Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard.

Q1. Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (10m) – Economy

Introduction:

MSMEs contribution to the country’s GDP is nearly a third of the country’s GVA and it contributes nearly half of the country’s exports. This sector absorbs more than 40% of the workforce and also fosters innovation and industrialization.

Despite the presence of multiple policies on the manufacturing sector, its contribution in GDP has stagnated around 15%.

Body:

How Manufacturing sector can help to increase economic growth

Ancillary sector to agriculture growth
Can provide base for service sector
Employment generation – use of skilled resource

Present policies of government to boost manufacturing sector

- Make in India Initiative: It promotes manufacturing and attracts foreign investment, simplified regulations, improves infrastructure, and ease the process of doing business.
- Ease of Doing Business: Reforms such as the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC), have had a positive impact on MSMEs.
- Startup India: It provides various incentives and support to startups, which often operate in the MSME space.
- Raising and Accelerating MSME performance (RAMP) programme: This is a programme with an outlay of Rs. 6,000 crore to be rolled out in 2023-24 to provide financial and technical support to MSMEs for improving their quality, technology, innovation, and market access.
- MUDRA Yojana: To boost credit to MSMEs
- Production Linked Incentives Scheme was launched to develop the core manufacturing sector at par with global manufacturing standards.

Industrial Corridor Development Programme

Special Economic Zones Policy: Aims at boosting domestic manufacturing and exports.

Way Forward:

Encourage MSMEs to focus on exports through incentives and simplified procedures.
Boost R&D and innovation in manufacturing via incentives and research partnerships.
Simplify and digitise compliance processes for MSMEs.

Conclusion:

Enhancing the manufacturing sector’s GDP contribution, especially through MSMEs, is essential for faster economic growth. While government policies have initiated progress, a holistic approach addressing infrastructure, finance, and skills development is needed.

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