UPDATED VALUE ADDITION MATERIAL 2024

INDIAN ECONOMY

Industrial Policy
CHANGES AND THEIR EFFECTS
IN INDUSTRIAL GROWTH

AHMEDABAD BENGALURU BHOPAL CHANDIGARH DELHI GUWAHATI HYDERABAD JAIPUR JODHPUR LUCKNOW PRAYAGRAJ PUNE RANCHI
 CONTENTS
1. Introduction ���������������������������������������������������������� 2 3.2. Ease of Doing Business in India ��������� 10

2. Evolution of the Indian Industry ����������������� 2 3.3. e- Biz Project ���������������������������������������������� 12

2.1. The Pre-Reform Regime ������������������������� 2 3.4. Make in India Initiative �������������������������� 12

2.1.1. Major Features of Pre-1991 3.5. National Industrial Corridor

Industrial Policy ������������������������������� 2 Development Programme
(NICDP) �������������������������������������������������������� 13
2.1.2. Assessment of Pre-1991
Industrial Policies �������������������������� 3 3.6. Steps Taken for the Promotion and
Development of MSMEs ������������������������ 13
2.2. Beginning of Reforms in
the 1980s ������������������������������������������������������ 4 3.7 Promotion of Startups in India ������������ 14

2.3. New Industrial Policy, 1991 ��������������������� 4 3.8. Atmanirbhar Bharat Abhiyan or Self-
reliant India Campaign: ����������������������� 14
2.3.1. Assessment of the New
Industrial Policy (NIP) ������������������ 7 4. Previous Years UPSC Mains
Questions ������������������������������������������������������������� 15
3. Initiatives Taken by the Government for
Industrial Development �������������������������������� 8 5. Previous Years Vision IAS GS Mains
Questions ������������������������������������������������������������� 16
3.1. Disinvestment ��������������������������������������������� 8

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1. Introduction Student Notes:

What is Industrial Policy?

Industrial policy, inter-alia, covers the procedures, principles, rules and regulations, which impact the
industrial establishments of a country and shape the pattern of industrialization.
Historical Background of India’s Industrial Policies
• In the post-World War II period, India was probably the first non-Communist developing country to
have instituted a fully-fledged industrial policy based on some form of central planning.
• The purpose of the policy was to co-ordinate investment decisions both in the public and the
private sectors and to seize the “commanding heights” of the economy by bringing certain strategic
industries and firms under public guidance.
• The first industrial policy of the Government of India was announced in April 1948. Subsequently
Industrial Policies/Statements were announced in 1956, 1977, 1980, 1990 & 1991. The progress in
industrial policy reforms enabled the country to pass through a long but successful journey.

2. Evolution of the Indian Industry

The Indian economy before 1947 exhibited the characteristics of an underdeveloped country
integrated into world capitalism, as it was a colony of the British. This is evident from a study of
its national income by industrial origin, occupational distribution of work-force, etc.
By the time India got independence, it was predominantly a primary producing country with
primary producing sectors (agriculture, forestry, animal husbandry, etc.) contributing about 58%
of the net domestic product and accounting for about 72% of the workforce in 1951. Further,
manufacturing accounted for only about 11% of the net domestic product and 9% of the
workforce.
• After independence, the Indian industry experienced slow and poor productivity
performance from 1950 to 1980.
• Policies adopted towards industrialisation had strong preference for the public sector,
extensive controls over private investment, a highly protective trade policy, and inflexible
labour laws (especially after the mid-1970s).
• The decade of the 1980s witnessed some experimentation with domestic deregulation that
yielded handsome dividends in productivity gains and acceleration in economic growth.
• In 1991, in response to a major balance-of-payments crisis, India made a radical shift away
from its long-standing policy of inward orientation, and the subsequent reforms moved the
policy regime significantly towards market orientation, deregulation, and liberalization.
• The Indian industry has responded to the increased competition – domestic as well as
foreign – with significant restructuring in the way of faster adjustment to the new and
emerging policy regime, which is inspired by market orientation.

2.1. The Pre-Reform Regime

The pre-reform industrial policy regime relied heavily on the development of a public sector to
cater to the infrastructure needs of development and to provide direction to the process of
industrial development within a mixed economy framework.
2.1.1. Major Features of Pre-1991 Industrial Policy
• Protection to domestic/local industries.
• Import substitution.
• Development banks to provide finance.
• Laws to regulate industries.
• Strict restrictions on foreign investments.
• Encouragement of small-scale industries.
• Emphasis on the public sector.

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a) Protection to the Indian industries: Local industries were given shelter from international Student Notes:
competition by introducing partial physical ban on the imports of products and high imports
tariffs. Protection from imports encouraged the Indian industry to undertake the
manufacture of a variety of products. There was a ready market for all these products.
b) Import-substitution policy: The Government used its import policy for the healthy
development of local industries. Barring the first few years after Independence, the country
was facing a shortage of foreign exchange, and so to save the scarce foreign exchange,
imports-substitution policy was initiated i.e. the Government encouraged the production of
imported goods indigenously.
c) Financial infrastructure: In order to provide the financial infrastructure necessary for
industry, the Government set up a number of development banks. The principal function of
a development bank is to provide medium and long-term finance. They have to also play a
major role in promoting the growth of enterprise. With this objective, the Government
established the Industrial Finance Corporation of India (IFCI) (1948), Industrial Credit and
Investment Corporation of India (ICICI) (1955), Industrial Development Bank of India (IDBI)
(1964), Industrial Reconstruction Corporation of India (1971), Unit Trust of India (UTI) (1963),
and the Life Insurance Corporation of India (LIC) (1956).
d) Control over the Indian industries: Indian industries were highly regulated through
legislations, such as the Industries (Development and Regulation) Act, 1951, Monopolies and
Restrictive Trade Practices (MRTP) Act, 1969, etc. These legislations restricted the production,
expansion and pricing of output of almost all kinds of industries in the country.
e) Regulations on foreign capital under the Foreign Exchange and Regulation Act (FERA),
1973: The FERA restricted foreign investment in a company and ensured that the control in
companies with foreign collaboration remained in the hands of Indians. Restrictions were
also imposed on technical collaborations and repatriations of foreign exchange by foreign
investors.
f) Encouragement to small industries: The Government encouraged small-scale industries
(SSIs) by providing a number of support measures for their growth. Policy measures
addressed the basic requirements of the SSI like credit, marketing, technology,
entrepreneurship development, and fiscal, financial and infrastructural support.
g) Emphasis on the public sector: The Government made huge investments in providing
infrastructure and basic facilities to the industries. This was achieved by establishing public
sector enterprises in the key sectors such as power generation, capital goods, heavy
machineries, banking, telecommunication, etc.
2.1.2. Assessment of Pre-1991 Industrial Policies
The pre-1991 industrial policies created a climate for rapid industrial growth in the country. It
helped create broad-based infrastructure and basic industries. A diverse industrial structure with
self-reliance on a large number of items had been achieved.
Positives:
• Industrial investment took place in a large variety of new industries.
• Modern management techniques were introduced.
• An entirely new class of entrepreneurs came up with the support system from the Government.
• A large number of new industrial centers were developed in many parts of the country.
• Over the years, the Government built the infrastructure required by the industry and made massive
investments to provide the much-needed facilities of power, communications, roads, etc.
• A good number of institutions were promoted to help entrepreneurship development, provide
finance for industry and facilitate development of a variety of skills required by the industry.

Shortcomings:
• The industrial licensing system promoted inefficiency and resulted in a high-cost economy.
• Due to considerable discretionary powers vested in the licensing authorities, the system promoted
corruption and rent-seeking.

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 • It resulted into pre-emption of entry of new enterprises and adversely affected the competition. Student Notes:
• The controls on output, investment and trade - popularly called the 'Permit Licence Raj' - were
stifling private initiative and wasting meagre public resources.
• The system, opposite to its rationale, favoured large enterprises and discriminated against
backward regions.

2.2. Beginning of Reforms in the 1980s

From 1980 onwards, after the domestic political uncertainty had ended, industrial policy
witnessed greater pragmatism with a gradual loosening of controls, and a greater willingness
to import technology and foreign private capital to modernise the manufacturing sector. A
central focus of the reforms was the improvement of industrial productivity.
Important Features:
• Selective removal of industrial licensing, import liberalization for exports, partial liberalization of
trade policies and procedures, and changes in the foreign direct investment (FDI) regime for capital
goods.
• The driving force for the reform was easier access to imported intermediate inputs to facilitate
capacity utilization and modern capital goods for technological upgradation.
• Export subsidies were provided in order to offset the anti-export bias resulting from the
protectionist regime.
• Stepping up of public investment in infrastructure and energy production (to insulate the economy
from external shocks), rural development for diffusion of green revolution technology, and for a
'direct' attack on poverty.

Result of deregulation and trade policy reforms of 1980s

Positives:
• Acceleration of the industrial growth rate to over 7 per cent per annum in the 1980s.
• Growth of exports of manufactured goods at about 11 per cent per annum during the 1980s.
Shortcomings:
• Despite having competitive edge in labour-intensive sectors like garments, leather products etc.,
restrictions on production for the small-scale sector continued.
• Industrial policy in the 1980s paid little attention to facilitating the restructuring of the industrial
sector by removing the numerous barriers to exit.

Macroeconomic Challenges in the 1980s:

• The sustainability of better growth and productivity performance of the industrial sector, however,
was being put to test by a deteriorating macroeconomic environment, largely on account of the
growing fiscal profligacy of the Government of India during the 1980s.
• The Gulf War of 1990 and the political instability at the turn of the decade further contributed
towards a collapse of international confidence in the Indian economy. The result was the Balance
of Payments crisis of 1991.

2.3. New Industrial Policy, 1991

• India’s New Industrial Policy (NIP), announced in July 1991, was radical, in terms of objectives
and major features, compared to its earlier industrial policies.
• It emphasized on the need to promote further industrial development based on
consolidating the gains already made and correct the distortion or weaknesses that might
have crept in, and attain international competitiveness.
• The Policy aimed at rapid and substantial economic growth, and integration with the global
economy in a harmonized manner.

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 Student Notes:

To achieve these objectives, the NIP initiated changes in India’s industrial policy environment,
which gained momentum gradually over the decade. The important elements of NIP can be
classified as follows:
1. Public sector de-reservation and privatization through disinvestment:
Till 1991, the public sector was assigned a pre-eminent position in the Indian industry to
enable it to achieve “commanding heights of the economy” under the Industrial Policy
Resolution (IPR), 1956. Accordingly, areas of strategic importance and core sectors were
exclusively reserved for public sector enterprises. Public enterprises were accorded
preference even in areas where private investments were possible.
Since 1991, the public sector policy consists of:
• Reduction in the number of industries reserved for public sector: Only sectors in
security and those of strategic importance i.e., arms, atomic energy, etc. were reserved
for the public sector. This led to a reduction from 17 reserved industries in the 1956 policy
to 8 in the 1991 policy.
• Restructuring of PSUs: The Policy aimed to bring down government equity in all non-
strategic PSUs to 26 percent or lower, restructure or revive potentially viable PSUs, close
down PSUs which cannot be revived and fully protect the interests of workers.
• Implementation of Memorandum of Understanding (MOU): As a part of the measures
to improve the performance of public enterprises, more and more of public sector units
have been brought under the purview of Memorandum of Understanding (MoU)
system. A memorandum of understanding is a performance contract, a freely negotiated
document between the Government and a specific public enterprise.
• Referral to the BIFR: Many sick public sector units have been referred to the Board for
Industrial and Financial Reconstruction (BIFR) for rehabilitation or, where necessary, for
winding up.

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 • Manpower rationalization: In order to achieve manpower rationalization, Voluntary Student Notes:
Retirement Scheme (VRS) was introduced in a number of PSUs to shed the surplus
manpower.
• Private equity participation: PSUs have been allowed to raise equity finance from the
capital market. This has put market pressure on PSUs to improve their performance.
• Disinvestment and privatization: Disinvestment and privatization of existing PSUs have
been adopted to improve corporate efficiency, financial performance and competition
amongst PSUs. It involves transfer of Government holding in PSUs to the private
shareholders.
2. Industrial delicensing:
• Till the 1990s, licensing was compulsory for almost every industry, which was not
reserved for the public sector.
• The New Industrial Policy 1991 aimed to abolish the licensing system to make the
economy more liberalized. Only few industries were left where license had to be
obtained before they start, such as industries related to security and strategic concerns,
and social reasons.
• A provision was made that capital goods can be imported with automatic clearance if
adequate foreign exchange is available through foreign equity.
3. Amendment of Monopolies and Restrictive Trade Practices (MRTP) Act, 1969:
The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 was enacted and the MRTP
Commission was set up as a permanent body to prevent emergence of private monopolies
and concentration of economic power in a few individuals.
Since 1991, the MRTP Act has been restructured in following ways:
• Pre-entry restrictions have been removed with regard to prior approval of the
government for the establishment of a new undertaking, expansion, amalgamation,
merger, take over, and appointment of directors of companies.
• Asset restriction and market share for defining an MRTP firm has been done away with.
• The MRTP Act is now applicable to both private and public sector enterprises and
financial institutions.
• Only restrictive trade practices of companies are monitored and controlled.
Later, the MRTP Act was replaced by the Competition Act, 2002. This law aims at upholding
competition in the Indian market. The Competition Commission has been established in
2003, which mainly controls the practices that have an adverse impact on competition.
4. Liberalized Foreign Investment Policy:
India’s earlier industrial policies welcomed FDI but emphasized that ownership and control
of all enterprises involving foreign equity should be in Indian hands. The Balance of Payments
(BoP) difficulties in the mid-1960s forced the country to adopt a more restrictive approach
towards FDI through the setting up of a Foreign Investment Board, which classified
industries into two groups i.e. banned and favored for foreign technical collaboration and
FDI. The number of industries for foreign investment was steadily narrowed down and by
1973 there were only 19 industries where FDI was permitted. The enactment of Foreign
Exchange Regulation Act (FERA), 1973 marked the beginning of the most restrictive phase
of India’s foreign investment policy.
The NIP, 1991 radically reformed foreign investment policy to attract foreign investment. The
important foreign investment policy measures are as follows:
• Repeal of FERA, 1973:
o The FERA, 1973 was repealed and the Foreign Exchange Management Act (FEMA)
came into force with effect from June 2000.
o Investment and returns can be freely repatriated except where the approval is

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 subject to specific conditions, such as lock-in period on original investment, dividend Student Notes:
cap, foreign exchange neutrality, etc. as specified in the sector specific policies.
o The condition of ‘dividend balancing’ was withdrawn for dividends declared.
o A foreign investor can freely enter, invest and operate industrial enterprises in India.
o The Foreign Contribution (Regulation) Act, 2010 has been enacted by the Parliament
to consolidate the laws to regulate the acceptance and utilization of foreign
contribution.
• Foreign Direct Investment (FDI):
o FDI is allowed in all sectors including the services sector except atomic energy and
railway transport.
o 34 industries were placed under the automatic approval route.
o Further, NRIs were allowed to 100% equity investments on non-repatriation basis
in all activities except the negative list.
5. Foreign Technology Agreement:
• Automatic approvals for technology agreement were given to industries within specified
parameters.
• Indian companies became free to negotiate the terms of technology transfer with their
foreign counterparts according to their own commercial judgment.
• The investment limit was upto one crore rupees. The provisions were made for 5% royalty
for domestic sales and 8% for exports. However, these could not exceed total of 8% of
sales over a period of 10 years from the date of agreement or seven years from
commencement of production.
6. Dilution of protection to Small-Scale Industries (SSI) and emphasis on competitiveness:
SSIs enjoyed a unique status in Indian economy due to their diversified presence across the
country. They utilize resources and skills, which would have otherwise remained unutilized.
Due to their potential to generate large-scale employment, produce consumer goods of mass
consumption, alleviate regional disparities, etc., industrial policies protected the sector for
its growth. However, since 1991 the protective emphasis of the SSI policy has undergone
dilution. In August 1991, the Government of India brought out an exclusive policy for SSI.
The policy marked:
• The beginning of an end to protective measures to small industry.
• Promotion of competitiveness by addressing the basic concerns of the sector namely
technology, finance and marketing.
These objectives were implemented through the measures like:
The number of items reserved exclusively for small industry manufacturing was gradually
reduced because such reservation to SSIs prevented participation of large-scale industries
even though import of the same items were allowed with quantitative and non-quantitative
restrictions.
• The number of products reserved exclusively for purchase from small-scale industries by
the government has been reduced.
• Concession element in lending rates for small industries was largely withdrawn during
the 1990s.
• Measures have been adopted to improve technology and export capabilities of SSIs.
Thus, the overall promotion orientation of the SSIs has shifted from protection towards
competitiveness.
2.3.1. Assessment of the New Industrial Policy (NIP)
The response to the Balance of-payments crisis was to not only put in place policies for
macroeconomic stabilization but seize the opportunity to launch wide-ranging economic
reforms to realize the potential of the Indian economy for higher growth.

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 Student Notes:
• The period from 1991–92 to 1996–97 saw rapid and wide-ranging reforms in industrial and trade
policies, tax policies, and other policies impacting on macroeconomic management.
• Post 1996-97, there was a distinct slowing down of reforms, partly because of complacency at the
favourable response to the early reforms, partly because of confusion resulting from change of
Government at the Centre, and also because by the mid-1990s, the competition had begun to pinch
and the Indian industry was becoming less supportive of change including external liberalization.
• Import duties were reduced gradually. After a sharp decline from an average of 73 per cent in 1991–
92 to around 25 per cent in 1996–97, the import-weighted import duty crept up again to 36 per
cent in 2000–01 reflecting a revival of protectionist pressure from the established Indian industries.
Subsequently, there was a reversal of this trend and the Government reiterated the objective of
reducing India's tariff protection rates to Association of East Asian Nations (ASEAN) levels.
• The Foreign Investment Promotion Board was set up to expedite applications for foreign
investment. In addition, the Indian stock market opened up for investment in equity to foreign
institutional investors (FIIs). These policy changes have led to a sharp increase in FDI flows from
almost nothing in 1990 to considerable levels at present.
• Profit-making public-sector units (PSUs) were allowed greater autonomy and larger freedom to
raise resources in the capital market, but the relatively less well-performing PSUs languished for
want of public funds and political will to restructure, privatize, or close down. A Disinvestment
Commission was set up in 1997, but privatization was not seriously put on the policy agenda until
2000-2001. For instance, privatization of BALCO (Bharat Aluminium Company Ltd.) in 2001.

3. Initiatives Taken by the Government for Industrial

Development
3.1. Disinvestment
Disinvestment or divestment, is when the government sells its assets or a subsidiary, such as a
Central or State public sector enterprise. Minority disinvestment, majority disinvestment, and
complete privatisation are the three main approaches to disinvestment.

The Union Finance Ministry has a separate department for undertaking disinvestment-related
procedures called the Department of Investment and Public Asset Management (DIPAM).

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 Student Notes:

Proceeds of Disinvestment:
The proceeds of disinvestment go into the National Investment Fund (NIF), which was setup in
2005. The purpose of the Fund was to receive disinvestment proceeds of the Central Public Sector
Enterprises and to invest the same to generate earnings without depleting the corpus. The
earnings of the Fund were to be used for selected Central Social Welfare Schemes. This fund was
kept outside the Consolidated Fund of India.
In 2013, NIF was restructured and it was decided that the entire disinvestment proceeds will be
credited to the existing ‘Public Account’ under the head NIF and they would remain there until
withdrawn/invested for the approved purpose. The allocations out of the NIF will be decided in
the annual Government Budget.

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 Recent Changes in Management of Disinvestment Proceeds: Student Notes:
The Department of Disinvestment was set up as a separate Department in 1999 and since 2004, it has
been made one of the Departments under the Ministry of Finance. The Department of Disinvestment
was renamed as Department of Investment and Public Asset Management (DIPAM) in 2016. It was
assigned the following functions:
• It was responsible for all matters relating to management of Central Government investments in
equity including disinvestment of equity in the Central Public Sector Undertakings.
• All matters relating to the sale of Central Government equity through offer for sale or private
placement or any other mode in the erstwhile Central Public Sector Undertakings.
• Decisions on the recommendations of Administrative Ministries, NITI Aayog, etc. for disinvestment
including strategic disinvestment.
• Decisions in matters relating to Central Public Sector Undertakings for purposes of Government
investment in equity like capital restructuring, bonus, dividends, disinvestment of government
equity and other related issues.
• Advise the Government in matters of financial restructuring of the Central Public Sector Enterprises
and for attracting investment in the said enterprises through capital market.
However, to streamline the disinvestment process, in January 2017, the Government transferred the
role of advising the Government on how to utilize the proceeds from disinvestment from the
Department of Investment and Public Asset Management (DIPAM) to the Department of Economic
Affairs.
The Department of Economic Affairs in the Finance Ministry will now be in charge of “financial policy in
regard to the utilization of the proceeds of disinvestment channelized into the National Investment
Fund.”

Recent changes in the Disinvestment Policy:

The New Public Sector Enterprise (PSE) Policy for Atmanirbhar Bharat, which also provides overall
guidance on strategic disinvestment, was notified on 4th February, 2021 with the approval of the
Cabinet. The Policy intends to minimize the presence of Government in the PSEs across all sectors of
economy.
• The New PSE policy delineates strategic sectors based on the criteria of national security, energy
security, critical infrastructure, provision of financial services and availability of important
minerals.
o Bare minimum presence of the existing Public Sector Commercial Enterprises at Holding
Company level will be retained under Government control in the strategic sectors.
• The remaining will be considered for privatization or merger or subsidiarization with another PSE
or for closure.
o All PSEs in non-strategic sectors shall be considered for privatization, where feasible,
otherwise such enterprises shall be considered for closure except not-for-profit companies, or
CPSEs providing support to vulnerable groups, or having developmental/ promotional roles,
etc.

3.2. Ease of Doing Business in India

The Ease of Doing Business (EoDB) index is a ranking system established by the World Bank to
compare Business Regulations in 190 economies. The Department for Promotion of Industry and
Internal Trade (DPIIT) is the Nodal Department for coordinating the initiatives under Ease of
Doing Business, which are aimed at creating a conducive business environment.

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 Student Notes:

India ranked 63rd in the World Bank’s Doing Business Report (DBR), 2020 published in October,
2019 before its discontinuation by the World Bank. India’s rank in the DBR improved from 142nd
in 2014 to 63rd in 2019, registering a jump of 79 ranks in a span of 5 years.
The key focus areas of the initiative are:
• Simplification of procedures related to applications, renewals, inspections, filing records, etc.
• Rationalization of legal provisions, by repealing, amending or omission of redundant laws.
• Digitization of Government processes by creating online interfaces.
• Decriminalization of minor, technical or procedural defaults.

India’s major achievements:

• Construction permits: India’s ranking on this parameter has improved from 184 in 2014 to 27 in
2019. This improvement has been mainly on the account of a decrease in the number of procedures
and time taken for obtaining construction permits in India.
• Getting electricity: India’s ranking on this parameter has improved from 137 in 2014 to 22 in 2019.
It takes just 53 days and 4 procedures for a business to get an electricity connection in India.
• Apart from these significant improvements, among the 190 economies, India ranked 13th in
Protecting Minority Investors and 25th in Getting Credit.

Initiatives taken to improves the business environment in the country are as follows:
• Starting a business: Permanent Account Number (PAN), Tax Deduction & Collection Account
Number (TAN), Director Identification Number (DIN) have now been merged into a single form i.e.
SPICe for company incorporation.
• Dealing with construction permits: Cost of obtaining construction permits reduced from 23.2% to
5.4% of the economy’s per capita income.
• Trading across borders: The Central Board of Excise and Customs (CBEC) has implemented the
‘Indian Customs Single Window Project’ to facilitate trade. Importers and exporters can
electronically lodge their Customs clearance documents at a single point. The government has
launched ‘PCS1x’ which intends to integrate 27 maritime stakeholders at one platform. Further, e-
Sanchit, an online application system, allows traders to file all documents electronically.
• Paying taxes: Reduction of corporate tax from 30% to 25% for mid-sized companies.
o The Goods and Service Tax came into effect on 1st July, 2017. It subsumes eight taxes at the
Central and nine taxes at the State level.
Though India has performed well on parameters like getting electricity, getting credit and
protecting minority investors, on some other parameters like construction permits, resolving
insolvency, paying taxes, enforcing contracts, etc. it is lagging behind. However, the Government
plotted an eight-point strategy and firmed up a 295-point reform agenda for states to improve
India’s ranking.

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3.3. e- Biz Project Student Notes:

• e-Biz is one of the integrated services projects and a part of the 27 Mission Mode Projects
(MMPs) under the National E-Governance Plan (NEGP) of the Government of India.
• The focus of e-Biz is to improve the business environment in the country by enabling fast and
efficient access to Government-to-Business (G2B) services through an online portal. This will
help in reducing unnecessary delays in various regulatory processes required to start and run
businesses.
• This project aims at creating an investor-friendly business environment in India by making
all regulatory information – starting from the establishment of a business, through its
ongoing operations, and even its possible closure - easily available to the various stakeholders
concerned. In effect, it aims to develop a transparent, efficient and convenient interface,
through which the Government and businesses can interact in a timely and cost-effective
manner in the future.
• The e-Biz portal was conceptualized with support from National Institute of Smart
Governance (NISG) and developed by Infosys Technologies Limited (Infosys) in a Public
Private Partnership (PPP) model for a period of 10 years.
3.4. Make in India Initiative
The ‘Make in India' initiative was launched on September 25, 2014, to facilitate investment, foster
innovation, build best in class infrastructure and make India a hub for manufacturing, design and
innovation. Make in India was one of the first 'Vocal for Local' initiatives that exposed India's
manufacturing domain to the world.
With the objective of making India a global hub of manufacturing, design and innovation, the
Make in India initiative, which is based on four pillars-new processes, new infrastructure, new
sectors and new mindset-has been implemented by the Government. The initiative is set to
boost entrepreneurship not only in manufacturing but also in relevant infrastructure and service
sectors.
Main pillars of the Make in India initiative:
• New processes: Make in India initiative recognizes 'ease of doing business' as the single most
important factor to promote entrepreneurship. A number of initiatives have already been
undertaken to ease the business environment.
• New infrastructure: The Government intends to develop industrial corridors and smart
cities, and create world-class infrastructure with state-of-the-art technology and high-speed
communication. Innovation and research activities are supported through a fast-paced
registration system and improved infrastructure for IPR registration. The requirement of skills
for the industry is to be identified and accordingly development of the workforce to be taken
up.
• New sectors: Foreign Direct Investment (FDI) has been opened up in defence production,
insurance, medical devices, construction and railway infrastructure in a significant way.
• New mindset: In order to partner with the industry for the economic development of the
country, the Government shall act as a facilitator and not a regulator.
Some major initiatives taken to enable Make in India:
• Production Linked Incentive (PLI) Schemes: Keeping in view India’s vision of becoming
Atmanirbhar and enhancing India’s manufacturing capabilities and exports, an outlay of INR
1.97 lakh crore (over US$ 26 billion) has been announced in the Union Budget 2021-22 for
PLI schemes for 14 key sectors of manufacturing, starting from fiscal year (FY) 2021-22.
• PM Gati Shakti and National Logistics Policy: The PM Gati Shakti is the first of its kind
initiative by the Government to develop a multimodal logistics infrastructure for national
transformation. Along with that, the recently launched National Logistics Policy aims to
reduce logistics costs by almost 10% over the next few years.

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• Industrialization and urbanization: The Government of India is developing various Industrial Student Notes:
Corridor Projects as part of National Industrial Corridor Programme which is aimed at
development of greenfield industrial regions/nodes which can compete with the best
manufacturing and investment destinations in the world. The Government of India has
accorded approval for the development of 11 Industrial corridors (32 projects) in four phases.
• New Design, Innovation and R&D: India is the third largest tech-driven Start-up ecosystem
globally with over 79,100 Startups. “Start-up India” initiative was launched aiming at
fostering entrepreneurship and promoting innovation by creating an ecosystem that is
conducive to the growth of Startups.
• Discount on Tax: Tax rates were rationalised to boost the Make in India initiative. India now
has one of the lowest tax rates in Asia, making it one of the most competitive global
economies.
3.5. National Industrial Corridor Development Programme (NICDP)
The National Industrial Corridor Development Programme is one of India's most ambitious
infrastructure programmes, which aims to develop futuristic industrial cities in India which can
compete with the best manufacturing and investment destinations in the world.
• The Government of India is developing eleven Industrial Corridor Projects as a part of the
National Industrial Corridor Programme across the country in a phased manner.
• As per the approved institutional and financial structure for the industrial corridors, the
Government of India, through the National Industrial Corridor Development &
Implementation Trust (NICDIT), provides funds as equity/debt for the development of world-
class trunk infrastructure in the industrial nodes/regions under industrial corridors and the
States are responsible for making available contiguous and encumbrance free land parcels.
• Some of the industrial corridors are Delhi-Mumbai Industrial Corridor (DMIC), Chennai-
Bengaluru Industrial Corridor (CBIC), Amritsar-Kolkata Industrial Corridor (AKIC), etc.
3.6. Steps Taken for the Promotion and Development of MSMEs
Realizing the importance of the MSME (Micro, Small and Medium Enterprises) sector, the
Government has undertaken a number of schemes/programmes like the Prime Minister’s
Employment Generation Programme (PMEGP), Credit Guarantee Trust Fund for Micro and Small
Enterprises (CGTMSE), Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation,
Scheme of Fund for Regeneration of Traditional Industries (SFURTI), Production Linked Incentives
(PLI) Schemes, and Micro and Small Enterprises Cluster Development Programme (MSECDP) for
the establishment of new enterprises and development of existing ones.
New initiatives undertaken by the Government for the promotion and development of MSMEs are as
follows:
• Udyog Aadhar Memorandum (UAM): The UAM scheme (2015) is a pathbreaking step to promote
ease of doing business for the MSMEs. Under the scheme, MSME entrepreneurs just need to file
an online entrepreneurs’ memorandum to instantly get a unique Udyog Aadhaar Memorandum
Number (UAMN).
• Employment Exchange for Industries: To facilitate match-making between prospective job seekers
and employers, an employment exchange for industries was launched in June 2015 in line with
Digital India.
• Framework for Revival and Rehabilitation of MSMEs: Under this framework, banks have to
constitute a Committee for Distressed MSME enterprises at the zonal or district levels to prepare a
Corrective Action Plan (CAP) for these units.
• A scheme for Promoting Innovation and Rural Entrepreneurs (ASPIRE): ASPIRE was launched with
the objective of setting up a network of technology centres and incubation centres to accelerate
entrepreneurship and promote start-ups for innovation and entrepreneurship in rural and
agricultural industry.
• The India Aspiration Fund: It has been set up under the Small Industries Development Bank of India
(SIDBI) for venture capital financing of newly set-up or expanding units in the MSME sector.

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 • SIDBI Make in India Loan for Small Enterprises (SMILE): It has been launched to offer quasi-equity Student Notes:
and term-based short-term loans to Indian SMEs with less stringent rules and regulations and a
special focus on 25 thrust sectors of Make in India.
• Micro Units Development Refinance Agency (MUDRA) Bank: It has been set up to provide
development and refinance to commercial banks/ NBFCs/cooperative banks for loans given to
micro-units. MUDRA Bank would follow a credit-plus approach while also providing financial literacy
and addressing skill gaps, information gaps, etc.
• Production Linked Incentive (PLI) Schemes: Keeping in view India's vision of becoming
'Atmanirbhar', Production Linked Incentive (PLI) Schemes for 14 key sectors have been announced
with an outlay of Rs. 1.97 lakh crore (over US$26 billion) to enhance India's manufacturing
capabilities and exports.
o The purpose of the PLI Schemes is to attract investments in key sectors and cutting-edge
technology; ensure efficiency and bring economies of size and scale in the manufacturing
sector and make Indian companies and manufacturers globally competitive.
o The PLI schemes are expected to have a cascading effect on the country's MSME ecosystem.
The anchor units that will be built in every sector are likely to set a new supplier/vendor base
in the entire value chain. Most of these ancillary units are expected to be built in the MSME
sector.

3.7. Promotion of Startups in India

India is going through the era of startups, where the country is creating a robust ecosystem for
businesses and entrepreneurs. India is now called the 'Startup Hub', as it has more than 99,000
startups, and 107 unicorn companies worth $30 billion.
Government schemes initiated to support Indian startups are as follows:
1. Startup India: Startup India is a flagship initiative of the Government of India, intended to catalyse
startup culture and build a strong and inclusive ecosystem for innovation and entrepreneurship in
India. Since the launch of the initiative on 16th January, 2016, Startup India has rolled out several
programmes with the objective of supporting entrepreneurs, and transforming India into a country
of job creators instead of job seekers.
• Through this scheme, better regulatory environment including tax benefits, easier compliance,
ease in setting up a company, faster exit mechanisms, etc. have been introduced.
• As of now, the Government has recognised 114,458 startups by the Department for Promotion
of Industry and Internal Trade (DPIIT).
• To recognise startups under the scheme, the maximum age for eligible startups is 7 years; for
biotechnology companies, the age is 10 years after the date of establishment.
2. Atal Innovation Mission: The scheme was launched by the Government in 2016, and it aims to
foster innovation as the government creates new programmes and policies to assist the
development of startups in several economic areas. The Atal Innovation Mission (AIM) grants
approximately Rs 10 crores to finance firms over five years. This scheme can be utilised by all the
emerging organisations in health, agriculture, education, transportation, etc.
3. Multiplier Grants Scheme (MGS): In order to promote research and development among industries
for the growth of goods and services, the Department of Electronics and Information Technology is
implementing the Multiplier Grants Scheme (MGS). Under the scheme, the government gives
maximum amount of Rs 2 crore per project for a duration of less than two years.
4. Startup India Seed Fund Scheme: The Government of India introduced this scheme in January 2021
to assist early-stage startups. Selected entrepreneurs under this scheme will get funding of Rs 5
crores. Startups will receive up to Rs 20 lakhs for developing concepts or demonstrations and up to
Rs 50 lakhs for growing their goods or services. Over 1000 startups have received more than Rs 177
crore under the Startup India Seed Fund Scheme.

3.8. Atmanirbhar Bharat Abhiyan or Self-reliant India Campaign:

• Atmanirbhar Bharat Abhiyaan or Self-Reliant India campaign is the vision of new India.
• To promote self-reliance, the Government of India has announced a special economic and
comprehensive package of INR 20 Lakh Cr- equivalent to 10% of India’s GDP – to fight COVID-
19 pandemic in India. The aim is to make the country and its citizens independent and self-
reliant in all senses.

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 Student Notes:

4. Previous Years UPSC Mains Questions

1. Normally countries shift from agriculture to industry and then later to services, but India
shifted directly from agriculture to services. What are the reasons for the huge growth of
services vis-a-vis industry in the country? Can India become a developed country without a
strong industrial base? (2014)
2. “Success of ‘Make in India’ programme depends on the success of ‘Skill India’ programme
and radical labour reforms.” Discuss with logical arguments. (2015)
3. There is a clear acknowledgement that Special Economic Zones (SEZs) are a tool of industrial
development, manufacturing and exports. Recognizing this potential, the whole
instrumentality of SEZs requires augmentation. Discuss the issues plaguing the success of
SEZs with respect to taxation, governing laws and administration. (2015)
4. Justify the need for FDI for the development of the Indian economy. Why there is gap
between MOUs signed and actual FDIs? Suggest remedial steps to be taken for increasing
actual FDIs in India. (2016)
5. How globalization has led to the reduction of employment in the formal sector of the Indian
economy? Is increased informalization detrimental to the development of the country?
(2016)
6. “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 in Industrial Policy
are capable of increasing the industrial growth rate? (2017)
7. “Investment in infrastructure is essential for more rapid and inclusive economic growth”.
Discuss in the light of India’s experience. (2021)
8. Economic growth in the recent past has been led by increase in labour productivity. Explain
the statement. Suggest the growth pattern that will lead to creation of more jobs without
compromising labour productivity. (2022)
9. Faster economic growth requires increased share of the manufacturing sector in GDP,
particularly MSMEs. Comment on the present policies of the Government in this regard.
(2023)

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5. Previous Years Vision IAS GS Mains Questions Student Notes:

1. What is Industrial Revolution 4.0? Critically discuss the effects it may have on Indian economy.
Approach:
• Give a brief overview of Industrial Revolution 4.0.
• Assess the possible effects of Industrial Revolution 4.0 on the Indian economy.
• Suggest the way forward in this regard.
Answer:
Industrial Revolution 4.0 is characterized by a wave of innovations and fusion of
technologies that is blurring the lines between the physical, digital, and biological
spheres. Simply said, it is a trend of automation and data exchange in manufacturing
technologies and includes the cyber-physical systems, IoT, cloud computing and cognitive
computing to foster not just ‘a smart factory’ but also beyond that in the operations and
field of decision making through Artificial Intelligence.
The effects that the Industrial Revolution 4.0 may have on the Indian economy include:
• There will be a decreased need for human labour and a requirement for a different
skill set, which can lead to large-scale unemployment.
• The job market can get segregated into ‘low-skill/low-pay’ and ‘high-skill/high-pay’
segments, which can lead to income inequality and social tensions.
• The appeal of cheap labour will be lost more quickly than previously forecasted,
especially in sectors such as textiles, footwear, mechanical engineering, etc. which
currently create large-scale employment opportunities in India.
• Sustainability of businesses especially small ones will be under threat.
• Adoption of smart technology in the production process will lead to real time
information and improved decision-making, which can enhance the production
process and facilitate horizontal integration with customers and suppliers.
• The government will increasingly face pressures to change its approach to public
engagement and policymaking, as its central role of conducting policy will diminish
due to new sources of competition and redistribution and decentralization of power
made possible by new technologies.
• On a positive front, transportation and communication cost will drop, logistics and
global supply chain will become more effective and cost of trade will diminish.
Way forward:
• With the right mix of accelerators – including regulatory frameworks, educational
ecosystems and government incentives – India can take the advantage of the Fourth
Industrial Revolution while simultaneously enhancing the quality, equity and
sustainability of its own growth and development outcomes.
• The Indian Government is already on the right path by bringing the necessary
structural reforms and promoting an entrepreneurial ecosystem through initiatives
such as Start-up India and Atal Innovation Mission. Adequate digital infrastructure
should also be created in this regard.
• Additionally, initiatives to equip the workforce with skills such as complex problem
solving, critical thinking, creativity, service orientation, cognitive flexibility etc.
should be implemented to fully reap the benefits of the Industrial Revolution 4.0.

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2. Though Code on Industrial Relations, 2019 is aimed at reducing labour dispute as well Student Notes:
as ease of doing business, it also restricts the collective bargaining power of the
workers. Comment.
Approach:
• Briefly mention the objectives of Code on Industrial Relations, 2019.
• Highlight how it will reduce labour disputes and improve ease of doing business.
• Mention the provisions that will reduce the collective bargaining power of the
workers.
• Conclude accordingly.
Answer:
The Code on Industrial Relations, 2019 seeks to amalgamate, simplify and rationalize
provisions of three central enactments relating to industrial relations- Trade Union Act of
1926, Industrial Disputes Act of 1947 and Industrial Employment (Standing Orders) Act
of 1946.
The Code attempts to reduce the labour disputes by introducing provisions such as-
• Registration of trade unions: Under the Code, seven or more members can apply for
registration of a trade union. Further, the union can be recognized as a negotiating
union with the employer.
• Unfair labour practices: The Code prohibits employers, workers, and trade unions
from committing any unfair labour practices listed in a Schedule to the Code. These
include coercing workers to join trade unions, establishing employer sponsored trade
unions of workers etc.
• Resolution of industrial disputes: The central or state governments may appoint
conciliation officers to mediate and promote settlement of industrial disputes. The
Code provides for the constitution of industrial tribunals for the settlement of
industrial disputes.
Further, the code also seeks to enhance ease of doing business as:
• It replaces numerous provisions in different acts and harmonises several differences
in definitions and application of labour laws across industry, states and companies.
• It provides a legal framework for fixed-term employment that provides
for engagement of a worker on the basis of a written contract for a fixed period with
all statutory benefits like social security, wages etc. at par with the regular employee.
This provides flexibility in hiring and firing.
• The Code bans lockouts or strikes without submitting 15 days’ notice for all industrial
employees. It also widens the definition of ‘strike’ to include mass casual leave. This
would avoid unnecessary disruption, thereby ensuring ease of doing business.
However, there are have been widespread concerns raised by various trade unions
alleging that the code has weakened the instruments of collective bargaining as:
• It proposes workers not be allowed to go on a strike after initiation of the process of
conciliation, irrespective of the time taken to arrive at a decision, thus restricting the
ability of unions to go on a strike.
• The code prescribes subscription charges for trade unions as well as proposes
changes to norms for registration of unions, making it difficult for unions to go for
collective bargaining.
• It has also altered the definition of industry, taking out eminent institutes related to
defence and security such as the Indian Space Research Organisation (ISRO) and
Defence Research and Development Organisation (DRDO) out of its purview, thus
prohibiting its employees from going on a strike or raising any dispute.

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 • Redefining strike to include mass casual leave would make even coincidental leaves Student Notes:
vulnerable to stiff penalties.
• The unorganised sector-trade unions would need to have 50% of office bearers who
are employees. This would make the workers more vulnerable to vindictive actions,
in the absence of outside support, even for demanding legitimate rights.
Therefore, the code needs wider consultation with representatives of the workers. This
would ensure that the ease of doing business is balanced with legitimate collective
bargaining rights of the workers.

3. What do you mean by industrial inertia? Bring out the factors that contribute to
industrial inertia and also give a few examples from the Indian context.
Approach:
• Define Industrial Inertia.
• Discuss the factors that lead to Industrial Inertia in an economy.
• Highlight its role in determining the location and development of industries in India.
• Corroborate with examples from the Indian context.
Answer:
Industrial inertia is the tendency of an industry to remain in a particular location even
when the original alluring conditions of its existence are gone. For example: existence
of traditional industries located in and around the coal fields such as the Ruhr region in
Germany and Pittsburgh in the USA even after the coal mines have been exhausted. The
term Industrial inertia has two-fold connotations i.e., Spatial and Behavioral. Spatially, it
implies stability in location whereas in behavioral terms, it results from managerial
behavior that either actively perceives advantages from existing location or just displays
lack of initiative.
Industrial inertia results from a wide variety of factors.
• Existence of large markets: The existence of industry in a particular location both
contributes to and is fed by the availability of a readily accessible market. If the shift
in location of the primary industry is not followed by its corresponding customers, it
affects the profitability of the industry.
• Existence of a pool of specialised labour: Over a long period of time, a location or
region that has become associated with a particular industry develops specialist skills
and experience. There emerge concerns over knowledge transfer alongside
movement of industry to a new location.
• Cost related to transferring existing infrastructure: The decision to relocate involves
a consideration of the cost associated with existing infrastructure and its physical
transfer like moving production equipment, transferring stocks etc. It is often
cheaper to remodel the existing industry or adopt new technologies than relocate to
a different location. For instance, the textile mills of Lakeshire were converted into
light engineering goods factories, when the cotton industry started declining.
• Industry Linkages: An industry develops necessary linkages with related firms over a
period of time, which is also a factor that contributes to industrial inertia.
• Inertia resulting from Government Policy: The decision to move industry is followed
by resistance by the local population as well as certain vested interests and may take
a political shape resulting in favourable government policies being framed. For
example, when the coal-iron ore reserves were getting depleted near Pittsburg,
intensive lobbying by industrialists led to the introduction of steel-pricing policies like
"Multiple Basing system", "Pittsburg plus" etc. by the US Government.

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 Instances of Industrial Inertia in India Student Notes:
The Beedi industry in Jabalpur and the lock industry in Aligarh are examples of industrial
inertia In India. For instance, the origins of Jabalpur beedi industry was closely tied to the
commercial use of the tendu leaf. The leaf was widely available in the deciduous forests
of central India, and proved to be superior to its competitors in texture and retention of
the flavour of the tobacco. Additionally, the demand for tendu leaf from the beedi
industry was met by local contractors. However, the emergence of new manufacturing
destinations as well as declining share of consumers has still not impacted the location
of the same. Similarly, the Aligarh lock industry continues to thrive despite adversarial
conditions.

4. The Production Linked Incentive (PLI) Scheme is a cornerstone of the government’s push
for achieving an Atmanirbhar Bharat. Discuss. Also, mention the challenges in realizing
its objectives.
Approach:
• Give a brief introduction about the launch of Production Linked Incentives (PLI)
Scheme.
• Explain how the scheme promotes the Atmanirbhar Bharat Mission.
• Mention various challenges in realising the objective of Atmanirbhar Bharat.
• Conclude accordingly.
Answer:
The Production Linked Incentive (PLI) Scheme was launched in 2020 by the Union
Government in three key sectors (mobile manufacturing and electric components,
pharmaceuticals and medical device manufacturing) and was later extended to 11 other
key sectors with a budget outlay of Rs 1970 billion to create national manufacturing
champions and generate employment opportunities for the country’s youth. The
minimum production in India as a result of PLI Schemes is expected to be over US$ 500
billion in 5 years.
Role in promoting Atmanirbhar Bharat Mission:
• Creation of large-scale manufacturing capacity: The incentives under this scheme
are directly proportional to production capacity/ incremental turnover. Hence, it will
help develop large-scale manufacturing facilities and better industrial infrastructure,
thus benefiting the overall supply chain ecosystem.
• Import substitution and export promotion: The PLI scheme aims to reduce the gap
between India’s highly skewed import-export basket, which is mainly characterized
by heavy imports of finished goods. The PLI schemes will promote domestic
manufacturing of goods, thereby reducing our dependence on imports and help in
expanding the quantum of exports from India in the long term.
• Technology transfer and skill development: The PLI Scheme will help attract foreign
investment in India and along with that the advanced technology and expertise thus
helping in skill development of our workforce.
• Focus on sunrise and strategic sectors: The PLI scheme covers new growing sectors
such as drones and drone components, advanced chemistry cell batteries,
Electronics and IT, Pharma etc. Thus, it will help India become future ready.
Challenges in realising these objectives:
• India becoming an assembly unit of imported parts: It is feared that the PLI scheme
might degenerate the manufacturing units in India into the assembly of the imported

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 parts. For example, the scheme aims to promote production of Air Conditioners in Student Notes:
India, but the critical parts like compressors, valves and coils are being imported.
• Lack of research and development in India: The incentives under this scheme are
linked to incremental sales of products manufactured in India, but lack of focus on
R&D by the Indian private industry is the major structural weakness. For example,
the largest share of value addition accrues the patent owners and the patent rights
are kept abroad.
• Possible challenge in WTO: Earlier, Merchandise Exports from India Scheme (MEIS)
was challenged in WTO for violation of the WTO Agreement on Subsidies and
Countervailing Measures (SCM Agreement) and the decision was not favourable for
India. If the goods manufactured under the PLI scheme significantly impacts global
market prices then it might be challenged in WTO as well.
• Lacks long term approach: It is being argued that the short-term fiscal PLI incentives
cannot overcome the lack of competitiveness in the long run.
Since its launch, the PLI Scheme has attracted much attention and various multinational
firms are showing interest in investing in India under this scheme. Going forward, the
government needs to ensure that the momentum gained by the scheme is sustained for
a long-term growth.

5. Highlight the issues associated with the Special Economic Zones (SEZs) in India. Do you
think that the Development of Enterprise and Service Hubs (DESH) Bill, 2022 can be a
possible game changer in this regard?
Approach:
• Give a brief introduction about Special Economic Zones (SEZs).
• Highlight the issues faced by the SEZs in India.
• Substantiate how the DESH bill can be a possible game changer in addressing these
issues.
• Conclude accordingly.
Answer:
Special economic zones (SEZs) are demarcated economic areas/ territories in a country
that are subject to different economic regulations than other regions within the same
country like tax exemptions, duty free exports, access to better infra among others to
attract FDI.
In the April-December 2021 period, exports from SEZs were $93 billion; these were
$102.3 billion in 2020-21. Of the 425 SEZs approved under the SEZ Act, 2005, 376 are
notified and just 268 are operational.
Various issues associated with SEZs in India
• Unutilised land: Over 25,000 hectares of land is lying unutilised in these preferential
treatment industrial enclaves due to lack of flexibility to utilise land for different
sectors.
• Exit of businesses: The global competitive advantage of Indian SEZs waned as a
consequence of the withdrawal of tax concessions and the sunset clause along with
several ASEAN countries relaxing their regulatory laws that lured these businesses.
• Small size of SEZ: The size of the special economic zones in India is way smaller as
compared to China, which has manufacturing zones, the size of mega cities,
strategically located close to ports and trade-friendly locations such as Hong Kong.
• Violation of WTO rules: In 2019, the World Trade Organization (WTO) held that
incentives given to Indian SEZ units violated WTOs rules of fair trade.

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 • Other issues: Other issues include multiple models of operation, domestic sales by Student Notes:
the SEZs facing a disadvantage due to payment of full customs duty, and lack of
support from state governments for an effective single-window system.
The Development of Enterprise and Service Hubs (DESH) Bill 2022, set to replace the
existing Special Economic Zones (SEZ) Act aims to move away from the original idea of
export-oriented production to developing them into inclusive economic hubs. The new
bill aims to fix the shortcomings in many ways:
• Access to domestic market: It delinks the positive net foreign exchange requirement
and provides these hubs with access to domestic markets. Also, to bring taxes at par
with those provided by units outside, the government may impose an equalisation
levy on goods or services supplied to the domestic market.
• Inclusion of more services: In SEZs, only specified services such as IT, ITeS are
allowed. But now all services in alignment with GST laws will be allowed, which
include liaison offices as well.
• WTO-compliant norms: It also aimed at making SEZ rules more WTO-compliant by
doing away with evaluation of net forex and direct tax incentives.
• Single-window clearance: It is also likely to provide for an integrated and
decentralised single window clearance mechanism for both central- and state-level
clearances.
• Proper utilisation of land: It allows the state governments to seek notification of any
existing industrial estate as a development hub to ensure all large existing and new
industrial enclaves to optimally utilise available infrastructure.
While the new DESH bill is a step in the right direction, it needs to address a few
challenges in order to successfully achieve its objectives such as setting up a focussed
approach for these developmental hubs, clear delineation of fiscal incentives after
export obligation is over and clarifying the role of state under the new law. Effective
implementation of the law could act as a lever to India's manufacturing growth.

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