telecom & Networking Products, Food Processing
and White Goods have contributed considerably to investment,
production, sales and employment
○ Some of the latest developments under the PLI programme include launch of
designated PLI in June 2022 to promote the entire value chain in telecom
manufacturing and to build a strong ecosystem for 5G as part of PLI Scheme for
Telecom & Networking products.

Start Up India Scheme

● Flagship initiative of Government of India, intended to catalyse startup culture and build
a strong and inclusive ecosystem for innovation and entrepreneurship in India
● Launched on 16th January, 2016, Startup India Initiative has rolled out several
programs with objective of supporting entrepreneurs, building robust startup
ecosystem and transforming India into country of job creators instead of job seekers
● These programs are managed by dedicated Startup India Team, which reports
to Department for Industrial Policy and Promotion (DPIIT)
● Key Pillars of Support for Startups:
○ Simplification and Handholding: Easier compliance, easier exit process for
failed startups, legal support, fast tracking of patent applications and website to
reduce information asymmetry
○ Funding & Incentives: Exemptions on Income Tax and Capital Gains Tax for
eligible startups; fund of funds to infuse more capital into startup ecosystem
and credit guarantee scheme
○ Incubation & Industry-Academia Partnerships: Creation of numerous
incubators and innovation labs, events, competitions and grants.
● Various targeted initiatives of the Government have given a major boost to start-ups.
For instance, under Start-up India Initiative, eligible companies get recognised as Start-
ups by DPIIT to access a host of tax benefits, easier compliance, and IPR (Intellectual
Property Rights) fast-tracking.
● There are several inherent challenges faced by start-ups: Revenue generation
struggles, lack of easy access to supportive infrastructure, or wading through the
regulatory environment and tax structures.
○ Also been observed that many Indian companies have been getting
headquartered overseas, especially in destinations with favourable legal
environments and taxation policies
○ This is called ‘Flipping’, which is the process of transferring entire ownership
of an Indian company to an overseas entity, accompanied by transfer of all IP
and all data hitherto owned by Indian company. It effectively transforms
Indian company into 100 percent subsidiary of a foreign entity, with
founders and investors retaining same ownership via the foreign entity, having
swapped all shares

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Industry 4.0
● Advent of fourth industrial revolution or industry 4.0 as it’s commonly referred to, has
begun
● Transformation integrates new technologies such as cloud computing, IoT,
machine learning, and artificial intelligence (AI) into manufacturing
processes, leading to efficiencies across value chain
● While adoption of these technologies in the Indian manufacturing sector is underway,
large-scale adoption is yet to happen. However, an enabling environment is rapidly
developing
● In recent years, India has made significant strides in internet penetration
which is requisites of industry 4.0. Push towards self-reliance in semiconductor
technology and production will help India erect another pillar of this revolution –
hyper-efficient processing technology
● Government is cognisant of importance of industry 4.0 in achieving goals of
Aatmanirbharta and its ambitions of becoming key player in global value chains
● A few initiatives by government include SAMARTH (Smart Advanced
Manufacturing and Rapid Transformation Hubs) Udyog Bharat 4.0 under
Ministry of Heavy Industries and Public Enterprises, which aims to encourage
technological solutions to Indian manufacturing units through awareness programmes
and demonstrations
o Another initiative is establishment of Centre for Fourth Industrial
Revolution in India in 2018, which looks to develop policy frameworks for
emerging technologies

SAMARTH Udyog Bharat 4.0

● Industry 4.0 initiative of Ministry of Heavy Industry & Public Enterprises, Government
of India under its scheme on Enhancement of Competitiveness in Indian Capital
Goods Sector
● Encompasses manufacturers, vendors and customers as the main stakeholders
● Aims to raise awareness about Industry 4.0 among Indian manufacturing industry to
reach 25% of total GDP by 2025 with help of demonstration centres
● Five CEFC (Common Engineering Facility Center) Projects are:
○ Center for Industry 4.0 (C4i4) Lab Pune
○ IITD-AIA Foundation for Smart Manufacturing
○ I4.0 India at IISc Factory R & D Platform
○ Smart Manufacturing Demo & Development Cell at CMTI
○ Industry 4.0 projects at DHI CoE in Advanced Manufacturing Technology, IIT
Kharagpur
● Features of SAMARTH Udyog Bharat 4.0:
○ Awareness Campaigns
○ Master Trainers to be trained
○ Start-up/ incubators to be provided
○ Hand-holding of SMEs to plan and implement relevant Industry 4.0 projects to
be done through consultancy services on chargeable basis
○ Collaborating with neighbourhood Universities for student training/internship
programmes
○ Involving industry in SPV membership model for sustainability
○ Participating in a Government formed platform for Industry 4.0 on a common
agenda
○ To make adequate provisions for e-waste management
○ Involving as many clusters of Capital Good as possible

Industries : Classification
Classification of Industries (based on ownerships)
● Private sector: owned and run by a single person or a group of individual
● Public sector: Government-owned and -operated
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● Joint sector: Owned and run by both government, as well as by an individual or group
of individuals
● Cooperative sector: owned and run by raw material producers or suppliers,
employees, or both

Maharatna, Navratna, and Miniratna Category

● Maharatna eligibility
○ Having Navratna status
○ Listed on Indian stock exchange with minimum prescribed public shareholding
under SEBI regulations
○ Average annual turnover of more than Rs 25,000 crore during the last three
years
○ Annual net worth of more than Rs 15,000
○ Average annual net profit of over rupees 5,000 crore during last 3 years
■ Example: Bharat Heavy Electricals Limited, Bharat Petroleum
Corporation Limited, Coal India Limited, GAIL (India) Limited, etc
○ In September 2022, Rural Electrification Corporation (REC) has been
accorded with the status of a ‘Maharatna’ Central Public Sector Enterprise
■ Rural Electrification Corporation (REC) was established in 1969, REC
Limited is an NBFC focusing on power sector financing and
development across India
■ Provides financial assistance to state electricity boards, state
governments, central/state power utilities, independent power
producers, rural electric cooperatives and private sector utilities
■ Appointed as Nodal Agency for Government of India’s flagship
schemes as:
● Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA)
● Deen Dayal Upadhaya Gram Jyoti Yojana (DDUGJY)
● National Electricity Fund (NEF)
○ Benefits of granting Maharatna Status:
■ Grant of ‘Maharatna’ status to REC will impart enhanced powers to
company’s Board while taking financial decisions
■ Board of ‘Maharatna’ CPSE can make equity investments to undertake
financial joint ventures and wholly-owned subsidiaries and undertake
mergers and acquisitions in India and abroad, subject to ceiling of 15%
of Net Worth of concerned CPSE, limited to Rs 5,000 crores in one
project
■ Board can also structure and implement schemes relating to personnel
and Human Resource Management and Training. With this, REC can
also enter into technology Joint Ventures or other strategic alliances
● Navratna Eligibility
○ CPSEs which are Miniratna I, Schedule ‘A’ and have obtained ‘excellent’ or ‘very
good’ MOU rating in three of last five years
■ Example: Bharat Electronics Limited, Container Corporation of India
Limited, Engineers India Limited, Hindustan Aeronautics Limited,
Mahanagar Telephone Nigam Limited, National Aluminium Company
Limited, NBCC (India) Limited, etc
● Miniratna eligibility
○ Category-I Miniratna CPSEs:
■ Should have made profit in the last three years continuously
■ Pre-tax profit should have been Rs 30 crore or more in at least one of
three years,
■ Should have positive net worth
● Example: Airports Authority of India, Antrix Corporation
Limited, Balmer Lawrie & Co. Limited, Bharat Coking Coal
Limited, Bharat Dynamics Limited, BEML Limited, etc
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○ Category-II Miniratna CPSEs:

■ Should have made profit for last three years continuously and
■ Should have a positive net worth
■ Miniratna CPSEs should have not defaulted in repayment of
loans/interest payment on any loans due to the Government
■ Miniratna CPSEs shall not depend upon budgetary support or
Government guarantees
● Example: Artificial Limbs Manufacturing Corporation of India,
Bharat Pumps & Compressors Limited, Broadcast Engineering
Consultants India Limited, Central Railside Warehouse
Company Limited, Engineering Projects (India) Limited, FCI
Aravali Gypsum & Minerals India Limited, etc

Industries: Privatisation and Disinvestment

● Privatisation implies shedding of ownership or management of government owned
enterprises.
● Government companies are converted into private companies in two ways:
(1) By withdrawal of government from ownership and management of public
sector companies;
(2) By outright sale of public sector companies.
● Privatisation of public sector enterprises by selling off part of equity of PSEs to public is
known as disinvestment

Disinvestment in India
● Disinvestment is the process of selling off or reducing the government's stake in a
public sector enterprise or company. Strategic decision taken by government to divest
or reduce its shareholding in a particular public sector enterprise or company
● Main objective of disinvestment is to reduce fiscal burden on government by
generating revenue from sale of shares, and also to improve efficiency and
competitiveness of public sector enterprise by bringing in private sector participation
● Department of Investment and Public Asset Management (DIPAM) under
Ministry of Finance deals with all matters relating to disinvestment of equity in Central
Public Sector Undertakings (CPSUs) in India
● Since late 1990s, disinvestment has become an almost regular feature of Union budgets
under successive governments, which set target each year to raise funds from stake
sales in public sector enterprises
o Some examples of disinvestment include BALCO, Air India, Hindustan Zinc Ltd.
Etc

Why Disinvestment is done

● Reducing financial burden on government: Disinvestment is done to raise funds
to reduce fiscal deficit and improve financial health of government. Revenue generated
from disinvestment can be used to fund social welfare programs, infrastructure
development, and other priority areas
● Opening up markets for private firms: Disinvestment is aimed at promoting
competition, improving efficiency, and encouraging private sector participation in the
economy. By reducing government's stake in public sector enterprises, it creates
opportunities for private firms to enter market and compete with public sector
enterprises
● Supporting liquidity measures: Disinvestment can support liquidity measures in
market by providing opportunity for investors to buy shares in public sector
enterprises, which can aid in consumption and demand as the need arises
● Raising money for long-term government goals: Disinvestment can provide
government with necessary funds to finance long-term growth and development goals,
such as building infrastructure, improving healthcare and education, and reducing
poverty
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Main objectives of disinvestment in India are

● Reducing fiscal burden on the exchequer: Disinvestment is aimed at raising funds
to reduce fiscal deficit and improve the financial health of government
● Improving public finances: Disinvestment can help to improve financial performance
of public sector enterprises and reduce burden on taxpayers
● Encouraging private ownership: Disinvestment promotes private sector
participation and ownership, which can lead to better efficiency, innovation, and
competition in market
● Funding growth and development programs: Revenue generated from
disinvestment can be used to finance long-term growth and development programs in
areas such as infrastructure, healthcare, education, and poverty reduction
● Maintaining and promoting competition in market: Disinvestment can promote
competition in market by reducing dominance of public sector enterprises and
encouraging entry of new players
● Depoliticizing essential services: Disinvestment can help to depoliticize essential
services by reducing government control over them and allowing them to operate
independently
● Initiating diversification and expansion programs: Disinvestment can help to
initiate diversification and expansion programs in public sector enterprises, which can
lead to new business opportunities and growth

Types of Disinvestments
● Market segmentation: Company may choose to disinvest from an underperforming
division, which demands similar resources and expenditure as other profitable divisions.
This strategy helps companies to focus on divisions that are performing well and scale
them up
● Asset offloading: Companies may adopt this strategy when an acquired asset does
not align with their long-term goals. In such cases, they may disinvest in those assets
and instead focus on their competitive abilities
● Social and legal considerations: Companies may have to disinvest if they hold a
significant market share that hinders fair competition. For example, an endowment fund
may choose to pull out investments from energy companies due to environmental
concerns

Methods of Disinvestment:
● Initial Public Offering (IPO)- offer of
shares by an unlisted CPSE or Government
out of its shareholding or a combination of
both to public for subscription for first time
● Further Public Offering (FPO)- offer of
shares by a listed CPSE or Government out
of its shareholding or combination of both
to public for subscription
● Offer for sale (OFS) of shares by
Promoters through Stock Exchange
mechanism: This method allows auction
of shares on stock exchange platforms. It is
extensively used by Government since 2012
● Strategic sale: When government sale
50%, or higher percentage of its shareholding of central public sector enterprise (CPSE)
along with transfer of management control, it is termed as strategic sale
● CPSE Exchange Traded Fund (ETF): An ETF is a basket of stocks. This route
allows simultaneous sale of GoI's stake (part of the ETF basket) in various CPSEs across
diverse sectors through single offering
● Cross-holding: Listed PSUs are allowed to buy government stake in another PSU

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● Institutional Placement: Government stake is auctioned off to select financial

institutions

Disinvestment v/s Divestment

● Disinvestment and divestment are often used interchangeably, but they have slightly
different meanings
o Disinvestment generally refers to sale or reduction of an asset, stake, or
division without intention of reinvesting capital back into same entity.
Disinvestment may involve selling off an entire entity, or it may involve selling
only a portion of the ownership stake
o Divestment, on other hand, usually refers to temporary reduction of
investment in company, asset, or stake due to financial, social, or political
pressures. It may involve selling off portion of ownership stake, but it does not
necessarily involve complete sale of entity
● In short, disinvestment usually refers to more permanent reduction of
investment or ownership, while divestment refers to temporary reduction of
investment or ownership

Core Industries of India

● In India, there are eight sectors that are considered the core sectors.
o These are electricity, steel, refinery products, crude oil, coal, cement, natural
gas and fertilizers.
● The eight industries have a combined share of 40.27 per cent in the Index of
Industrial Production (IIP)
● Industries and weightage
o Petroleum and Refinery Products- 28.04
o Electricity generation- 19.85
o Steel Production- 17.92
o Coal Production- 10.33
o crude oil production- 8.98
o Natural Gas Production-6.88
o Cement Production-5.37
o Fertiliser Production-2.63
● In FY23 (until September 2022), combined index of eight core industries stood
at 142.8 driven by production of coal, refinery products, fertilizers, steel, electricity
and cement industries

Index of Industrial Production (IIP)

● Measure of industrial performance which sheds some light on where we stand in terms
of industrial growth
● Tracks manufacturing activity in different sectors of an economy. It measures industrial
production for period under review
● It is key economic indicator of manufacturing sector of economy. The IIP also provides
data for 23 subgroups (textiles,
wearing apparel, electrical
equipment, motor vehicles etc.)
of the manufacturing sector

Sectors in Industry
Steel
● Steel Sector plays pivotal role in
crucial sectors such as
construction, infrastructure,
automobile, engineering and
defence
● Over years, steel sector has
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witnessed tremendous growth.

Country is now global force in
steel production and 2nd largest
crude steel producer in the
world
● Steel sector’s performance in
fiscal year 2021-22 has been
robust, with cumulative
production and consumption
of finished steel at 88 MT and
86 MT, respectively, during April-
December 2022, higher than
corresponding period during
previous four years (Economic Survey 2022-23)
o Growth in finished steel production is aided by double-digit growth in
consumption (11 percent on a YoY basis), bolstered by pick-up in
infrastructure sector significantly driven by increased Capex (Capital
Expenditure) of the government
● According to Economic Survey 2022-23, India is now global force in steel
production and 2nd largest crude steel producer in the world
● India is currently largest producer of sponge Iron or DRI in world and 2nd
largest finished steel consumer in world after China
● Availability: Availability of iron and steel in country are largely determined by
market forces and gaps are mostly met with imports
● Price: Steel prices are determined by interplay of market forces. Price regulation of
iron & steel was abolished in 1992. Government monitors steel market conditions and
adopts fiscal and other policy measures based on its assessment

Challenges of Steel Sector

● Finance: Steel is capital-intensive sector. According to PWC report of 2019, nearly
INR 7,000 crore is required to set up 1 tonne of steel-making capacity through
Greenfield route
○ Naturally, cost of financing any expansion or new steel capacity is usually
through borrowed capital
○ And in India, cost of finance is extremely high compared to cost of finance in
countries such as China, Japan and Korea
● Demand: Steel has cyclical demand in India. Monsoons put brakes on
construction, the primary consumer of steel. In these months, one must keep steel
plant running with low to no income
○ In severely tight situation, such constant leaks can cripple units into
closure, as was case in 2018 when many steel units downed shutters with
lengthy bankruptcy proceedings taking place later
● Low per capita consumption due to overall poverty: According to Ministry of
Steel under the Government of India, world’s average per capita consumption of steel
is 224.5 kgs, while India’s has a mere 75 kgs per capita consumption of steel. Example:
China’s has a hefty 590 kgs
○ With such dismal consumption, incentive to set up huge plants (of the likes
of Posco of Korea) to take advantage of economies of scale does not exist
● Low investment in technology: It’s known fact that India invests much less than
world in technology, research, and development. Same applies to steel
manufacturing and consumption and has been case for decades
○ One of outcomes has been relative unattractiveness of sector vis-a-vis others
among young engineers
○ India depends heavily on international research and technology, which comes
with heavy bills and adds to costs

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● Logistics: For most steel makers, managing logistics requirements is arduous,

challenging and costly
● Shortage of power: Steel-making is power-intensive business, and India is power-
deficit country despite large number of power purchase agreements (PPAs) being
signed in mid-90s and early 2000s

Government initiatives taken in the field

● Government has allowed 100% Foreign Direct Investment (FDI) in steel sector
under automatic route. According to data released by Department for Promotion of
Industry and Internal Trade (DPIIT), between April 2000-September 2022, Indian
metallurgical industries attracted FDI inflows of US$ 17.09 billion
● New Industrial Policy Regime: allowed private investment in iron and steel industry
by removing it from list of industries reserved for public sector and exempting it from
compulsory licencing
● In 2019, Government introduced Steel Scrap Recycling Policy with an aim to
reduce import
○ Industry is also benefitting from developments happening across various
industries. New Vehicle Scrappage policy will help in reducing steel prices
since policy enables recycling materials used in old vehicles
● National Steel Policy (NSP) 2017: Focuses on enhancing domestic consumption,
high quality steel production and making the sector globally competitive. Key features
of the NSP 2017 are:
o Encourage adequate capacity additions
o Cost-efficient production
o Domestic availability of iron ore, coking coal & natural gas
o Facilitating foreign investment
o Asset acquisitions of raw materials
o Enhancing the domestic steel demand
● Promotion of R&D in Iron & Steel Sector: Measures such as Domestically
Manufactured Iron and Steel Products (DMI&SP) Policy, Quality Control Order (QCO)
covering carbon steel, alloy steel, tin plate, tin free steel and stainless steel has been
taken
● Under RoDTEP scheme: Export tax on steel was withdrawn recently as Centre
expanded list of items that fall under Remission of Duties and Taxes on Exported
Products (RoDTEP) scheme to include chemicals, pharmaceuticals, and iron and steel
products
o This will enhance not only export of engineering goods containing steel, but
also boost steel consumption

Crude Oil and Natural Gas

● Oil and gas sector is among the eight core industries in India and plays major role in
influencing decision-making for all other important sections of economy
● India’s economic growth is closely related to its energy demand, therefore, the need
for oil and gas is projected to increase, thereby making the sector quite conducive for
investment. India retained its spot as third-largest consumer of oil in the world as of
2021
● Crude Oil production (weight: 8.98 per cent) declined by 1.1 percent in January,
2023 over January, 2022
o Its cumulative index declined by 1.3 percent during April to January, 2022-23
over the corresponding period of previous year. India’s crude oil
production in FY22 stood at 29.7 MMT
● Natural Gas production (weight: 6.88 per cent) increased by 5.3 percent in
January, 2023 over January, 2022
o Its cumulative index increased by 1.4 percent during April to January, 2022-23
over corresponding period of previous year

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● Oil demand in India is projected to register 2x growth to reach 11 million barrels

per day by 2045
o Diesel demand in India is expected to double to 163 MT by 2029-30, with
diesel and gasoline covering 58% of India’s oil demand by 2045
● Consumption of natural gas in India is expected to grow by 25 billion cubic metres
(BCM), registering an average annual growth of 9% until 2024
● In May 2022, ONGC announced plans to invest US$ 4 billion from FY22-25 to
increase its exploration efforts in India
● In July 2021, Department for Promotion of Industry and Internal Trade (DPIIT)
approved an order allowing 100% foreign direct investments (FDIs) under
automatic route for oil and gas PSUs.

Challenges to the Sector

● Dependence on imports: India is heavily reliant on oil and gas imports to meet its
energy demands, making it vulnerable to price fluctuations in the global market
● Inadequate domestic production: Despite having significant reserves, domestic
production of oil and gas in India is insufficient to meet its growing energy needs
● Technological obsolescence: Many oil and gas fields in India are old and require
new technology and investment for efficient production
● Infrastructure constraints: Lack of adequate infrastructure, such as pipelines and
storage facilities, is significant challenge to oil and gas sector in India
● Environmental concerns: Oil and gas sector has significant impact on environment,
and concerns related to pollution and climate change are growing, leading to increased
scrutiny and regulations

Government initiative
● On May 21, 2022, Government announced reduction in excise duty of Rs. 8 (US$ 0.10)
per litre on petrol and Rs. 6 (US$ 0.077) per litre on diesel
● In May 2022, government approved changes in Biofuel Policy to bring forward
target for 20% ethanol blending with petroleum to 2025-26 from 2030
● In October 2021, Union Ministry of Petroleum & Natural Gas approved revised project
cost of Rs. 28,026 crore (US$ 3.8 billion) to increase refining capacity for ongoing
Numaligarh Refinery Expansion Project from 3 to 9 MMTPA
● In July 2021, Department for Promotion of Industry and Internal Trade (DPIIT)
approved an order allowing 100% foreign direct investments (FDIs) under automatic
route for oil and gas PSUs
● Government is planning to set up around 5,000 compressed biogas (CBG) plants
by 2023

One Country One Gas Network

● As of June 2022, total of 21,946 kilometres of natural gas pipelines are operational and
approximately 13,262 kilometres of gas pipelines are under construction as part of Gas
Grid
● India aims to expand its pipeline network by 60%, or 34,500 km, by 2024-25
● By 2027, all states are expected to be connected by a national pipeline network
● 221 GAs have been operationalized for CNG supply as of September 2022

Hydrocarbon Exploration and Licensing Policy (HELP) (2016)

● In line with vision of reducing hydrocarbon import dependency by 10% by
2022, Hydrocarbon Exploration and Licensing Policy (HELP) was launched with clear
objective of boosting production of oil & gas in Indian sedimentary basin
● This policy is based on new model of Revenue Sharing Contract (RSC) which
has replaced the earlier model of Production Sharing Contract (PSC).
○ Under HELP Open Acreage Licensing (OAL) mechanism has been launched
which allows investors to carve out blocks of their choice by assessing E&P

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data available at NDR & by submitting an Expression of Interest (EoI). HELP

replaced New Exploration Licensing Policy (NELP)

Features of HELP
● Uniform licence: for exploration and production of all forms of hydrocarbon.
● Open Acreage Licensing (OAL): Under HELP Open Acreage Licensing (OAL)
mechanism has been launched which allows investors to carve out blocks of their
choice by assessing E&P data available at NDR & by submitting an Expression of Interest
(EoI).
● Revenue Sharing Model: Under NELP, contracts were based on concept of
profit sharing where profits are shared between Government and contractor after
recovery of cost. Under profit sharing methodology, it became necessary for
Government to scrutinise cost details of private participants and this led to many
delays and disputes.

National Data Repository (NDR)

● Government-sponsored data bank for oil exploration and production that has cutting-
edge infrastructure for data preservation, maintenance, and dissemination to allow for
its systematic usage for upcoming exploration and development
● NDR will provide important data resource In line with Digital India initiative
● Falls under General Directorate of Hydrocarbons (DGH). It started in July
2017
● A bidder (an Indian or a foreign company) after studying data through NDR can
propose Expression of Interest (EOI), throughout the calendar year in two windows
without waiting for announcement of bids
● A bidder (Indian or foreign corporation) can submit Expression of Interest (EOI), after
studying data through NDR, throughout calendar year in two windows, without having
to wait for announcement of bids

Developing and expanding the National Gas Grid

Government has planned to develop and expand National Gas Grid. Currently,
approximately 16,788 kilometres of natural gas pipelines are operational and approximately
14,239 kilometres of gas pipelines are being developed

Fertilizers
● Fertilizers are substances that provide one or more of the essential plant-growth
compounds. Organic and inorganic fertilisers are both possible
● Fertilizers production (weight: 2.63 per cent) increased by 17.9 per cent in
January, 2023 over January, 2022. Its cumulative index increased by 10.5 percent
during April to January, 2022-23 over corresponding period of previous year
● According to the Ministry of Agriculture, India utilises approximately 25.6 million
tonnes of fertilizers, the majority of which are nitrogen (17 million tonnes), phosphorus
(6 million tonnes), and potassium (1 million tonnes). (2.5 million tonnes)
● There are 3 basic types of fertiliser used—urea, Diammonium Phosphate (DAP), and
Muriate of Potash (MOP)
o Urea is most produced (86 percent), most consumed (74 percent share), and
the most imported (52 percent)
● India is 2nd largest consumer of Urea fertilizers after China
● India Fertilizers Market stood at 28.56 billion USD in 2022 and is projected to
register CAGR of 6.25% to reach 41.08 billion USD in 2028

Challenges to the Sector

● Heavy Import dependence: In terms of fertiliser production, India is still not self-
sufficient (approximately 50% of fertilisers are imported). Phosphate and potassium (P
& K) fertiliser requirements are met almost entirely through imports, whereas 85
percent of India's urea needs are met by domestic production
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● High Subsidies: India spends roughly one trillion rupees on fertiliser subsidies. In
Urea and DAP there are high subsidies
● Repercussions on soil health and the environment: Research indicates that
persistent use of nitrogenous fertilisers has negative impact on soil health and crop
yield, resulting in deficiencies of other major and micronutrients.

Government initiative
● Neem Coating of Urea
o Department of Fertilizers (DoF) has mandated that all domestic producers produce
100 percent of their urea as Neem Coated Urea (NCU)
o The advantages of using NCU are: increase in yield, reduction of plant protection
chemical usage, reduced vermin and disease infestation, enhancement of the soil's
health etc.
● New Urea Policy 2015
○ Objectives of policy: Maximising domestic urea production; Enhancing
energy efficiency in the production of urea; and Government subsidy burden is
rationalised.
○ On basis of actual energy consumption and predetermined norms, units have
been divided into three categories, revised energy consumption norms have
been established for next three fiscal years, and target energy norm for 2018-
19 has been established
○ Helps in reducing government's subsidy burden in two ways: by reducing
specific energy consumption norms and by increasing energy efficiency and
import substitution resulting from increased domestic production
● New Investment Policy 2012
o Government announced New Investment Policy (NIP)-2012 in January of
2013 and made amendments in 2014 to facilitate new investment in urea
sector and ensure India's urea sector self-sufficiency

● Pradhan Mantri Krishi Sinchayee Yojana: To facilitate efficient use of fertilisers via
micro-irrigation techniques
● Pradhan Mantri Kisan Samridhi Kendra (PMKSK)
○ It has been decided to convert existing village, block/sub district/ taluk and
district level fertilizer retail shops into Model Fertilizer Retail Shops
○ These shops will act as “One Stop Shop” for all the agriculture related inputs
and services
● Nutrient Based Subsidy (NBS) Scheme
○ Under NBS system, producers receive subsidised fertilisers based on nutrients
(N, P, K, and S) contained in these fertilisers
○ In addition, secondary and micronutrient-enriched fertilisers such as
molybdenum (Mo) and zinc receive additional subsidies
○ Subsidy on Phosphatic and Potassic (P&K) fertilisers is announced
annually for each nutrient on per-kilogram basis by government, with
consideration given to international and domestic prices of P&K fertilizers, the
exchange rate, inventory levels, etc
○ NBS policy aims to increase use of P&K fertilisers in order to attain
optimal balance (N:P:K = 4:2:1) of NPK fertilisation
● Nano Urea: It is intended to supplant urea granules. It has potential to significantly
reduce urea import costs Compared to conventional urea, it will boost crop yield and
productivity
● One Nation One Fertilizer (ONOF)
o Union Ministry of Chemicals and Fertilizers issued memo announcing
implementation of "One Nation One Fertilizer" scheme, under which single
brand and logo for fertilisers must be used by all manufacturers under Centre's
fertiliser subsidy scheme, which has been renamed as Prime Minister's scheme
(PMBJP)
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o For all Fertilizer Companies, State Trading Entities (STEs), and Fertilizer
Marketing Entities, single brand name for UREA, DAP, MOP, and NPK, etc.
would be BHARAT UREA, BHARAT DAP, BHARAT MOP, and BHARAT NPK, etc
o In addition, logo signifying Fertilizer Subsidy Scheme, known as Pradhanmantri
Bhartiya Janurvarak Pariyojna, will be placed on the bags of fertiliser
o Under scheme, companies may only display their name, trademark, logo, and other
pertinent product information on one-third of their bags
o On remaining two-thirds of space, "Bharat" logo and the Pradhanmantri
Bharatiya Jan Urvarak Parivarak logo must be displayed

Cement
Economic Survey 2023-24
● The Indian cement industry comprises 159 integrated large cement plants, 120
grinding units and 62 mini cement plants.
● The current annual installed capacity of the cement industry in India is about 622
million tonnes, with cement production of around 427 million tonnes in FY24.
● Most of the cement plants in India are located in proximity to the raw material
source. About 85 per cent of the cement industry is concentrated in the States of
Rajasthan, Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh,
Gujarat, Tamil Nadu, Maharashtra, Uttar Pradesh, Chhattisgarh and West
Bengal.

● India is second largest producer of cement in world- accounts for more than 7% of
global installed capacity
● India has lot of potential for development in infrastructure and construction
sector and cement sector is expected to largely benefit from it
● As per Crisil Ratings, Indian cement industry is likely to add~80 million tonnes (MT)
capacity by FY24, highest since last 10 years, driven by increasing spending on housing
and infrastructure activities
● FDI inflows in industry, related to manufacturing of cement and gypsum products,
reached US$ 5.48 billion between April 2000-June 2022.

Challenges to the Sector

● Overcapacity: There is currently an overcapacity in Indian cement industry due to
high competition and a large number of players in market
● Input costs: Cement production is dependent on raw materials such as limestone,
coal, and gypsum, which can be subject to price fluctuations. Rising input costs can
impact profitability of cement companies
● Transportation: Major challenge in India due to poor infrastructure and logistical
challenges. This can result in higher transportation costs and delays in delivery

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● Environmental regulations: Cement production is major source of greenhouse gas

emissions, and industry is subject to increasing environmental regulations. Meeting
these regulations can be costly and require significant investments in new technology
● Land acquisition: Requires large amounts of land for mining and manufacturing. Can
be a challenging process in India due to issues with land ownership and disputes.
● Labour laws: Indian cement industry is subject to a complex web of labour laws,
which can make it difficult to manage and operate production facilities. Can impact
productivity and efficiency of cement companies

Government initiative
● As per Union Budget 2022-23:
o Higher allocation for infrastructure– US$ 26.74 billion in roads and US$ 18.84
billion in railways is likely to boost demand for cement
o Under housing for all segment, 8 million households will be identified according
Rs. 48,000 crore (US$ 6.44 billion) set aside for PM Awas Yojana
o Government approved outlay of Rs. 199,107 crore (US$ 26.74 billion) for
Ministry of Road Transport and Highways, and this step is likely to boost the
demand for cement
● The 600 million tonnes target of expected demand by 2025 can easily be
surpassed by cement industry if current trend continues. National Infrastructure
Pipeline (NIP), according to Invest India, increased from 7,400 projects to 9,305
projects (IBEF, 2022)
● In October 2021, Prime Minister launched ‘PM Gati Shakti - National Master
Plan (NMP)’ for multimodal connectivity. Gati Shakti will bring synergy to create
world-class, seamless multimodal transport network in India. This will boost the
demand for cement in the future
● Union Budget allocated Rs. 13,750 crore (US$ 1.88 billion) and Rs. 12,294 crore (US$
1.68 billion) for Urban Rejuvenation Mission: AMRUT and Smart Cities Mission
and Swachh Bharat Mission

Textile Sector
Economic Survey 2023-24
● As per the National Accounts published by the Central Statistics Office,
textiles, including the wearing apparel sector, generated a gross value added of ₹3.77
lakh Crore in FY23, which was about 10.6 per cent of the manufacturing GVA at
current prices during the year.
● The sector also accounted for 29.3 per cent of the total non-corporate
manufacturing GVA and 7.9 per cent of the corporate manufacturing GVA in
FY23.

● Textile sector accounts for more than two percent of total GDP and more
than 12 percent of the manufacturing sector gross domestic product (GDP)
● The sector is also the second largest provider of employment in India, after agriculture.
Provides employment to an estimated 45 million people directly and to another 60
million indirectly through allied activities
● Not only is textile sector highly labour intensive, it also employs unskilled
and semi-skilled labour force and is also an important source of
employment for women
● India is sixth largest exporter of textile and apparel in world, with four percent
share of global trade in textiles and apparel
● Considering potential of textile sector in generating employment and
export revenues, government has taken several measures to promote
sector, including for capacity building, technology upgradation, and to boost
employment generation

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○ In September, 2021, Production Linked Incentive Scheme was

launched to promote investments in manmade fabric and apparels.
● Export of readymade garments registered a growth of 3.2 percent YoY basis during
same period
● FDI inflows into textile sector are yet to recover to pre-pandemic levels

Challenges related to the Textile sector

● Domestic production has turned sluggish in recent months. While exports
have suffered owing to preferential tariff treatment towards countries like Bangladesh
and Vietnam, cheap imports from China and some other countries in certain segments
are hurting domestic industry
● Production of textile has declined: Production of textiles as measured by
Index of Industrial Production (IIP) for textile has seen consistent decline since
March 2022. Index value, which was 118.5 in March 2022, has fallen to 102.3 in
October 2022
○ Broader look at manufacturing sector suggests that it has not yet recovered to
pre-Covid levels of production
● Imports have surged: While production has taken a hit, imports of textiles have
increased. In period from April to November, 2022, imports of textiles were valued at
Rs 433 billion. In same period of last year, imports of textiles were valued at Rs. 313
billion. In recent months, particularly after onset of Russia-Ukraine war, imports have
risen from Rs 43 billion in March 2022, to Rs 51 billion in November 2022.
● Exports suffer due to limited market access: Countries like Bangladesh, Sri Lanka
and African countries get duty-free access and make India’s textiles comparatively less
competitive in international landscape.
● Logistics: Costs and time involved in getting goods from factory to destination are
greater than those for other countries
● Labor regulations: Regulations on minimum overtime pay, strict regulation regarding
overtime, lack of flexibility in part-time work and high minimum wages are few hurdles
in India’s labour market

Reforms in the sector

● Introduction of Goods and Service Tax (GST) offers an excellent opportunity to
rationalize domestic indirect taxes so that they do not discriminate in case of apparels
against production of clothing that uses man-made fibres; and in case of footwear
against production of non-leather based footwear
● Number of labor law reforms can overcome obstacles to employment. Labour
Codes introduced by the government of India is a step in direction

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● 7 PM Mega Integrated Textiles Region and Apparel Park (MITRA): PM

MITRA inspired from 5F’s- farm to fibre; fibre to factory; factory to fashion; fashion to
foreign- will strengthen textile sector by developing integrated large scale and modern
industrial infrastructure facility for entire value-chain of textile industry.
● Harmonized System of Nomenclature (HSN) Codes for Technical Textile:
Main purpose of HSN codes is to classify goods from all over world in systematic and
logical manner. This brings in uniform classification of goods and facilitates international
trade
● Technotex India: International exhibition and conference on technical textiles and
showcases medical textiles, transport textiles, industrial textiles, eco textiles, geo
textiles, and packaging textiles

National Technical Textiles Mission (NTTM)

● Government has approved proposal for creation of National Technical Textiles Mission
for period of 4 years (2020-21 to 2023-24) with outlay of Rs.1480 crores.
Ministry of Textiles cleared 23 strategic research projects worth around Rs 60 crores
in Specialty fibres, Sustainable Textiles, Geotextiles, Mobiltech and Sports textiles
under National Technical Textiles Mission
● Technical textiles are textiles materials and products manufactured primarily
for technical performance and functional properties rather than aesthetic
characteristics
● Technical Textiles products are divided into 12 broad categories (Agrotech,
Buildtech, Clothtech, Geotech, Hometech, Indutech, Mobiltech, Meditech, Protech,
Sportstech, Oekotech, Packtech) depending upon their application areas
● Objective: Penetration level of technical textiles is low in India at 5-10%, against 30-
70% in advanced countries. Mission aims at improving penetration level of technical
textiles in country
o To position India as global leader in Technical Textiles by taking the domestic
market size from USD 40 billion to USD 50 billion by 2024

Electronics Industry

Economic Survey 2023-24

● India's electronics manufacturing sector has experienced significant growth since
2014, accounting for an estimated 3.7 per cent of the global market share in
FY22.
● At the same time, the industry contributed 4 per cent to India's total GDP in
FY22.
● Domestic production of electronic items increased significantly to ₹8.22 lakh
Crore, while exports rose to ₹1.9 lakh Crore in FY23.
● India has become an attractive destination for investments in this sector, and
substantial manufacturing capacities have been established in the country over the
past five years.

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● Domestic electronics industry, as of FY20, is valued at US$118 billion

o Aims to reach
US$300 billion
worth of
electronics
manufacturing and
US$ 120 billion in
exports by FY26,
supported by
vision of a US$ 1
trillion digital
economy by 2025
o Electronic goods
were among top
five commodity
groups exhibiting positive export growth in November 2022, with the exports
in this segment growing YoY by 55.1 percent
● Industry’s significant growth drivers are mobile phones, consumer
electronics, and industrial electronics
o In mobile phone segment, India has become second-largest mobile phone
manufacturer globally, with production of handsets going up from 6 crore units
in FY15 to 31 crore units in FY22

Challenges faced by Electronics Industry

● Missing Profits: Despite India's rapid expansion in electronic manufacturing, net value
added by manufacturing units is still quite low.
● Upstream Industries with Limited Indigenous Capability: Because more
difficult processes, involving larger value addition, occur prior to assembly, in 'upstream'
industries, value addition at last stages of manufacturing is very low in era of global
supply chains, notably in electronics
○ Processors, display panels, memory chips, cameras, and other electronic
components are among them
○ Currently, imports account for about 80% of these components, with China
accounting for approximately 67 percent of all imports
● Due to a lack of foundries (semiconductor fabrication plants where microchips are
made), India relies on foreign contractors to manufacture microchips
○ There are around 170 commercial foundries worldwide, but none in India
○ Chipmakers such as Intel, TSMC, and Samsung have opted for other nations
over India because of country's unclear domestic demand and low cost
efficiency
● Considerations for National Security: Vast majority of chips and components used
in India's communication and vital systems are imported. Backdoors could be
programmed in chips during production, compromising networks and cyber-security,
jeopardising national security and sovereignty.
● Increasing Imports: Projected that electronics imports will soon supersede crude oil
as India's most important import commodity, reducing assembly units to merely
packaging units

Initiatives taken by Government

● Increasing Investments: To lure microchip giants, overall outlay of Scheme for
Promotion of Manufacturing of Electronic Components and
Semiconductors (SPECS) must be boosted from existing Rs. 3300 crores
● Profiting from Anti-Chinese Feelings: As a result of United States' accusations
that China is aggravating Covid-19 and India-China conflict, and subsequent
developments as a result, several multinational corporations (MNCs) are transferring
manufacturing out of China
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● Pushing for Make in India: India needs to develop semiconductor production as well
as assembly plants. The National Policy on Electronics 2019 was approved by
Union Cabinet in 2019, with goal of placing India as a global hub for Electronics System
Design and Manufacturing

Other Initiatives
● Production Linked Incentives Schemes: Introduced in 2020. Its idea is to
provide support to sectors, regain dominance in global trade and be more prepared
for volatilities and shocks in global supply chains
● EMC 2.0 (Modified Electronics Manufacturing Clusters) Scheme
● PARAKH- A Unified Laboratory Network: “PARAKH” was up in June 2021,
an initiative for mapping of testing and laboratory infrastructure across country on
a unified network of testing laboratories

Semiconductor
● Form major part of all electronic products, as a result of growth in electronics
manufacturing sector, semiconductor market in India has also witnessed
proportionate growth over last few years
● As per industry estimate, semiconductor consumption in India was around INR 1.1
lakh crore in year 2020 which is being met through imports due to absence of
commercial semiconductor fabs in India.
● Government is very focused on its important objective of building overall
semiconductor ecosystem and ensure that, it in-turn catalyses India’s rapidly
expanding electronics manufacturing and innovation ecosystem
● Vision of AtmaNirbharta in electronics & semiconductors was given further
momentum by Union Cabinet chaired by Hon’ble Prime Minister approving
Semicon India programme with total outlay of INR 76,000 crore for
development of semiconductor and display manufacturing ecosystem in our country
● Aims to provide financial support to companies investing in semiconductors, display
manufacturing and design ecosystem. This will serve to pave way for India’s growing
presence in global electronics value chains
Following four schemes are introduced under the aforesaid programme:
● Scheme for setting up of Semiconductor Fabs in India provides fiscal support
to eligible applicants for setting up of Semiconductor Fabs which is aimed at
attracting large investments for setting up semiconductor wafer fabrication facilities
in the country
● Scheme for setting up of Display Fabs in India provides fiscal support to
eligible applicants for setting up of Display Fabs which is aimed at attracting large
investments for setting up TFT LCD / AMOLED based display fabrication facilities in
country. Scheme provides fiscal support of up to 50% of Project Cost subject to a
ceiling of INR 12,000 crore per Fab
● Scheme for setting up of Compound Semiconductors / Silicon Photonics /
Sensors Fab and Semiconductor Assembly, Testing, Marking and
Packaging (ATMP) / OSAT facilities in India: Provides fiscal support of 30% of
Capital Expenditure to eligible applicants for setting up of Compound
Semiconductors / Silicon Photonics (SiPh) / Sensors (including MEMS) Fab and
Semiconductor ATMP/ OSAT facilities in India
SEMICON India 2022 Conference
● Prime Minister of India inaugurated first ever Semicon India 2022 Conference in
Bengaluru
● Semicon India 2022 Conference was organised by Ministry of Electronics &
Information Technology in Bengaluru
● The flagship conference is the first step towards actualizing the India
Semiconductor Mission and making its aspirations known globally

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Pharmaceuticals
Economic Survey 2023-24
● India’s pharmaceutical market currently valued at USD 50 Billion is the world's
third largest by volume.
● “Pharmacy of the world” as it is often called offers around 60,000 generic brands
across 60 therapeutic categories, accounting for 20 per cent of global generic drug
exports by volume.
● Not surprisingly, eight of the top 20 global generic companies are based in India.

● India’s domestic pharmaceutical market is estimated at US$ 41 billion in 2021 and is

likely to grow to US$ 65 billion by 2024 and is further expected to reach US$ 130
billion by 2030.
● India is ranked 3rd worldwide in production of pharma products by volume and
14th by value
● Sector is the largest provider of generic medicines globally, occupying a 20
percent share in global supply by volume, and is also a leading vaccine manufacturer
globally with a market share of 60 percent.

Challenges
● Technology: Indian pharmaceutical sector falls behind other WTO countries in terms
of R&D for creating new medications
● pharmaceutical industry in India is heavily reliant on China for raw materials, despite
being a leading supplier of high-quality medications to a number of countries
● Globalization (competition): Firms from nations such as China, Israel, and Japan
compete fiercely.

Large players' hostile and negative lobbying, which commonly accuses Indian firms of
breaking patent restrictions
● Adulteration and piracy: In India, mushroom proliferation of replica producers has
become source of concern for pharmaceutical industry. United States Trade
Representative (USTR) has placed India on priority watch list in its Special 30
report, which is affecting Indian pharmaceutical industry

Initiatives by the Government

● Contract Research: A Contract Research Organization (CRO), sometimes known as
Clinical Research Organization (CRO) is being extensively pursued by Indian
pharmaceutical corporations in partnership with overseas companies
● Scheme for Promotion of Bulk Drug Parks: Envisages creation of world class
infrastructure facilities in order to make Indian bulk drug industry a global leader. It was
launched in 2020

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● Production linked
incentive (PLI) scheme for
Bulk drug: It has been
approved for promotion of
domestic manufacturing of 53
critical APIs in country with
budget of INR 6,940 crore for
next eight years
● Strengthening
Pharmaceutical Industry
(SPI) Scheme: Launched on
11th March 2022 with total
financial outlay of ₹500 crore
for five years from FY22 to
FY26 with multiple objectives
○ Aims to strengthen existing infrastructure facilities by providing
financial assistance to pharma clusters to create common facilities
○ Upgrades production facilities of MSMEs to meet national and
international regulatory standards by providing interest subvention or capital
subsidy on their capital loans
○ Also promotes knowledge and awareness about pharmaceutical and
medical devices industry by undertaking studies, building databases and
bringing industry leaders, academia and policymakers together to share their
knowledge and experience

Coal sector
Economic Survey 2023-24
● Coal accounts for more than 55 per cent of India’s primary commercial energy. Coal
fired power generation accounts for about 70 per cent of the total power generation.
Coal production accelerated in the last five years, leading to reduced import
dependence. In FY24, India produced 997.2 million tonnes of coal, imported 261 MT
and consumed 1233.86 MT10.

● In India, coal is most important

and abundant fossil fuel. Provides
55 percent of country's energy
requirements
● India's energy consumption is
predicted to rise as result of its
growing population, expanding
economy, and desire for better
quality of life
● Coal production for FY23 is
estimated to increase to 911
million tonnes, about 17
percent higher compared to
previous year. In April-December,
2022, coal production rose by 14
percent on YoY basis and was 21 percent higher than pre-pandemic of FY20
● Coal industry is expected to grow at 6-7 percent annually to reach production
level of 1 billion tonnes by FY26 and about 1.5 billion tonnes by 2030.

Status of Coal mining in India

● India has fifth (when accounting for only proven reserves) largest coal reserves in
world
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● Coal resources of India are available in older Gondwana Formations of

peninsular India and younger Tertiary formations of north-eastern region
● India is second largest importer of coal
● Coal accounts for over 55% share in total installed generation capacity in India
● India was second largest coal producer after China in 2021-22. India produced 778.2
Million tonnes of coal in 2021-22
● Top States in Coal Production: Chhattisgarh, Odisha & Jharkhand
● Countries with highest coal reserves: USA, Russia, Australia, China and India

Nationalisation of Coal Sector-Background and Reforms:

● Nationalisation took place in two stages:
o The first in 1971-72 with the coking coal mines
o The second in 1973 with the non-coking coal mines
● Coking Coal Mines (Emergency Provisions) Act of 1971, passed in October,
provided for temporary management of coking coal mines and coke oven plants in
public interest, pending nationalisation
● Coking Coal Mines (Nationalisation) Act, 1972, was passed in May 1972, and all
coking coal mines and coke oven plants other than those owned by Tata Iron & Steel
Company Limited and Indian Iron & Steel Company Limited were nationalised and
transferred to Bharat Coking Coal Limited (BCCL), new Central Government
Undertaking
● Another law, Coal Mines (Taking over of Management) Act, 1973, gave Indian
government authority to take over management of coking and non-coking coal mines in
seven states, including those taken over in 1971
● Coal Mines (Nationalisation) Act, 1973, which is now piece of Central legislation
defining eligibility of coal mining in India, was enacted in May 1973, and this was
followed by nationalisation of all these mines in May 1973

Challenges faced by sector

● Delays in environmental and forest clearances: In the past, the environment
ministry designated
environmentally sensitive
areas as 'Go or No Go
zones,' with no mining
allowed in no go areas.
Other clearances from
state and federal
governments are also
necessary
● Problems in land
acquisition
● Insufficient technology
● Procedure of allocating resources was arbitrary, discretionary, and opaque. No
consideration of merit, and no process for determining price of national resources

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● For more than four decades, PSU Coal India was only commercial miner in country,
exhibiting monopolistic tendencies in sector. Mining industry's monopoly was unable
to meet domestic demand
● Coal India's low productivity is still a source of concern
● Because of tight regulatory issues, coal plants have greater operating and maintenance
costs
● India's electricity regulators do not update tariffs on regular basis to account for
changes in operating expenses as result of regulation
● Effectiveness of state pollution control boards in monitoring and enforcing compliance
is questionable

Initiatives by the Government

● Different measures initiated towards achieving self-reliance in coal production,
including Private participation in coal production; FDI under automatic route;
Auctioning of coal blocks for commercial production; Expansion of existing mines and
opening of new mines; Greater use of mass production technology in mining;
Mechanisation of loading; Development of evacuation infrastructure etc
● Ministry of Coal launched UTTAM (Unlocking Transparency via Third Party
Assessment of Mined Coal) application for coal quality monitoring in April 2018
● Cabinet Committee on Economic Affairs (CCEA) has approved new coal linkage
strategy that uses reverse auction to assure adequate fuel supply to power plants
● Ministry of Coal has developed Online Coal Clearances System to give its
investors a single point of contact for all licences, clearances, and approvals granted by
Ministry of Coal
● Coal Allocation Monitoring System (CAMS) was created to track transparent
allocation of coal by CIL to States, States to SNA, and SNA to such consumers
● National coal Index: NCI is price index that measures how price of coal has changed
during given month in relation to a fixed base year. Base year is 2017-18. And it was
started in 2020. It was developed by Indian statistical Institute, Kolkata
● Commercial coal mining: Without any constraints on final use, commercial mining
enables private sector to mine coal. Private businesses have the choice of gasifying the
coal or exporting it. They can also use it in their own end-use plants or sell them in the
markets

Mineral Laws (Amendment) Act, 2020

● Act amends Mines and Minerals (Development and Regulation) Act, 1957 (MMDR
Act) and the Coal Mines (Special Provisions) Act, 2015 (CMSP Act)
o MMDR Act regulates overall mining sector in India
o CMSP Act provides for auction and allocation of mines whose allocation
was cancelled by Supreme Court in 2014
● Removal of restriction on end-use of coal: Previously, companies acquiring
Schedule II and Schedule III coal mines through auctions can use coal produced only for
specified end-uses such as power generation and steel production
o Act removes this restriction on use of coal mined by such companies
o Companies are allowed to carry on coal mining operation for own
consumption, sale or for any other purpose
● Eligibility for auction of coal and lignite blocks: Act clarifies that companies need
not possess any prior coal mining experience in India in order to participate in
auction of coal and lignite blocks
o Further, competitive bidding process for auction of coal and lignite blocks
will not apply to mines considered for allotment to: (i) government
company or its joint venture for own consumption, sale or any other specified
purpose; and (ii) company that has been awarded a power project on the basis
of a competitive bid for tariff

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● Composite licence for prospecting and mining: Previously, separate licences are
provided for prospecting and mining of coal and lignite, called prospecting licence, and
mining lease, respectively
o Act adds new type of licence, called prospecting licence-cum-mining
lease. This will be composite licence providing for both prospecting and mining
activities
● Advance action for auction: Under the MMDR Act, mining leases for specified
minerals (minerals other than coal, lignite, and atomic minerals) are auctioned on expiry
of the lease period
o Act provides that state governments can take advance action for auction of
mining lease before its expiry
● Prior approval from central government: Under MMDR Act, state governments
require prior approval of central government for granting reconnaissance permit,
prospecting licence, or mining lease for coal and lignite
o Act provides that prior approval of central government will not be required
in granting these licences for coal and lignite, in certain cases. These include
cases where: (i) allocation has been done by central government, and (ii) mining
block has been reserved to conserve a mineral
● Reallocation after termination of the allocations: CMSP Act provides for
termination of allotment orders of coal mines in certain cases
o Act adds that such mines may be reallocated through auction or allotment as may
be determined by central government
o Central government will appoint designated custodian to manage these mines until
they are reallocated
o Note: Prospecting includes exploring, locating, or finding mineral deposit
▪ Schedule I of Act provides a list of all such mines
▪ Schedule II mines are those where production had already started then
▪ Schedule III mines are ones that had been earmarked for a specified end-
use
● Rupee per Tonne model to revenue-sharing model: Provides that bid parameter
will be revenue share. Bidders would be required to bid for percentage share of
revenue payable to Government. Floor price shall be 4% of revenue share. There
shall be no restriction on sale and/or utilization of coal from coal mine

National Mineral Policy, 2019

● National Mineral Policy 2019 replaces extant National Mineral Policy 2008 ("NMP
2008") which was announced in year 2008
● Benefits: New National Mineral Policy will ensure more effective regulation. It will
lead to sustainable mining sector development in future while addressing issues of
project affected persons especially those residing in tribal areas
● Objective: Aim of National Mineral Policy 2019 is to have more effective, meaningful
and implementable policy that brings in further transparency, better regulation and
enforcement, balanced social and economic growth as well as sustainable mining
practices
● National Mineral Policy 2019 includes provisions which will give boost to mining
sector such as:
o introduction of Right of First Refusal for RP/PL holders
o encouraging the private sector to take up exploration
o auctioning in virgin areas for composite RP cum PL cum ML on revenue share basis
o encouragement of merger and acquisition of mining entities and
o transfer of mining leases and creation of dedicated mineral corridors to boost
private sector mining areas
o The 2019 Policy proposes to grant status of industry to mining activity to boost
financing of mining for private sector and for acquisitions of mineral assets in other
countries by private sector

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o Also mentions that Long term import export policy for mineral will help private
sector in better planning and stability in business
o Policy also mentions rationalize reserved areas given to PSUs which have not been
used and to put these areas to auction, which will give more opportunity to private
sector for participation
o Policy also mentions to make efforts to harmonise taxes, levies & royalty with
world benchmarks to help private sector
● National Mineral Policy, 2019 focuses on make in India initiative and Gender
sensitivity in terms of vision
● In so far as regulation in Minerals is concerned, E-Governance, IT enabled systems,
awareness and Information campaigns have been incorporated
● Regarding role of state in mineral development online public portal with provision for
generating triggers at higher level in event of delay of clearances has been put in place
● NMP 2019 aims to attract private investment through incentives while efforts would
be made to maintain a database of mineral resources and tenements under mining
tenement systems
● New policy focuses on use coastal waterways and inland shipping for evacuation and
transportation of minerals and encourages dedicated mineral corridors to facilitate the
transportation of minerals
● NMP 2019 proposes long-term export-import policy for mineral sector to provide
stability and as an incentive for investing in large scale commercial mining activity
● The 2019 Policy also introduces concept of Inter-Generational Equity that deals with
well-being not only of present generation but also of generations to come and also
proposes to constitute an inter-ministerial body to institutionalise mechanism for
ensuring sustainable development in mining
Coal Gasification Projects
● Planned to be set up in West Bengal, Odisha, Chhattisgarh, Maharashtra
and Tamil Nadu.
● Method allows conversion of coal into syngas. Can be further processed for
production of value-added chemicals
About Coal gasification
● Coal gasification is a process in which coal is partially oxidised to form fuel gas
known as Syngas which is mixture consisting primarily of Carbon Monoxide (CO),
Hydrogen (H2), Carbon dioxide (CO2), Methane (CH4) and water vapour (H2O)-
from coal, water and air/oxygen
● Involves circulating gasification agents (air, oxygen, steam or carbon
dioxide) into coal. The product gases are used for processing and utilisation
Benefits
● Allows reduction of imported natural gas or crude oil. This will help in saving
Forex reserves
● Will make India self-reliant through capitalization of indigenous resources
● Setting up of coal gasification plants will create direct and indirect employment
opportunities
● Hydrogen gas extracted from coal gasification can be used in fueling a hydrogen
economy

Shipbuilding industry
● Strategically important industry due to its role in energy security, national
defence and development of heavy engineering industry.
● Has potential to increase contribution of industry and services sector to national GDP
● With its immense direct and indirect linkages with most other leading industries, such
as steel, aluminium, electrical machinery and equipment etc., and its huge dependence
on infrastructure and services sectors of economy, shipbuilding industry has
potential to strengthen the mission of an ‘Aatmanirbhar’ Bharat
● Indian Navy (IN) shipbuilding projects currently in progress at various Indian shipyards
are poised to provide requisite impetus to the industry
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● Shipbuilding with its links to other ancillary industries, including steel, engineering
equipment, port infrastructure, trade and shipping services has potential to create
collaborative production eco-system
○ With development of these ancillary industries, sector generates
opportunities for smaller businesses and strengthens supply chain
networks
○ Significant proportion of value addition, approximately 65 percent, in construction
of ship is derived from manufacturers of shipboard materials, equipment, and
systems

PYQs(UPSC)
Prelims
(Q).Consider the following statements: (2019)
1. Coal sector was nationalized by the Government of India under Indira Gandhi.
2. Now, coal blocks are allocated on lottery basis.
3. Till recently, India imported coal to meet the shortages of domestic supply, but now
India is self-sufficient in coal production.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2 and 3
Answer: (a)

(Q).With reference to India’s Five-Year Plans, which of the following

statements is/are correct? (2019)
1. From the Second Five-Year Plan, there was a determined thrust towards
substitution of basic and capital goods industries.
2. The Fourth Five-Year Plan adopted the objective of correcting the earlier trend of
increased concentration of wealth and economic power.
3. In the Fifth Five-Year Plan, for the first time, the financial sector was included as an
integral part of the Plan.
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3
Answer: (a)

(Q). Despite having large reserves of coal, why does India import millions of
tonnes of coal? (2014)
1. It is the policy of India to save its own coal reserves for future, and import it from other
countries for the present use.
2. Most of the power plants in India are coal-based and they are not able to get sufficient
supplies of coal from within the country.
3. Steel companies need a large quantity of coking coal which has to be imported.
Which of the statements given above is/are correct?
(a) 1 Only
(b) 2 & 3 Only
(c) 1 & 3 Only
(d) 1,2, & 3
Answer: (b)

(Q).What is/are the recent policy initiative(s) of Government of India to

promote the growth of the manufacturing sector? (2014)

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1. Setting up of National Investment and Manufacturing Zones

2. Providing the benefit of ‘single window clearance’
3. Establishing the Technology Acquisition and Development Fund
Select the correct answer using the codes given below:
(a) 1 Only
(b) 2 & 3 Only
(c) 1 & 3 Only
(d) 1, 2 & 3
Answer: (d)

Mains
1. “Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-
Product (GDP) in the post-reform period” Give reasons. How far the recent changes
are Industrial Policy are capable of increasing the industrial growth rate? (2017)
2. Success of ‘Make in India’ programme depends on the success of ‘Skill India’
programme and radical labour reforms.” Discuss with logical arguments. (2015)
3. There is a clear acknowledgement that Special Economic Zones (SEZs) are a tool of
industrial development, manufacturing and exports. Recognizing this potential, the
whole instrumentality of SEZs requires augmentation. Discuss the issues plaguing the
success of SEZs with respect to taxation, governing laws and administration. (2015)

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