Q.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 is Industrial Policy is capable of increasing the industrial growth rate?

Body Analysis

Reasons for Lagging Industrial Growth

• Infrastructure Deficiencies: Inadequate infrastructure (poor transport networks, unreliable power) hinders growth. For example, India's logistics costs are around 14% of GDP (compared to 8-10% in developed nations), reducing global competitiveness.
• Regulatory Bottlenecks: Complex and overlapping regulations persist. The World Bank's Ease of Doing Business Report (2020) ranked India 163rd in "Dealing with Construction Permits". The legacy of the License Raj still lingers in the form of numerous required clearances.
• Skill Gaps and Labor Issues: A major gap exists between industry needs and workforce skills. The India Skills Report 2023 notes only 48% of Indian youth are employable.
• Global Competition: Indian industries face intense competition from global players in low-cost manufacturing sectors like textiles and electronics. For instance, Bangladesh and Vietnam have outpaced India's textile sector due to lower labor costs and favorable trade pacts.
• Slow Technological Adoption: Automation in Indian manufacturing is only 30% of its potential (McKinsey Global Institute), putting Indian industries at a disadvantage.
• Inadequate Access to Finance: SMEs face a credit gap estimated at $240 billion (IFC report), with high interest rates and stringent lending requirements limiting capacity expansion.

Recent Changes in Industrial Policy and Their Impact

• Production-Linked Incentive (PLI) Schemes: Introduced in 2020 to boost domestic manufacturing. The electronics PLI has been highly successful; mobile phone exports surged to over $15 billion in 2023 from $3 billion in 2018.
• Labor Law Reforms: Consolidated 29 central labor laws into 4 labor codes (2020) to simplify regulations. For example, the Industrial Relations Code allows easier hiring and firing for firms with up to 300 workers.
• Infrastructure Development: Launched the National Infrastructure Pipeline (NIP) with a ₹111 lakh crore investment target. Under the Bharatmala Pariyojana, 13,000 km of highways were completed by 2023, reducing logistics costs.
• Focus on Innovation and Technology: Atmanirbhar Bharat emphasizes self-reliance. Initiatives under the FAME scheme have positioned India as an emerging global hub for EV production.
• Ease of Doing Business: Introduced the Single Window Clearance System in 2021, reducing the time to start a business from 30 days to 10 days on average by 2023.