Economic Survey Volume 2 Chapter 8 (Latest)
CHAPTER – 8
INDUSTRY AND INFRASTRUCTURE
Major – GST, IBC,
- initiation and simplification of online application for Industrial License and Industrial Entrepreneur Memorandum,
- integration of 20 services with the eBiz portal which functions as a single window portal for obtaining clearances from various Government agencies,
- limiting the number of documents required for export and import to three by DGFT.
As per the first advance estimate of national income 2017-18, overall industrial sector growth is at 4.4% with manufacturing growth at 4.6%
Index of Industrial Production (IIP)
- Base year revised from 2004-05 to 2011-12.
- As per Used based classification:
- Consumer non-durables (9.4%) have shown consistency.
- Primary goods (3.4%) had lower rate- due to suboptimal performance of Mining Sector and Petrol/Motor spirit industry.
- Capital goods (2.1%) – below expectations- due to
impactof destocking after announcementof GST.
Eight Core Industries
The Index of Eight Core Industries measures the performance of eight core industries i.e. Coal,
Crude Oil, Natural Gas, Petroleum Refinery Products, Fertilizers, Steel, Cement and Electricity.
Its base year has been revised from 2004-05 to 2011-12.
They comprise about 40% weight in the IIP.
Growthof 4.8% in 2016-17 as compared to 3% in 2015-16.
- Positive growth – coal, refinery products, fertilizers, steel and electricity. (Steel registering a robust growth of 10.7% due to
impositionof Minimum Import Price (MIP ) ,anti-dumping duty etc. on steel imports)
- Negative growth – Crude Oil, Natural Gas, and Cement.
- For the period Apr-Nov,
2017-18 : growthof 3.9%
Corporate Sector Performance
- Nominal credit growth (y-o-y) to industry turned positive to 1% in November 2017 for the first time after witnessing negative growth since October 2016. (Lower credit supply can be attributed to impaired balance sheets of public sector banks due to higher NPAs but it could also reflect weak demand for credit)
- Demand for funds by Indian firms, in the wake of the credit slowdown, has been somewhat met by alternative sources such as corporate bonds and commercial paper.
Foreign Direct Investment
Total FDI inflow grew by 8% i.e. US$ 60.08 billion in 2016-17 in comparison to US$ 55.56 billion of the previous year. It is the highest ever for a particular financial year.
Top 3 contributors to India’s FDI equity inflows
|Countries||Share (in %)|
Top 3 sectors receiving FDI equity inflows
|Sectors||Share (in %)|
|Computer Software & Hardware||8.40|
- Make in India
- It aims at making India a global hub for manufacturing, research & innovation and integral part of the global supply chain.
Governmenthas identified ten ‘Champions sectors’ under Make in India 2.0, which have potential to become global champion, drive double digit growth in manufacturing and generate significant employment opportunities.
- Intellectual Property Rights (IPR) Policy, 2016
- It aims to improve Indian intellectual property ecosystem and to create an innovation movement in the country and aspires towards “Creative India; Innovative India”.
- Start-up India
- It aims to create an ecosystem that is conducive to
- Under this, regulatory burden has been reduced on Startups such as Government has allowed them to self-certify compliance under 3 labour laws and 6 environment laws.
Champions Sectors include Capital goods, Auto and Auto Components, Defence & Aerospace, Biotechnology, Pharmaceuticals and Medical Devices, Chemicals, Electronic System Design & Manufacturing (ESDM), Leather & Footwear, Textiles & Apparels, Food Processing, Gems & Jewellery, New & Renewable Energy, Construction, Shipping and Railways.
SECTOR WISE ISSUES AND INITIATIVES
To counter cheap steel imports from China, South Korea, and Ukraine into Indian markets, following measures were adopted:
- Raising customs duty,
impositionof anti-dumping duty, impositionof MIP
- Rolling out New Steel Policy in 2017.
- Policy on preference to domestically manufactured select iron & steel products.
Global trends of steel prices (
Major schemes implemented for
The MSME sector faces a major problem in terms of getting adequate credit for
Textiles and Apparels
It has tremendous potential for growth in exports and employment. China is losing market share in clothing exports due to rising labour costs. However, India has not been able to leverage this opportunity due to – India’s competitors (Bangladesh, Vietnam, Ethiopia) having duty free access to markets of EU and USA; stringent labour laws; and high logistics cost.
Measures adopted to promote textiles and apparel sector:
India also faces high customs tariffs in a number of developed country markets of leather goods and non-leather footwear.
Therefore to address the situation,
Gems and Jewellery
India is one of the largest exporters of gems and jewellery. It is one of the fastest growing sectors and is export oriented and labour intensive. As per the 68th round of NSSO, the sector employed 20.8 lakh persons in 2011-12.
Following programs may be taken up for promoting employment in this sector:
- PPP models could be explored for training in jewellery designing.
- The jewellery training institutes may be affiliated with the Gems and Jewellery Sector Skill Council.
- Setting up infrastructure such as refineries, hallmarking centres etc., to promote jewellery manufacturing in rural areas.
- Creation of multiple jewellery parks to promote production in a more organized environment.
In order to ensure high and sustainable growth, investment in infrastructure is vital. Around US$ 4.5 trillion worth of investments
Road transport is the dominant mode of transport in India, both in terms of traffic share and in terms of contribution to the national economy. India has one of the largest road networks of over 56.17 lakh km.
Conversion of State Highways to National Highways
- 3180 km of State Highways have been converted to NHs
- India’s road density at 1.66 km/sq.km of area
The Government’s focus on constructing NHs in
- Higher the Density of National Highways, higher the Interstate Trade (Export + Import) as per cent of Gross State Domestic Product (GSDP) in
- A positive relationship exists between
densityof NHs and the per capita income in IndianStates. Higher the density of National Highways (NHs), higher the Per capita GSDP.
Policy for Construction of other PWD Road, especially District Roads
These roads play an important role in providing villages
There is a need for developing OPWD roads so as to provide access to district headquarter, market hubs etc. and to facilitate connectivity to State highways, thereby enhancing economic activities.
Status of Stalled Projects and NPAs in Road Sector
Projects under different phases of National Highway Development
The share of Non-Performing Assets (NPAs) out of total advances in road sector increased from 1.9% in 2012-13 to 20.3% in September 2017-18.
To expedite completion of delayed projects- streamlining of land acquisition & environment clearances, exit for equity investors, premium re-schedulement, revamping of dispute resolution mechanism, frequent reviews at various levels etc.
In order to facilitate implementation of the projects, Hybrid Annuity Model (HAM) instead to Engineering, Procurement and Construction (EPC) has been adopted.
It is a new umbrella program for the highways sector with an objective to achieve optimal resource allocation for a holistic highway development by bridging critical infrastructure gaps through effective interventions like
To make rail transportation attractive and arrest the declining trend various initiatives were taken
Like- tariff rationalization, withdrawal of dual freight policy for export of iron ore, policy guidelines of Merry Go Round System, new delivery models like Roll-on Roll-off services etc.
Government is also pushing for railway infrastructure development like
Infrastructure Status to Station Redevelopment
‘Station Redevelopment’ is the biggest non-fare revenue generating project for redeveloping railways stations in the country and has been included in the Harmonized List of Infrastructure
An MOU has been signed by Ministry of Railways with Ministry of Housing and Urban Affairs for integrated planning for station redevelopment projects in cities identified as SMART cities.
Metro Rail system
Metro rail projects are highly capital intensive, so it is difficult to fund metro rail projects from
Government exchequer only. Thus, Government of India has notified Metro Rail Policy, 2017, which imbibes on the learning from international examples and bridges the gap for enhancing the feasibility of metro rail projects from economic, social and environmental perspective.
India is the third largest and the fastest growing domestic aviation market in the world in terms of
Launched in October 2016, a first-of-its-kind scheme globally to stimulate regional connectivity through a
To encourage the growth of Indian tonnage and for
- Reduction of GST from 18% to 5% on bunker fuel used in Indian flag vessels;
- Brought parity in the tax regime of Indian seafarers employed on Indian flag ships vis-à-vis those on foreign flag ships;
- Removing obstacles in the smooth implementation of the India Controlled Tonnage (ICT) scheme which allows Indian companies to directly own ships in foreign flags;
- Easing many procedural compliance issues like ship registration, procuring chartering permission and payment of chartering fees online.
Scope for ship-repair industry
Geostrategic location of India (located strategically on the international trade route),
It can create a strong manufacturing base as well as generate millions of jobs.
– Major Ports have been benchmarked to international standards
– Major Ports Authorities Bill, 2016 to replace Major Ports Trust Act, 1963 to modernize the institutional structure of Major Ports has been introduced in the Parliament on 16.12.2016.
– Radio Frequency Identification System (RFID) to reduce dwell time, transaction time and ease congestion has been operationalized in 9 Major Ports.
– Direct port delivery and direct port entry initiated at Major Ports for EXIM containers.
Inland Waterways Transport (IWT)
- The ‘Jal Marg Vikas Project’ on National Waterways-I (NW-I) in river Ganga, a large integrated IWT project, has been launched between Varanasi and Haldia covering a distance of 1380 kms at an estimated cost of 5369
- On NW-2 (River Brahmaputra), Ro-Ro services have commenced between Dhubri and Hatsingimari in July 2017 on an Inland Waterways Authority of India (IWAI) vessel.
- Under the National Waterways Act, 2016, 106 additional inland waterways have been declared as National Waterways (NWs).
- Eight new NWs have been taken up for development in 2017-18 [NW-16 (Barak river); three in Goa viz. NW- 27
:Cumberjua, NW 68 – Mandovi ,NW 111 – Zuari; NW-86 ( River Rupnarayan ) ;NW 97 (Sunderbans); NW-9 (Alappuzha–Kottayam– Athirampuzha Canal) and NW-37 (River Gandak).
The overall tele-density in India was 93.42 % including 56.78 % in rural areas and 172.86 % in urban areas (as
Despite various bottlenecks, Indian Telecom sector has taken up various reforms such as spectrum management, Bharat Net programme and umbrella scheme like ‘Digital India’ in order to convert India into a digital economy and a knowledge based society.
Bharat Net Programme: This is the largest rural connectivity project of its kind in the world, and is the first pillar of Digital India Programme. It aims to link each of 2.5 lakh gram panchayats of India through
- India has witnessed a substantial development in power sector with improved power generation capacity at 330860.6 MW (
November,2017) and reduced peak deficit (the percentage shortfall in peak power supply vis-à-vis peak hour demand) from 9% in 2012-13 to 2% during Apr- Sep 2017-18.
- However, bottleneck continues in
distributionof power supply. Various initiatives have been undertaken to meet the ambitious target of providing electricity to all by 2019. These are Deen Dayal Upadhyaya Gram Jyoti Yojana, Ujjawal DISCOM Assurance Yojana (UDAY), Integrated Power Development Scheme, etc.
Saubhagya (Pradhan Mantri Sahaj Bijli Har Ghar Yojana): launched in September 2017, it envisages electrification of around 4 crore households that do not have electricity connection by March 2019. Under it, beneficiary households would be identified using
National Smart Grid Mission in power sector to plan and monitor implementation of programmes related to smart grid activities. It has a budget allocation of Rs. 30 crores for 2017-18.
- National LED programme: launched in January 2015, it includes two components-
(a) Unnat Jyoti by Affordable LED for All (UJALA) providing LED bulbs to domestic consumers with a target to replace 77 crore incandescent bulbs with LED bulbs
(b) Street Lighting National Programme (SLNP) to replace 1.34 crore conventional street lights with smart and energy efficient LED street lights by March 2019.
- The Bureau of Energy Conservation is simultaneously taking up
numberof programmes for energy conservation including standardisation and labelling of appliances, buildings, passenger cars and heavy duty vehicles etc.
Achievements: The Indian logistics industry worth around US$ 160 Billion has grown at a compound annual growth rate (CAGR) of 7.8% during last five years. It provides employment to more than 22 million people. With GST, the Indian logistics market is expected to reach about US$ 215 Billion in
2020, growing at a CAGR of 10.5% India has improved its rank in all the six components of logistics performance index.
- A new Logistics Division has been created in the Department of Commerce to develop and coordinate integrated development of the logistics sector, improvement in existing procedures, identification of bottlenecks and gaps, and
introductionof technology based interventions in this sector.
- Logistics sector included in the Harmonized Master List of Infrastructure Subsector which will offer given benefits:
- Facilitate the credit flow into the sector with longer tenures and reasonable interest rates
- The infrastructure status will simplify the process of approval for construction of multimodal logistics (parks) facilities
- Encourage market accountability through regulatory authority and will attract investments from debt and pension funds into recognized projects.
Petroleum and Natural Gas
Crude oil production target during 2017-18 (April-Oct) was not met due to declining production from old and marginal fields, delay in completion of some projects in western offshore, unplanned shutdown of wells, processing platform/plants and pipelines.
Shortfall in Natural gas production target during 2017-18 (April-October) was due to decline of production from old and marginal fields, under-performance of wells, delay in getting multiple clearances, land acquisition, Right of Use (RoU) permission issues and resistance from local groups for development projects and unplanned shutdown of wells, processing platforms/plants and pipelines.
Important new initiatives
- Mapping of Sedimentary Basins: it will help in
launchof future Exploration and Production (E&P) activities and will also be instrumental in increasing investments in domesticproduction of oil and gas
- Increasing refining Capacity: India has emerged as a refinery hub (2nd largest in Asia) with refining capacity exceeding demand.
- National gas Grid: To ensure easy availability of clean and eco-friendly fuel, Natural Gas, to the industrial, commercial, domestic and transport sectors in the States of Uttar Pradesh, Bihar, Jharkhand, Odisha and West Bengal.
- Pratyaksh Hanstantrit Labh (PAHAL):
Targetedsystem of subsidy delivery to LPG consumers.
- Pradhan Mantri Ujjwala Yojana (PMUY): Aimed at replacing the unclean cooking fuels mostly used in rural India with the clean and more efficient LPG.5 crore LPG connections are targeted to be provided to BPL families by 2018-19.
Housing for All by 2022 is a government priority for which a housing policy is required which caters to the need of increasingly fluid Indian population, by enabling horizontal (ability to move to, between and within cities as job opportunities arise) and vertical mobility.
The importance of Rental Housing – an important part of urban eco-system
Trends in rental housing-
- Its share in Indian cities has been declining from 54% in 1961 to 28% in 2011. However, it is not uniform as northern states experienced
sharperdecline (excluding the mountain states).
- More prevalence in Urban areas (31%) than in rural areas (only 5%) – census 2011.
- Higher in larger cities than in smaller cities.
- More urbanized states have a higher % of rental housing (Gujarat, Maharashtra)
Issues: rent control, unclear property rights and difficulties with contract enforcement
The problem of vacant housing
A trend increase in vacant houses: from 6.5 million in 2001 to 11.1 million in 2011. According to the national census, vacant houses constitute around 12% of the share of the total urban housing stock. Greater prevalence in the western half of the country (Maharashtra followed by Gujarat).
India’s housing requirements are complex but till now policies have been mostly focused on building more homes and on
Data suggests that a more holistic approach is required that takes into account rentals and vacancy rates. This needs policy-makers to pay more attention to contract enforcement, property rights and spatial distribution of housing supply vs. demand.