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“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?  (250 words)

The industrial growth rate has lagged behind the overall growth of GDP in the post-reform period due to several reasons. The recent changes in industrial policy aim to address these issues and increase the industrial growth rate.

Reasons for lagging industrial growth:

  • Inadequate infrastructure: India’s physical infrastructure suffers from capacity and efficiency deficits, leading to high logistics costs and reduced competitiveness of Indian goods in global markets.
  • Restrictive labor laws: Overly protective labor laws in the formal sector discourage employers from hiring workers regularly and may lead to entrepreneurs avoiding labor-intensive sectors.
  • Complicated business environment: Complex and time-consuming business processes and clearances act as disincentives for businesses.
  • Slow technology adoption: Indian industry has been slow to adopt new and advanced technologies, resulting in low productivity and higher costs.
  • Low productivity: Productivity in Indian manufacturing is only one-third of that in China, with workers predominantly employed in low productivity and low wage activities.
  • Challenges for trade: Manufacturing, especially exports, faces challenges from stagnant/shrinking global demand and rising protectionist tendencies worldwide.

Recent changes in Industrial Policy:

The new Industrial Policy aims to increase the industrial growth rate by:

  • Clear vision, strategic objectives, and intent: Developing a shared vision for a globally competitive Indian industry with skill, scale, and technology.
  • Establishing global linkages: Encouraging FDI and technology transfer to increase domestic value addition, strengthen linkages, and enable brand building.
  • Enhancing industrial competitiveness: Reducing the cost of infrastructure, easing regulatory/compliance burden, reducing the cost of capital, and improving labor productivity.
  • Employing a growing workforce: Focusing on skill development and job creation in high-potential sectors.
  • Ensuring sustainability and responsible industrialization: Promoting green technologies and environmentally friendly practices.
  • Enabling ecosystem for technology adoption and innovation: Encouraging R&D investments and fostering a culture of innovation.

In conclusion, the recent changes in Industrial Policy aim to address the constraints that have hindered industrial growth and create a conducive environment for increasing the industrial growth rate.

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