Will Sezs Boost India to a Manufacturing Hub?

By: Geetika

India has the potential to become a major manufacturing hub for equipment and machinery used in construction, mining and building sectors within the country and for export purposes. Considering the potential of the future Indian market, more companies are now contemplating manufacturing units in India either directly or through joint ventures. India's economic upward trend will continue and that the world economy will turn the corner and continues to be an attractive market also for the mining machinery manufacturers with current coal production of about 325 million tonnes (mt), projected to be increased to about 430 mt in the next few years.

India would soon become a manufacturing hub riding on the back of its natural advantages of knowledge infrastructure, strengths in manufacturing and the ongoing focus to enhance competitiveness. India's import of electronics goods would swell overtaking the oil imports. That would spur an investment boom in IT and electronic hardware sector. The Indian government has laid emphasis on the SME sector in India. Some of the programmes in this regard include revamping Technology Up gradation Fund scheme and ingraining greater degree of innovativeness across the SME sector. The Government was evolving a scheme for this purpose in consultation with National Manufacturing Competitiveness Council.

Units in Special Economic Zones (SEZs) have been put on notice. Under Section 10-A (1-A), an undertaking in an SEZ manufacturing or producing articles or things or computer software after March 31, 2002, is allowed 100 per cent deduction of export profits for five years and 50 per cent for the next two years, followed by a 50 per cent deduction of export profits credited to a special reserve account for the next three years.

To rationalize the provisions of this section, a sunset clause has been inserted to the effect that no deduction under the sub-section would be allowed to any undertaking which begins to manufacture or produce such articles or things or computer software after March 31, 2009 in an SEZ. New semiconductor fabrication policy is been approved by both the Planning Commission and the finance ministry the proposal, which will make the policy attractive to foreign companies.

The finance ministry has also supported the IT ministry's proposal to extend the net foreign exchange clause by 10 years in case of information technology SEZs. For multi-product SEZs, it said the net foreign positivity would be given for five years." Relaxing the positivity clause will be an additional benefit for units in export processing zones. It will also be helpful if zero excise duty is levied on imported raw materials.

India's road map on becoming a manufacturing hub has to be based on building blocks of global vision, a passionate mindset about manufacturing, focus on value- enhancing innovations and facilitating business climate The on going phase of industrial rebound could be attributed to improved investment climate ,increase domestic demand and increase external demand, ease in availability of finance at lower cost and increasing capacity additions but there is a lot of room for improvement in diverse sectors .

The industrial sector has received further boost because of the increased momentum of manufacturing outsourcing .India is fast developing into a manufacturing hub for multinational corporations with growing recognition of sector skills in production design ,reconfiguration and customization with assured quality and value addition.

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