By Dr. Jaimine Vaishnav

In the bustling corridors of India’s economic landscape, a fervent discussion rages on about the nation’s journey towards a $5 trillion economy. At the heart of this discourse lies the New Industrial Policy (NIP), a bold initiative aimed at rejuvenating manufacturing, supercharging exports, and wooing foreign investors. But as the dust settles on its implementation, hard questions emerge: Is this growth truly inclusive?

The New Industrial Policy’s Grand Design

The New Industrial Policy (NIP), introduced in 2020 and amended in 2021 and 2023, aims to enhance India’s manufacturing sector, boost exports, and attract foreign investment. Key aspects include increasing manufacturing’s GDP contribution, fostering innovation, and promoting equitable growth. The policy features the Production Linked Incentive (PLI) scheme, particularly successful in the automotive sector, which has driven significant investments and job creation in electric vehicle production. Despite infrastructure and skill development challenges, recent amendments focus on improving rural infrastructure and vocational training. While the policy has spurred economic growth, ongoing adjustments are essential to ensure inclusive development and equitable wealth distribution.

It seeks to craft an industrial ecosystem that can slug it out with the best on the global stage. What are the policy’s cornerstones?

A laser focus on beefing up manufacturing’s slice of the GDP pie, cutting through the red tape to roll out the welcome mat for investors, firing up the engines of innovation, and giving exports a shot in the arm.

India’s New Industrial Policy (NIP) is designed to enhance the manufacturing sector, with a particular focus on high-tech and large-scale industries, and has significantly boosted the electric vehicle (EV) sector through incentives for local production and foreign investment. However, the policy overlooks small and medium enterprises (SMEs), labour-intensive sectors, and the service industry,  vital for job creation and balanced economic growth. This approach has led to increased economic disparity, as the benefits primarily reach a small elite, while issues such as bureaucratic red tape and poor infrastructure in rural areas persist.

Despite the growth in certain sectors, the NIP has not achieved widespread economic improvement. But here’s the rub: while the policy’s architects dreamt of factories humming with activity and shipyards bustling with outbound cargo, the on-ground reality tells a different tale. The manufacturing sector, far from being the job bonanza it was touted to be, seems more enamoured with robots than people. High-tech production lines churn out goods at breakneck speed, but the promised employment boom? It’s largely missing in action.

Despite India’s GDP indicating that the economy is growing like a beanstalk, employment figures have been stuck in the doldrums. It’s as if the feast of economic expansion is happening behind closed doors, with only a select few holding invitations.

And that is not a good sign. Historically, high unemployment increases the chances of civil unrest, threatening future economic stability. The NIP’s journey is like navigating a minefield. Despite the policy’s ambitions, the unemployment rate remains a significant issue. Recent data from the Centre for Monitoring Indian Economy (CMIE) shows that the unemployment rate hovers around 8%, reflecting the disconnect between economic growth and job creation. This highlights the urgent need for policies that not only drive economic expansion but also generate ample employment opportunities.

The Case

The automotive industry saw a game-changing shift when the government rolled out a new scheme in 2021. This programme, tied to production levels, puts the pedal to the metal for electric vehicles (EVs). It dangled carrots in front of carmakers based on how many vehicles they sold, how well they performed, and how much of the manufacturing happened on home turf. The response? It was like watching a drag race—fast and furious.

Take our home-grown EV champion, for instance. They poured money into their factories like there was no tomorrow. And boy, did it pay off! They went from pushing out a modest number of electric cars to selling them by the truckload in just two years. Their secret sauce? The new policy helped them price their cars just right, making them a tempting option for buyers.

But that’s not all. The scheme had foreign bigwigs sitting up and taking notice too. verseas decided to take the plunge, announcing they’d achieved their goal? Churning out EVs and the batteries that power them. This move didn’t just give our EV scene a shot in the arm; it also meant job opportunities galore.

In 2021, the Indian government introduced the Production Linked Incentive (PLI) scheme for the automotive industry, with a focus on electric vehicles (EVs).

Impact on Domestic Manufacturers

Tata Motors, a leading Indian EV manufacturer, significantly increased their production capacity following this policy. According to their annual reports, Tata Motors’ EV sales grew from approximately 4,200 units in FY 2020-21 to over 35,000 units in FY 2022-23. The policy enabled them to optimize pricing, making their vehicles more competitive in the market.

Foreign Investment

The scheme also attracted foreign investment. Suzuki Motor Corporation announced in March 2022 that they would invest ₹10,440 crores (approximately $1.3 billion) in Gujarat for local manufacturing of EVs and batteries. This investment is expected to create new job opportunities in the region.

Supply Chain Development

The policy encouraged the development of a local supply chain for EV components. Companies like Exide Industries and Amara Raja Batteries, which previously focused on traditional automotive batteries, began investing in EV battery technology. This localization of the supply chain has the potential to reduce costs and make EVs more affordable for Indian consumers.

Iron and Steel Industry 

The iron and steel industry in India has faced several challenges recently:

  1. Raw Material Costs: In 2023, iron ore prices increased significantly, putting pressure on steel manufacturers’ profit margins. This affected major players like Tata Steel, JSW Steel, and Steel Authority of India Limited (SAIL), as well as emerging players such as Lloyd’s, Essar, and others. 
  2. Export Duties: In May 2022, the government imposed export duties on certain steel products to control domestic prices. While these duties were removed in November 2022, they had a significant impact on the industry’s export performance. Companies like ArcelorMittal Nippon Steel India (AM/NS India) reported a decline in exports during this period.
  3. Environmental Regulations: The industry is facing stricter environmental norms, requiring substantial investments in cleaner technologies. For instance, Tata Steel has committed to reducing its carbon emissions and aims to be carbon neutral by 2045.
  4. Global Competition: Indian steel makers are facing increased competition from cheaper imports, particularly from China and other Asian countries. This has affected the market share of domestic producers like Jindal Steel and Power Limited (JSPL).
  5. Infrastructure Push: On the positive side, the government’s focus on infrastructure development has boosted domestic demand for steel. Companies like SAIL and JSW Steel have reported increased sales to infrastructure projects.

Both these industries illustrate how government policies can significantly impact industrial growth and challenges. While the automotive sector, particularly EVs, has seen positive growth due to targeted policies, the steel industry is navigating a complex landscape of domestic and global factors.

Changing Track

As India barrels down this road of rapid industrialisation, it’s high time for some soul-searching. The NIP has certainly put more zeroes on our GDP, but has it put more food on every table? Perhaps it’s time to rejig our priorities—give small and medium enterprises their moment in the sun, for starters. After all, these plucky outfits have historically been the real MVPs of job creation.

Moreover, the NIP needs to shed its top-brass-knows-best attitude. It should morph into a genuine partnership, roping in voices from every rung of the economic ladder, from the street-corner shopkeeper to the boardroom bigwig. While the New Industrial Policy (NIP) has focused on macro-economic growth, many corporations in India are taking the initiative to drive grassroots development through their Corporate Social Responsibility (CSR) programs. These efforts are crucial in ensuring that economic growth translates into tangible benefits for communities across the country. 

Corporate Initiatives in Grassroots Development

  1. Tata Consultancy Services (TCS): Through its Adult Literacy Program, TCS has helped over 1.2 million adults become literate. The program uses computer-based functional literacy software available in 10 Indian languages.
  2. Reliance Foundation: The foundation’s Rural Transformation program has impacted over 5,500 villages across India. It focuses on enhancing farm and non-farm livelihoods, improving water security, and providing access to knowledge and technology.
  3. ITC Limited: The e-Choupal initiative has empowered over 4 million farmers in 35,000 villages by providing internet access to check fair and current prices, weather information, and scientific farming techniques.
  4. Hindustan Unilever Limited (HUL): Project Shakti has created entrepreneurship opportunities for over 100,000 women in rural India, helping them become direct-to-consumer sales distributors.
  5. Mahindra & Mahindra: The Nanhi Kali program supports the education of over 350,000 underprivileged girls across India, providing academic support and material assistance.
  6. Lloyd’s Infinite Foundation: In the historically strife-torn area of Gadchiroli, Lloyd’s Infinite Foundation has undertaken a host of activities, including opening a sports academy, hospital, school, and more to help the community.

Impact on Grassroots Development

These CSR initiatives are making significant contributions to grassroots development:

  1. Skill Development: Many programs focus on providing vocational training and skills that enhance employability.
  2. Women Empowerment: Several initiatives specifically target women, helping them become financially independent and active contributors to their local economies.
  3. Education: Corporate programs are filling gaps in the education system, especially in rural and underserved areas.
  4. Agricultural Support: Some initiatives are directly benefiting farmers by providing access to information, technology, and markets.
  5. Health and Sanitation: Many CSR programs focus on improving health infrastructure and awareness in rural areas.

Challenges and Future Directions

While these CSR initiatives are making a positive impact, challenges remain:

  1. Scale: Given India’s vast population, scaling these initiatives to reach all underserved communities is a significant challenge.
  2. Coordination: There’s a need for better coordination between corporate initiatives and government programs to avoid duplication and maximise impact.
  3. Measurement: Developing robust metrics to measure the long-term impact of these initiatives remains a challenge.
  4. Sustainability: Ensuring that these programs create lasting change rather than short-term benefits is crucial.

As India continues its economic growth trajectory, the role of corporate-led grassroots development initiatives will be crucial in ensuring inclusive growth. By complementing government efforts, these CSR programs are helping to bridge the gap between macro-economic progress and ground-level impact, contributing to a more equitable distribution of the benefits of India’s economic growth.