The Economic Survey stressed the need to revive private investments by opening up sectors such as defence to foreign direct investment, removing infrastructural bottlenecks by permitting commercial coal mining and making land acquisition simpler and ushering in structural changes to to help industry move up the value chain.
“In view of the ongoing industrial slowdown, the policy focus now needs to target key growth drivers in the short term. One of the crucial drivers can be revival of the private corporate sector investment,” the survey said. “Allowing FDI in defence and some other sectors has huge potential for attracting large-scale investments and state-of-the-art technology. The existing special economic zones and newly set up and proposed national investment and manufacturing zones (NIMZs) can multiply investment provided constraints are removed and a stable incentive structure is put in place,” it added.
Manufacturing and mining sector GDP declined 0.7% and 1.4% respectively in 2013-14 largely due to a considerable deceleration in investment particularly by the private sector during 2011-12 and 2012-13.
The key to revival in the next two years would be upgrading from low to high technology sectors, the survey said.
“In the medium term, challenge for Indian manufacturing is to move from lower tech to higher tech sectors, from lower value-added to higher value-added sectors and from lower productivity to higher productivity sectors. The near-term industrial outlook is conditional on continued improvements in the policy environment and quick return to peak investment rate,” it added.
Industrial output as measured by the index of industrial production (IIP) remained almost flat in 2013-14 and declined 0.1% compared with an expansion of 1.1% in 2012-13.