NEW DELHI: The government on Monday underlined its intention to revive manufacturing, outlining action plans that included a single-window clearance system and foreign direct investment in defence, among other measures.

“My government will follow a policy of encouraging investments, including through FDI, which will be allowed in sectors that help create jobs and assets,” President Pranab Mukherjee said in his address to Parliament.
India’s manufacturing sector growth contracted 0.7% in 2013-14, the first time since 1991-92 when the country embarked on economic reforms. The nation’s economy grew at 4.7% in 2013-14, the second straight year of sub-5% growth.

“We will introduce policies to strengthen technology transfer, including through liberalised FDI in defence production,” the president said. “With readily available skilled human resource, India can emerge as a global platform for defence manufacturing, including software, which will strengthen our defence and spur industrial development as well as exports.”

The department of industrial policy and promotion (DIPP) has already circulated a draft Cabinet note to allow up to 100% FDI in defence. In this sector, the DIPP has proposed to increase the FDI cap from 26% to 49% in case of no tech transfer, up to 74% in case of tech transfer, and up to 100% for cases that bring in state-of-the-art technology.

It is also preparing Cabinet notes to allow FDI in e-commerce, besides liberalising FDI norms for construction and railways.

India’s FDI inflows grew by just 8% in 2013-14 to $22.4 billion. “It will encourage domestic industry, including the private sector; to have a larger share in design and production of defence equipment,” Mukherjee said.

“For rapid creation of jobs in the manufacturing sector, the government will strategically promote labour-intensive manufacturing, he said, adding that reforms will be undertaken to enhance the ease of doing business.

Mukherjee said the government will strive to move towards a single-window system of clearances, both at the Centre and at the statesthrough a hub-spoke model. The president spoke about setting up of world-class investment and industrial regions, particularly along the Dedicated Freight Corridors and Industrial Corridors.

“Special mention was made of developing manufacturing facilities along rail freight corridors, which is in accordance … the proposed actions would have strongly positive impact on reviving growth, said Ajay Shriram, president of CII, an industry body.

“Big, bold, radical ideas in Presidential Address-Hi-speed trains, Urbanisation, 100 cities, FDI in Defence, impetus to Brand India. Action all d way,” DIPP secretary Amitabh Kant said in a tweet after Mukherjee’s address.

Last week, Kant had tweeted about the need to focus on labourintensive sectors like textiles, leather, and food processing to revive manufacturing. The DIPP has also sought rectification of anomalies in the inverted duty structure, arguing that they are undermining domestic manufacturing by making imported finished goods cheaper.