Industry & Infrastructure

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development.

Recent Developments

The Industrial sector in India, including construction, is an important contributor to the growth with the sector accounting for 31.1% of the total Gross Value Added (GVA) in 2016-17. A strong and a robust industrial and manufacturing sector helps in promoting domestic production, exports and employment, all of which can be catalysts for higher growth in the economy.

Baba Kalyani Committee Report on SEZ

The Baba Kalyani led committee was constituted by the Ministry of Commerce & Industry in June, 2018 to study the existing SEZ policy of India. Recently, the committee submitted its report to the Union Minister for Commerce & Industry.

The key recommendations of the Group are:

  • Framework shift from export growth to broad-based Employment and Economic Growth (Employment and Economic Enclaves-3Es).
  • Enabling framework for Ease of Doing Business (EoDB) in 3Es in sync with State EoDB initiatives.
  • Shift from supply driven to demand driven approach for 3Es development to improve efficiency of investment-based on certain industries, current level of existing inventory in the region.
  • Dispute resolution through arbitration and commercial courts.
  • Formulation of separate rules and procedures for manufacturing and service SEZs.
  • Enhance competitiveness by enabling ecosystem development by funding high speed multi modal connectivity, business services and utility infrastructure. Critical to provide support to create high quality infrastructure either within or linked to the zones e.g. High Speed Rail, Express roadways, Passenger/Cargo airports, shipping ports, warehouses etc.
  • Promote integrated industrial and urban development- walk to work zones, States and center to coordinate on the frame work development to bring linkages between all initiatives.

Recent Changes in IIP Series

The basket of goods for Index of Industrial Production has been revised from the base year of 2004-05 to 2011-12. The methodological changes introduced are summarised as below:

  • The IIP in the new series consists of three sectors i.e. Mining, Manufacturing and Electricity.
  • The new basket consists of 407 item groups with 259 item groups common with the old basket.
  • The weights for the new series at the sectoral level have been calculated using the GVA figures from National Accounts Statistics (NAS) with base year 2011–12.
  • The value data collected for these item groups have been deflated using the Wholesale Price Index (WPI) 2011-12 in absence of a Producers Price Index.
  • The Use based classification has replaced Basic Goods with Primary Goods, and, a new category named Infrastructure/ Construction Goods has also been introduced.

Logistics Performance Index, 2018

The World Bank’s LPI, 2018 is a benchmarking tool which allows comparisons across 167 countries. The index can help countries identify challenges and opportunities and improve their logistics performance.

  • The top 10 rankings in 2018 include 8 in Europe plus Japan and Singapore. Germany is at the top, scoring 4.20. The scores of the following nine countries are in a tight interval, with Sweden in 2nd with a score of 4.05 and Finland in 10th with a score of 3.97.
  • The bottom 10 countries are mostly low income/ lower-middle-income countries in Africa or isolated areas.
  • Among the lower-middle-income countries, large economies such as India (44th with a score of 3.18) and Indonesia (46th with a score of 3.15) and emerging economies such as Vietnam (39th with a score of 3.27) and Côte d’Ivoire (50th with a score of 3.08) stand out as top performers.

Recent Status of Some Important Sectors of Indian Industry

(a) MSME Sector

  • The Micro, Small and Medium Enterprises (MSME) sector in India plays a crucial role by providing large employment opportunities, industrialization of rural areas, reducing regional imbalances, etc.
  • The sector faces problems in terms of getting adequate, cheap and timely availability of institutional credit.
  • The decline in credit to MSME sector can be attributed to deteriorating health of public sector banks due to piling up of NPAs.

(b) Steel Sector

  • Government of India’s focus on infrastructure and restarting road projects is aiding the boost in demand for steel.
  • Further, acceleration in rural economy and infrastructure is expected to lead to growth in demand for steel.

Pradhan Mantri Mudra Yojana (PMMY)

The Government has initiated the Pradhan Mantri Mudra Yojana for development and refinancing activities relating to micro industrial units. The purpose of MUDRA is to provide funding to the non-corporate small business sector. The Government has also set up Micro Units Development and Refinance Agency (MUDRA) Bank under this scheme.

  • As per the recent World Steel Association Report, India has jumped ahead of Japan to become the world’s 2nd largest steel producing country in the world. While China is still on top with its crude steel production in 2018.
  • The NSP 2017 targets 300 million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by 2030.

National Steel Policy 2017

Some of the key features of the NSP 2017 are as follows:

  • Create self-sufficiency in steel production by providing policy support & guidance to private manufacturers, MSME steel producers, CPSEs
  • Encourage adequate capacity additions
  • Development of globally competitive steel manufacturing capabilities,
  • Cost-efficient production
  • Domestic availability of iron ore, coking coal & natural gas.
  • Facilitating foreign investment
  • Asset acquisitions of raw materials
  • Enhancing the domestic steel demand

(c) Clothing and Textiles Sector

  • India’s textiles sector is one of the oldest industries in Indian economy dating back several centuries.
  • India’s overall textile exports during FY 2017-18 stood at US$ 39.2 billion.
  • The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital intensive sophisticated mills sector at the other end of the spectrum.

Amended Technology Upgradation Fund

The Government of India has introduced “Amended Technology Up-gradation Fund Scheme (A-TUFS)”, in place of the existing Revised Restructured Technology Upgradation Fund Scheme (RR-TUFS), where the new scheme is estimated to create employment for 35 lakh people and enable investments worth Rs. 95,000 crore (US$ 14.17 billion) by 2022.

Key Initiatives to Boost Industrial Performance

(a) Make in India

  • The ‘Make in India’ programme was launched globally on 25th September, 2014 which aims at making India a global hub for manufacturing, research & innovation and integral part of the global supply chain.
  • This initiative is based on four pillars of New Processes, New Infrastructure, New Sectors and New Mindset.

(b) Start-up India

  • Start-up India is intended to build a strong eco-system for nurturing innovation and Startups in the country that will drive sustainable economic growth and generate large scale employment opportunities.
  • The Government through this initiative aims to empower Startups to grow through innovation and design.

(c) Ease of Doing Business

  • The Government has taken several measures to improve Ease of Doing Business where emphasis has been laid on simplification and rationalization of the existing rules and introduction of information technology to make governance more efficient and effective.
  • As per the WB Report, 2019 India jumped 23 places on the Ease of Doing Business Index to 77th rank, up from 100th rank last year.

(d) Intellectual Property Rights (IPR) Policy

  • This policy aims to improve Indian intellectual property ecosystem, hopes to create an innovation movement in the country and aspires towards “Creative India; Innovative India”.
  • A Cell for Intellectual Property Rights Promotion and Management (CIPAM) has been created under the aegis of Department of Industrial Policy and Promotion (DIPP) for addressing the 7 identified objectives of the Policy.
  • Recently, India’s rank in Global Innovative Index has gone up from 60th rank in 2017 to 57th rank in 2018.

(e) National Investment and Infrastructure Fund (NIIF)

The NIIF is being operationalized by establishing 3 Alternative Investment Funds (AIFs) under the SEBI Regulations. NIIF has mandate to solicit equity participation from strategic anchor partners, like overseas sovereign/quasi-sovereign/multilateral/bilateral investors.

1st Investment by NIIF

National Investment and Infrastructure Fund (NIIF) has made its First investment on January 22, 2018. NIIF has partnered with DP World to create an investment platform for ports, terminals, transportation and logistics businesses in India. The platform will invest in opportunities in the ports sector, and beyond sea ports into areas such as river ports and transportation, freight corridors, port-led special economic zones, inland container terminals, and logistics infrastructure including cold storage.

(f) Operation Khanij Khoj

  • The Centre in February 2017 launched ‘Operation Khanij Khoj’ of Geological Survey of India (GSI).
  • It is focused on probing for deep seated/concealed mineral deposits. Characterizing India’s geological cover, investigating lithospheric architecture, resolving 4D geodynamic and metallogenic evolution, and detecting and characterizing the distal footprints of ore deposits, would be the main components of this initiative.

(g) National Capital Goods Policy, 2016

The National Capital Goods Policy, 2016 gives an impetus to the capital goods sector and a leg up to the Make in India initiative. This is for the first time that a national policy has been framed for the sector.

The aim of the policy is to create game changing strategies for the capital goods sector. Some of the key issues addressed include Availability of Finance, Raw Material, Innovation and Technology, Productivity, Quality and Environment Friendly Manufacturing Practices, Promoting Exports and Creating Domestic Demand.

Policy Recommendations: Key policy recommendations include strengthening the existing scheme of the Department of Heavy Industry (DHI) on enhancement of competitiveness of Capital Goods Sector by increasing budgetary allocation for increasing scope to further boost global competitiveness in various sub sectors of CG. The aim is to enhance the export of Indian made capital goods through a ‘Heavy Industry Export & Market Development Assistance Scheme (HIEMDA)’.

(h) Mining Surveillance System (MSS)

  • MSS is a satellite-based monitoring system which aims to establish a regime of responsive mineral administration, through public participation, by curbing instances of illegal mining activity through automatic remote sensing detection technology.
  • Ministry of Mines, through Indian Bureau of Mines (IBM), has developed the MSS, in coordination with Bhaskaracharya Institute for Space Applications and Geo-informatics (BISAG), Gandhinagar and Ministry of Electronics and Information Technology (MEITY), to use space technology for curbing illegal mining activity in the country.
  • Developed under the Digital India Programme, MSS is one of the first such surveillance systems developed in the world using space technology.

(i) National Mineral Exploration Policy, 2016

  • The Ministry of Mines will carry out the auctioning of the identified exploration blocks for exploration by the private sector.
  • In case the exploration leads to discovery of an auctionable resource, the explorer will receive a share of the revenue obtained from the further auction of such a block.
  • If the explorer agency does not discover any auctionable resource, the exploration expenditure will be reimbursed on a normative cost basis (estimation of costs based on certain level of efficiencies).

Draft National Mineral Policy, 2018

Key Highlights

  • • A long term export policy for the mineral sector would provide stability and prove to be an incentive for investing in large scale commercial mining activity.
  • • To develop mining as a stand-alone industry, substantial investment is required.
  • • Assurances on export of minerals will be a key factor for investment decisions particularly on foreign direct investment (FDI) in the sector.

(j) National Data Repository

The Union Ministry of Petroleum and Natural Gas (MoPNG) has set up a National Data Repository in November, 2018, which is database of all geo-scientific data of hydrocarbon resources in the country.

Key goals of NDR

  • To validate, store, maintain and reproduce high quality and reliable geo-scientific data
  • To facilitate efficient data reporting, data exchange, and data trading among existing players including all geo-scientific agencies
  • NDR is expected to store and maintain hydrocarbon exploration & production data in a safe and reusable manner, in perpetuity.
  • The data shall be preserved in accordance with generally accepted NDR standards, and made available to entitled users.

Industrial Corridor

An industrial corridor aims to create an area with a cluster of manufacturing or other industry. Such corridors are often created in areas that have pre-existing infrastructure, such as ports, highways and railroads.

Industrial Corridors in India

The Government is developing or planning to develop 5 Industrial Corridors in the country, as follows:

  • Delhi-Mumbai Industrial Corridor (DMIC): covers 6 states .i.e. Maharashtra, Gujarat, Madhya Pradesh, Rajasthan, Haryana and Uttar Pradesh.
  • Chennai-Bengaluru Industrial Corridor (CBIC): covers the States of Tamil Nadu, Andhra Pradesh and Karnataka. The nodes namely Ponneri (Tamil Nadu), Krishnapatnam (Andhra Pradesh) and Tumakuru (Karnataka) have been identified during perspective planning.
  • Bengaluru-Mumbai Economic Corridor (BMEC): covers the States of Maharashtra and Karnataka. Dharwad has been identified by Government of Karnataka for further development. Government of Maharashtra has given in-principle approval for development of Sangli/ Solapur.
  • Amritsar- Kolkata Industrial Corridor (AKIC): covers the States of Punjab, Haryana, Uttarakhand, Uttar Pradesh, Bihar, Jharkhand and West Bengal. Rajpura-Patiala (Punjab), Gohna (Haryana), Prag-Khurpia Farms (Uttarakhand), Bhaupur (Uttar Pradesh), Gamhariya (Bihar), Barhi (Jharkhand) and Raghunathpur (West Bengal) have been tentatively identified as the sites for Integrated Manufacturing Clusters (IMCs) for further development.
  • East Coast Economic Corridor (ECEC): covers the States of West Bengal, Odisha, Andhra Pradesh and Tamil Nadu. Vizag to Chennai segment of this Corridor has been taken as phase-1 wherein Vishakhapatnam, Machilipatnam, Donakonda and Srikalahasti-Yerpedu (Andhra Pradesh) have been identified for further development.

Special Economic Zone (SEZ)

  • Government of India first introduced the concept of SEZ in the export- import policy 2000 with a view to provide an internationally competitive and hassle-free environment for exports.

Present Status of SEZs in India

  • As of September 2017, 221 SEZs are in operation, and by January 2018, a massive 423 have received formal approval for operation.
  • Several measures were taken to strengthen SEZs in our country:
    • Minimum Land Area requirement for setting up of new SEZs has been reduced to 50% for Multi-product and Sector-specific SEZs.
    • Sectoral broad-banding has been introduced to encompass similar / related areas under the same Sector.
    • A new sector ‘agro-based food processing’ sector has been introduced to encourage agro-based industries in SEZs.
  • SEZ refers to a specially demarcated territory usually known as ‘deemed foreign territory’ with tax holidays, exemption from duties for export and import, world level economic and social infrastructure for production and augmentation of export activities within the territory along with facilities like abundant and relatively cheap labour, strategic location and market access, etc.
  • The Special Economic Zone Act 2005 provides the umbrella legal framework, covering all important legal and regulatory aspects for setting up of SEZs as well units operating in SEZ.

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