India seeks to boost manufacturing, hit $1.3 tn in exports through deregulation, sources say; announcement likely in Budget

India will seek to triple the nation's exports by 2035 by boosting manufacturing through structural changes rather than with hefty spending, according to two government officials. Details of the new structure could be announced in the Union Budget on February 1.

In Prime Minister Narendra Modi's third such attempt, the South Asian nation is prioritising manufacturing in 15 sectors, including high-end semiconductors, metals and the labour-intensive ‌leather industry, aiming ‌to lift India's growth and boost annual goods exports to $1.3 trillion, they said.

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Modi's government has twice failed to double the share of manufacturing to 25% of gross domestic ‌product - with a "Make in India" campaign in 2014 and a $23 billion package of incentives in 2020.

"In past years, several government initiatives to boost manufacturing growth have led to modest, incremental progress at best. What is needed is a bold, focused and cohesive strategy to drive transformative change," according to a government official involved in drafting the policy.

MODEST FUNDING TO BE DECIDED BY GOVERNMENT PANEL

The government ​will spend about 100 billion rupees ($1 billion) to build infrastructure for about 30 ​manufacturing hubs across the targeted sectors while providing grants of $218 million for advanced areas such as chips and energy ‌storage, said the officials, who ‍asked not to be named because they were not authorised to speak to media.

The Finance ‍Ministry and government think tank NITI Aayog, which is tasked with preparing the ‌policy, did not respond to requests for comment.

Funding this time is modest as the plan focuses on easing regulatory and compliance burdens, the biggest impediment to Indian manufacturing, rather than doling out subsidies, the officials said.

Financial support to industries will be decided case by case with recommendations from a new government panel to administrative departments, replacing the pre-budget fiscal packages of earlier schemes, they said.

The new structure, called the National Manufacturing Mission, was announced in the budget last year but details were not disclosed. Details could be announced in the budget on February 1, but that will be decided closer ‍to the date, the officials said.

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FOCUS ON CUTTING RED TAPE

The panel's focus will be to ensure faster regulatory clearance, approvals for land and cheaper financing for large projects, the officials said. It will be ‍chaired by a ⁠minister and composed of bureaucrats, including the ⁠cabinet secretary, they said.

It will oversee the building of manufacturing hubs for the 15 sectors, and work with state governments to assure steady and cheap electricity supplies for such units, the sources said.

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Manufacturing hubs have been identified based on existing infrastructure, geographic advantages and proximity to ports, the officials said.

Divergent policies by India's federal and state governments have weighed on investment and hampered manufacturing. States have followed different regulations for labour and business compliance, increasing costs for companies operating in multiple states.

The proposed panel would coordinate with states to ease regulations such as those requiring multiple permits for power, land and water.

It would also recommend cutting red tape by reducing overlaps between quality and standards checks, and suggest aligning tariffs to industry requirements and "national priorities", the sources said.