SCALE Committee to revive manufacturing.

News: A meeting between Commerce and Industry Minister Piyush Goyal and heads of the industry has led to the formation of the SCALE to pull out the Indian manufacturing facing the import dependence pitfall by the covid pandemic. Read News Here.

What is SCALE?

SCALE or Steering Committee for Advancing Local Value-Add and Exports is a committee set up by the Ministry of Commerce and Industry and Manufacturing industry. Scale is set up for navigating Indian manufacturing away from the import-dependence pitfalls exposed by the COVID-19 pandemic. 

• The SCALE includes the top officials from three industry bodies — CII, FICCI, and Asshocham — three representatives from the government and three industry leaders. 
• The group is working on ideas for 17 sectors — from toys, textiles, furniture, and e-cycles to drones, and even fisheries.
• It shall have no deadlines and will follow a rigorous process of consultations to align different factions of the industry with varying agendas at multiple levels. 

How is SCALE different from other committees?

1. SCALE has no deadlines and drafts and no voluminous reports — all its proposals are laid out in a presentation at best.
2. It doesn’t just gather ideas from various sectoral players and splash them together for the government to consider, as usual, industry representations tend to be.
3.  It follows a rigorous process of consultations to align different factions of the industry with varying agendas at multiple levels and tries to nudge an alignment of interests where differences seem intractable before it takes up the relevant issues with the government.  

( So all-in-all the SCALE is set up for 1. To Strengthen Manufacturing and 2. To move away from Import dependence)

Problems with the Manufacturing Sector in India:

1. Manufacturing in India contributes to a small and stagnant share of GDP.(17%)
2. Its composition is distorted towards skill and capital-intensive activities.
3. Only a small share of employment is in the organized sector in manufacturing.
4. Employment is heavily concentrated in small firms.
5. Absence of Midsized companies: The Manufacturing sector is basically dominated by a large number of small enterprises and a relatively smaller number of large-scale manufacturing enterprises. There is almost a near absence of mid-sized firms. Such a peculiar scenario is referred to as “the Problem of the Missing Middle”.
6. Lack of Skilled human resources: According to the 2011 census, India has almost 53 percent of the population in the working-age group. However, the lack of availability of skilled human resources is considered to be a constraint for the manufacturing sector.
7. Logistics Cost: The Logistics cost accounts for about 12 to 14 percent of India’s GDP as compared to 8-9 percent in other countries.
8. Impact of Free Trade Agreements (FTA’s): The FTA’s Signed by India with developed economies such as Japan, South Korea, etc. have led to the import of cheaper foreign goods and hence adversely impacted domestic manufacturing.
9. Technology Adoption: The Adoption of new technologies like artificial intelligence, data analytics, machine-to-machine communications, robotics, and related technologies, collectively called the “Industry 4.0” are a bigger challenge for Small and Medium Enterprises than for organized large-scale manufacturing.
10. High Taxation: The Corporate tax rates within India were considered to be at least 50 percent higher as compared to other emerging economies. It was only recently that the Indian Government has decided to reduce the corporate tax rates and bring them on par with the tax rates prevailing in other countries.
11. The other reasons include difficult land acquisition procedures, poor ease of doing business, policy uncertainty, poor infrastructure, etc.

Government Initiatives to boost manufacturing:

• Make in India Action Plan:
  • to increase the manufacturing sector’s growth rate to 12-14% per annum;
  • to create 100 million additional manufacturing jobs in the economy by 2022;
  • to ensure that the manufacturing sector’s contribution to GDP is increased to 25% by 2022 (later revised to 2025). But the Make In India Plan failed as the NPA’s of the Indian banks and the liquidity crunch faced by the NBFC’s has led to reduced credit creation within the Indian economy;
• National manufacturing policy 2011: The main objective of this policy is to enhance the share of the manufacturing sector in GDP to 25% and creating 100 million jobs over a decade.
• Aatma Nirbhar Bharat:
  • the Prime Minister has announced the ‘Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission)’ with an economic stimulus package — worth Rs 20 lakh crores aimed towards achieving the mission.
  • The announced economic package is 10% of India’s Gross Domestic Product (GDP) in 2019-20.
  • The amount includes packages already announced at the beginning of the lockdown incorporating measures from the RBI and the payouts under the Pradhan Mantri Garib Kalyan Yojana.
  • The package is expected to focus on land, labor, liquidity, and laws.

• Various Schemes:
  • Start-up India;
  • Stand-up India;
  • MUDRA Yojana;
  • National Manufacturing Competitiveness Program (NMCP)
  • Zero Defect – Zero Effect
  • Schemes for development of MSMEs like the A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE), Revamped Scheme Of Fund for Regeneration Of Traditional Industries (SFURTI), Domestic Market Promotion Scheme (DMP), etc. Read more in detail about the various schemes here.
• Infrastructure:
  • National Investment and Manufacturing Zones (NIMZs);
  • Special Economic Zones (SEZs);
  • Industrial Corridors;
  • Dedicated Freight Corridors;
  • Sagarmala Project;
  • Bharatmala Project; etc.
• Policy Initiatives: Like-
  • Recent Changes in the definition of MSME’s (i.e it included the aspect of “Turnover”)
  • Consolidation of labor laws into 4 labor codes. The archaic and outdated labor laws have led to a higher compliance burden on the firms and disincentivized the private sector from investing in the manufacturing sector.
  • Reduction in the Corporate tax rates;
  • Increase in FDI limits in various sectors such as defense, public procurement policy, etc.

Steps for strengthening manufacturing in India:

1. Focus on infrastructural development of the Coastal Economic Zones (CEZs). (This will facilitate the port-led development)
2. Focus on Sunrise Sector based on new technologies. This can give a boost to the governments’ Industry 4.0 ( A sunrise industry means a new and growing industry, especially in electronics or telecommunications.).
3. Boost innovation through startups. This can be done by giving tax incentives to newly formed businesses.
4. Take steps to improve productivity and boost exports.
5. Renegotiate Free Trade Agreements which would be beneficial to the manufacturing sector in India.
6. Improve financial position of NBFCs and Banks.
7. Attract foreign investment by reducing hurdles for acquiring land.
8. Government should promote the scheme of ‘plug and play’ for further fast-tracking investment proposals. (‘Plug and play’ concept normally refers to ready facilities in terms of building, power-water-sewage connectivity, road connectivity, besides other basic things including clearances in hand required to start the industry.)
9. Greater connect between government-industry-academia to identify the changing requirements.

Questions related to the topic:

Q. Why is the manufacturing sector in India not developed as compared to other emerging economies. What are the challenges faced by the sector? (15 M)

Q. What steps were taken by the government to boost the manufacturing sector in India.? (10 M)

Q. What is SCALE in terms of Industry development and Exports. How can the committee help in fast-tracking the development of the manufacturing sector laced with low investment and environmental challenges? (15M)

Q. Which among the following statements is/are correct about Manufacturing?

1. Manufacturing or industrial production is included in the group of Tertiary economic activities.
2. More the share of industrial production in the gross domestic production (GDP) of a country higher is considered the level of economic development.

Select the correct code from the options given below:

A. only 1

B. Only 2

C. Both

D. None.

Answer: B

Q. Which among the following factors affect the industrial location?

1. Government Policy
2. Relief
3. Climate
4. Raw Materials

Select the correct code from the options given below:

A. only 1 and 3

B. 1,3,4

C. All

D. None.

Answer: C

Q. Which among the following pairs of industries is/are correctly matched?

1. Raw material-oriented industries – the industry is weight gaining.
2. Market-oriented industries – the industry is weight losing

Select the correct code from the options given below

A. only 1

B. Only 2

C. Both

D. None.

Answer: D

Q. Which among the following statements is/are correct about labor as an important factor of manufacturing?

1. The mobility of labour is a factor contributing to dispersal of industry.
2. For the manufacturing activity, both cost and availability of labour are important.

Select the correct code from the options given below:

A. only 1

B. Only 2

C. Both

D. None.

Answer: C

More on this website for your UPSC Preparation:

INTERNATIONAL RELATIONS: https://currentaffairsupsc.in/international-relations/

POLITY: https://currentaffairsupsc.in/polity/

ECONOMICS: https://currentaffairsupsc.in/economics/

SCIENCE AND TECHNOLOGY: https://currentaffairsupsc.in/science-technology/

ENVIRONMENT & ECO.: https://currentaffairsupsc.in/environment-ecology-and-biodiversity/

HISTORY: https://currentaffairsupsc.in/history/

MISC: https://currentaffairsupsc.in/misc/

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