The major objectives of the NMP are to increase the sectoral share of manufacturing in GDP to at least 25%, create 100 million jobs by 2022 and enhance global competitiveness of the sector
New Delhi: The government today cleared the long-awaited National Manufacturing Policy (NMP) which seeks to set up mega industrial zones and create 100 million jobs by 2022, reports PTI.
“The NMP seeks to enhance the share of manufacturing in the gross domestic product (GDP) to 25% within a decade and create 100 million jobs in manufacturing as part of the inclusive growth agenda of the UPA,” commerce and industry minister Anand Sharma said after the Cabinet approved the policy.
To encourage the manufacturing sector, the government will provide fiscal incentives to the industry, particularly to the small and medium enterprises (SMEs).
The Cabinet had earlier taken up the NMP in its meeting on 15th September. The matter was, however, deferred following differences between ministries over the labour and environment issues.
It was later referred a Group of Ministers (GoM) headed by agriculture minister Sharad Pawar.
The NMP, Mr Sharma said, “will ensure compliance of labour and environmental laws while introducing procedural simplifications and rationalisation so that the regulatory burden on the industry is reduced.”
He said the interventions proposed are generally sector neutral, location neutral and technology neutral, except the attempt to incentivise green technology for sustainable development.
“No subsidy is proposed for individual units or areas. The basic thrust is to provide an enabling environment for tapping the potential of the private sector and the entrepreneurial skills of the younger population,” Mr Sharma said.
The major objectives of the NMP are to increase the sectoral share of manufacturing in GDP to at least 25%, create 100 million jobs by 2022 and enhance global competitiveness of the sector.
Besides, it focuses on domestic value addition, technological depth and environmental sustainability of growth.
The policy envisages specific interventions broadly in the areas of industrial infrastructure development and improvement of the business environment through rationalisation and simplification of business regulations.
Besides, development of appropriate technologies, especially green technologies for sustainable development, and skill development of the younger population are envisaged, Mr Sharma said.
The NMP aims at creating large integrated industrial townships—National Investment and Manufacturing Zones (NIMZs).
“The land for these zones will preferably be waste infertile land which is not suitable for cultivation; not in the vicinity of any ecologically fragile area and with reasonable access to basic resources,” Mr Sharma said.
The contribution of the manufacturing sector is just over 16% of India’s GDP, currently.
With a view to accelerating the growth of the manufacturing sector, Mr Sharma said that the manufacturing policy proposes to create an enabling environment suitable for the sector to flourish in India.
With the increase in housing loan ceiling, the limit of subsidy for an individual borrower would go up to Rs14,865 per year for a loan of Rs15 lakh on reducing balance basis from the present limit of Rs9,910 for a loan of Rs10 lakh
New Delhi: The government today raised the housing loan ceiling for availing 1% interest subsidy to Rs15 lakh from existing Rs10 lakh, a decision that will benefit borrowers by up to Rs14,865 per annum, reports PTI.
A meeting of the Union Cabinet approved the proposal to give 1% interest subsidy for home loans of up to Rs15 lakh provided the actual cost of the house is not exceeding Rs25 lakh.
Under a scheme introduced in 2009, home loan borrowers are getting 1% interest subsidy on home loans of up to Rs10 lakh, provided the cost of the house did not exceed Rs20 lakh.
“A budgetary provision of Rs500 crore has been made for the financial year 2011-12 for implementing the scheme,” minister of state for information and broadcasting Ambika Soni reporters after the Cabinet meeting.
With the increase in housing loan ceiling, the limit of subsidy for an individual borrower would go up to Rs14,865 per year for a loan of Rs15 lakh on reducing balance basis from the present limit of Rs9,910 for a loan of Rs10 lakh, Ms Soni said.
The government has designated the National Housing Bank (NHB) as the nodal agency for implementing the scheme both for scheduled commercial banks and housing finance companies, the minister said.
Finance minister Pranab Mukherjee in his Budget speech this year had announced liberalisation of the existing scheme of 1% interest subvention on housing loans.
The existing scheme of 1% interest subvention of housing loan up to Rs10 lakh provided the cost of the housing unit does not exceed Rs20 lakh was approved by the Cabinet in September 2009, she said.
The scheme provides interest subsidy on housing loans as a measure to generate additional demand for credit and to improve affordability of housing in the lower and middle income groups, Ms Soni said.
Earlier the Reserve Bank of India and the NHB were designated as nodal agencies for implementing the scheme for scheduled commercial banks and housing finance companies, respectively.
The RBI has already hiked the repo rate by 375 basis points (bps) from the bottom, and it is loose fiscal policy that is the main culprit behind high inflationary pressures, says Macquarie
Over the past 22 months, headline inflation as measured by the wholesale price index (WPI) have remained well above the Reserve Bank of India’s (RBI) comfort zone of 5% to 5.5% and averaged 9.5% during this period. While worsening fiscal deficit is responsible for high inflation in India, it is the loose fiscal policy that is exerting high inflationary pressures, said Macquarie Research.
In a research note, the investment banking and diversified financial services group said, “While on monetary policy, the central bank has already hiked the repo rate by 375 basis points (bps) from the bottom, we believe it is the loose fiscal policy that is the main culprit behind high inflationary pressures."
According to a study paper prepared by the RBI, empirical estimates conducted over the sample period 1953-2009 suggest that one percentage point increase in the level of the fiscal deficit could cause about a quarter of a percentage point increase in the WPI.
“Post the credit crisis while growth in India bounced back quickly, the credit crisis-driven policy stance was not reversed at the same pace as policymakers were worried about sluggish global growth. Hence, the fiscal policy remained expansionary. The domestic demand side pressures in the context of binding supply constraints as capacity creation (investments) remaining weak is the main reason for the acceleration in inflation, in our view,” the research note added.
India has a history of high deficit levels. In fact, it was only before the credit crisis that India managed to achieve a consolidated deficit level of 4.8% of gross domestic product (GDP) in FY08, the lowest in the past two decades, Macquarie said.
India’s fiscal deficit has deteriorated sharply since the credit crisis. The government’s consolidated fiscal deficit (including off-budget items) increased significantly to 10% of GDP in FY09 from 4.8% of GDP in FY08 and remained high at 9% of GDP in FY11 (excluding telecom licence and BWA collection). Macquarie said, “For FY12, we expect India’s consolidated fiscal deficit (including off-budget items) to remain high at 8.6% of GDP in the wake of slowing revenue growth and lack of expenditure management by the government. Looking at the central government accounts, we estimate the deficit to remain high at 5.3% of GDP in FY12, with an additional off-budget expenditure of 1% of GDP compared to the government target of 4.6% of GDP.”
During the credit crisis, the government pursued an expansionary fiscal policy to meet pent-up domestic demand and hence cushioned growth. While government expenditure grew by 30% year-on-year (Y-o-Y) in FY09, gross tax collections grew by a modest 2%Y-o-Y during the same period. Consequently, the government’s consolidated fiscal deficit (including off-budget items) more than doubled to 10% of GDP in FY09 from 4.8% of GDP in FY08 and remained high at 9% of GDP in FY11, excluding collections from the telecom licence and broadband and wireless auction (BWA). Some of the measures announced in FY09 were populist as India had Parliamentary elections in May 2009 and these were announced even before the credit crisis to serve political objectives. These include wage hikes for central government employees, pre-election spending, farm-loan waivers and expansion of social-security schemes like rural employment.
The 10-year government securities (G-Sec) bond yields have already increased by about 30bps over the past two weeks to 8.8% currently on higher-than-expected government borrowing for the second half of FY12, inflationary concerns and concerns about further fiscal slippage.
“While we expect 10-year G-Sec yields to remain range-bound around the 8.7%-8.8% level in the near-term, considering that the RBI might conduct open market operations (OMO) to ease liquidity, the possibility of a pause in the rate-hike cycle might bring some temporary relief,” the research report added.