The Government of India has initiated push to enhance manufacturing in Tier 2 and 3 cities. This strategy is part of a broader effort to stimulate economic growth across the nation. The Commerce Ministry has directed all states and Union Territories to develop a ‘City Level Economic Vision’ for 100 selected cities by June 2026. This initiative aims to transform 1,039 towns into manufacturing hubs and increase their contribution to the Gross Value Added, currently at 17 per cent.
Strategic Framework for Manufacturing
The Department of Promotion of Industry and Internal Trade has crafted a strategic framework to guide this initiative. The framework was discussed at the Fourth National Conference of Chief Secretaries. It aims to decentralise manufacturing from established industrial zones to smaller cities. This shift is expected to tap into the demographic advantages and affordable labour present in these areas.
Key Enablers for Growth
To create a thriving manufacturing ecosystem, the government has identified several key enablers. These include improving infrastructure, enhancing logistics, creating skilled workforce, and reducing compliance burdens. States with lower Gross State Domestic Product (GSDP) are encouraged to focus on labour-intensive industries. Conversely, states with mature manufacturing sectors should concentrate on research and development and high-tech industries.
Timelines and Implementation Plans
The strategic framework outlines specific timelines for implementation. States must develop a State Logistics Action Plan by June 2026. They are also tasked with creating a flexible land lease policy for industrial parks and establishing 100 plug-and-play parks by December 2025. Additionally, states need to enhance their single-window systems to facilitate ease of doing business.
Focus on Skill Development
Skill development is important aspect of this initiative. Each state is required to conduct skill gap studies for emerging manufacturing sectors by December 2025. The government aims to support the establishment of 100 new start-up incubation centres. Moreover, it plans to reduce the vacancy of trainers in Industrial Training Institutes (ITIs) by 50 per cent by December 2029.
Employment and Economic Impact
The government envisions increasing the share of manufacturing in employment from the current 12 per cent to 22 per cent by 2047. By promoting manufacturing in Tier 2 and 3 cities, it aims to create more job opportunities. Historically, the share of manufacturing employment has remained stagnant since the early 1970s.
Challenges and Considerations
While the initiative holds promise, it faces challenges such as infrastructure deficits and regulatory hurdles. Addressing these challenges will be vital for the success of the manufacturing push in smaller cities. The government’s commitment to reducing compliance burdens and improving logistics will be essential in overcoming these obstacles.
Questions for UPSC:
- Critically analyse the role of manufacturing in India’s economic development strategy.
- Explain the significance of skill development in enhancing manufacturing capabilities in India.
- What are the potential impacts of decentralising manufacturing to Tier 2 and 3 cities? Discuss.
- With suitable examples, comment on the challenges faced by Tier 2 and 3 cities in attracting manufacturing investments.
Answer Hints:
1. Critically analyse the role of manufacturing in India’s economic development strategy.
- Manufacturing contributes to GDP, currently at 17%, with potential for growth.
- It creates job opportunities, aiming to raise employment share from 12% to 22% by 2047.
- Decentralising manufacturing can stimulate economic activity in underdeveloped regions.
- Manufacturing drives innovation and technology development, enhancing global competitiveness.
- Government initiatives aim to address infrastructure and regulatory challenges to boost manufacturing.
2. Explain the significance of skill development in enhancing manufacturing capabilities in India.
- Skill development addresses the gap in workforce capabilities needed for modern manufacturing.
- It supports the establishment of start-up incubation centres, encouraging innovation and entrepreneurship.
- Reducing trainer vacancies in ITIs ensures a skilled workforce is readily available for industries.
- Skill gap studies help identify emerging sectors, aligning training with market needs.
- Enhanced skills lead to increased productivity and efficiency in manufacturing processes.
3. What are the potential impacts of decentralising manufacturing to Tier 2 and 3 cities? Discuss.
- Decentralisation can alleviate pressure on Tier 1 cities, reducing urban congestion.
- It promotes regional economic development, creating job opportunities in smaller towns.
- Access to affordable labor and demographic advantages can attract investments in these areas.
- Infrastructure development in Tier 2 and 3 cities can enhance overall economic resilience.
- Improved local economies can lead to better living standards and reduced migration to urban centers.
4. With suitable examples, comment on the challenges faced by Tier 2 and 3 cities in attracting manufacturing investments.
- Infrastructure deficits, such as poor transport and logistics, hinder investment attraction.
- Regulatory hurdles and compliance burdens can deter potential investors.
- Lack of skilled workforce due to inadequate training facilities, like ITIs, limits manufacturing growth.
- Examples include cities like Kanpur facing pollution issues, affecting investment appeal.
- Competition from established Tier 1 cities with better resources and support systems can overshadow Tier 2 and 3 cities.
