State-level deregulation key to attracting more FDI: CRF's Fellow Rupa Dutta
New Delhi, July 8
State-level deregulation and stronger last-mile implementation of reforms are crucial to attracting higher foreign direct investment, Rupa Dutta, Distinguished Fellow at the Centre for Trade and Economics, Chintan Research Foundation, toldon Wednesday, noting that some states have attracted higher investment than others.
"The idea is, as I said, you improve the ease of doing business, reduce the compliance burdens, have more Jan Vishwas Bills and, .... we were really discussing, we need deregulation at the state level. That is very important because that is the last mile of implementation," she told ANI on the sidelines of a FICCI event on Investment Economics in India Manufacturing, FDI and Industrial Transformation.
She further added that there have been a lot of reforms in the Centre, but the states have to be in sync.
"Some states have done better and they have got more investment. In our presentation also we have shown which are the states getting more FDI," Dutta said.
According to Dutta, the government should continue to act as a catalyst and facilitator by increasing investment in infrastructure, strengthening research and development (R&D) support and encouraging innovation, while industry must also step up investments.
She noted that industry's share in gross fixed capital formation has remained around 30 per cent and stressed the need to encourage higher private sector investment.
Highlighting the importance of micro, small and medium enterprises (MSMEs), Dutta said the sector contributes around 45 per cent of India's exports and 30 per cent of GDP.
She said MSMEs need greater access to Industry 4.0 and Industry 5.0 technologies so they become more technologically advanced, improve quality and expand into a larger export basket.
On industrial infrastructure, Dutta said the proposed industrial cities will provide land, electricity and connectivity under a hub-and-spoke model, making it easier for investors to establish manufacturing units.
She added that steps are being taken to expedite land clearances, labour reforms are in place, and efforts are being made to improve access to capital and encourage enterprises through better policy support.
Responding to a question on the government's focus on critical minerals and semiconductor manufacturing, Dutta said India has dedicated missions for both sectors but cautioned that their impact would take time to materialise.
"Definitely steps are being taken, but these steps would take a bit of time. The investment decisions will not happen immediately," she said.
Dutta said that while high-end manufacturing remains important, labour-intensive sectors such as textiles, leather, footwear, and gems and jewellery should also receive greater attention as they generate significant employment, support MSMEs and contribute to exports.
She also said the Production Linked Incentive (PLI) scheme is performing well in terms of employment generation and exports in some sectors, adding that there is growing demand for extending the scheme to more industries.
The seminar focused on catalysing both domestic and foreign investment to strengthen India's manufacturing sector and convert investment into higher manufacturing output.
Dutta said India needs to increase manufacturing's share in Gross Domestic Product (GDP), promote technology transfer and build globally competitive firms to maximise the benefits of the free trade agreements (FTAs) signed by the country.
While both services and manufacturing play an important role in economic growth, she said the seminar's focus was on manufacturing.
She said industry representatives raised concerns over the business environment, with discussions centred on improving ease of doing business, reducing compliance burdens and decriminalising offences through measures such as the Jan Vishwas Bills.
— ANI
Reader Comments
Good points on MSMEs. They really are the backbone of our economy but get overlooked. If we can get them access to Industry 4.0 tech, it would be a game-changer for exports. My uncle runs a small textile unit in Tirupur and he's struggling to compete with larger players. Policy support needs to reach the ground level.
Important to note that while FDI is great, we shouldn't forget about domestic investment. Rupa Dutta mentioned industry's share in gross fixed capital formation is around 30% - that needs to go up. Also, labour-intensive sectors like textiles and footwear need more attention. They create jobs for millions.
The hub-and-spoke model for industrial cities sounds promising but I've heard similar promises before. Land clearances and labour reforms are mentioned but ground reality is different. States need to compete with each other to attract investment, not just rely on central schemes. Competition between states like Karnataka, Tamil Nadu and Telangana has actually worked well.
Good to see focus on semiconductors and critical minerals but she's right - these will take time. We should be realistic about timelines. Meanwhile, labour-intensive sectors should not be ignored. Also, PLI scheme has helped in electronics but need to see if it's truly creating sustainable jobs or just temporary ones. 🤔
One thing missing from this discussion is the role of state-level bureaucracy. Even if laws are deregulated, the mindset of officials at the lower levels needs to change. My friend tried to set up a small manufacturing unit in Uttar Pradesh and faced endless harassment. States
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.